Sitting of 29 March 2004

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Orders of the Day
  European Parliamentary and Local Elections (Pilots) Bill
  Lords message considered [25 March]
  European Parliamentary and Local Elections (Pilots) Bill

    Clause 1
    5.20 pm
    The Parliamentary Under-Secretary of State for Constitutional Affairs (Mr. Christopher Leslie): I beg to move, That this House disagrees with Lords amendment 1F to Commons amendment 1C.
    I can barely believe that, despite the House of Commons reaching a strong view on so many occasions and so frequently expressing its opinion, we are still being told by the Conservative and Liberal majority in the House of Lords that it knows better than the House of Commons when it comes to elections policy. In its latest amendment, the other place suggests that we should not proceed with all-postal voting in four regions, which the Government announced on 21 January. On this occasion, the other place wants to leave out the north-west of England for a variety of inexplicable reasons, and I urge the House to reject that suggestion and to stand firm with our decided view that we want four regions in those pilots.
    Sir Patrick Cormack: Will the Minister confirm that a decision to conduct three rather than four pilots would be welcomed by the Electoral Commission, which has made it plain over the past few days that perhaps Yorkshire and Humber should be conceded, but not the north-west?
    Mr. Leslie: The hon. Gentleman has moved his position from previous occasions. He should know that, in our democracy, it is this House, acting on the advice of Ministers, that makes final decisions when it comes to elections policy. We take advice from the Electoral Commission and hear what it has to say, but at the end of the day—that day ended some time ago—Parliament has the right to take a firm decision.
    Mr. David Watts: Does my hon. Friend agree that the potential for fraud is the major reason why Liberal peers oppose the north-west being involved in the postal ballot? Can he explain why Liberal Democrat peers are happy to have a postal vote in a referendum, but are not happy to have one for local and European elections?
    Mr. Leslie: My hon. Friend looks for logic in the Opposition parties' thinking, but their rationale is not apparent. Hon. Members will be astonished by the history of how we are here today. The Government decided to go with four regions on 21 January, and the House of Commons ratified that decision on 8 March. The House of Commons reconfirmed that decision on 16 March, and reiterated it only last week on 24 March, but here we are again.
    Mr. John Redwood: All the time that we still have a second chamber—I believe that it is still Government policy to allow us a second chamber—its views should be taken seriously and there should be give and take. The second chamber has given up its insistence on two pilots; why can the Minister not give up his insistence on four pilots and reach a sensible compromise?
    Mr. Leslie: It is true that the other place has powers to revise and amend legislation, and, as we heard last week, noble Lords are experienced and often speak with authority. In this case, however, the other place's powers are being abused by the Opposition parties in their pursuit of overturning the will of the Government and the House of Commons. There comes a point when revision and amendment become obstructive and vexatious. This is not real scrutiny, but a brazen attempt by the Conservatives and the Liberals actively to prevent people in the north-west from having convenient voting mechanisms in the European and local elections.
    Mr. Nick Hawkins: Does the Minister recognise that his case is fatally undermined by the fact that, as recently as 16 December, he said in this House—not once, twice or three times, but about six times—that the Government intended to have three pilots? The other place has reluctantly conceded three pilots. The Government, under huge pressure from the Deputy Prime Minister, have changed their mind and are seeking to insist on four. His own colleagues have fatally undermined the Minister.
    Mr. Leslie: As the hon. Gentleman knows, we have been discussing this since 21 January, when the Government made it absolutely clear that we wanted four regions: the east midlands, the north-east, the north-west, and Yorkshire and Humber. It is important that we proceed with all-postal voting in four regions, and I shall tell him why. We already know about the difficulties with turnout, not least in local and European elections, and it is important to ensure that we can respond with modern electoral mechanisms. We also know that all-postal voting is popular and convenient among the public, which is proved by the fact that it usually results in a rise in turnout of at least 10 per cent. We know that the resources are there for pilots in four regions, and if we can afford to go ahead, there is no reason why we should not do so.
    Most importantly, we know that regional returning officers in all four regions are keen that all-postal voting should proceed; indeed, they perceive several risks in not proceeding. In correspondence with me and my Department, they have expressed worry that the delays and uncertainty created by the other place have cast a blight on their planning and preparations, because they find it difficult to proceed while there is no legislative clarity.
    Mr. Clive Betts: I am sure that my hon. Friend is aware that over the past few weeks the Select Committee on the Office of the Deputy Prime Minister has been taking evidence on all-postal vote elections. When returning officers from Yorkshire gave evidence, they made it clear that any attempt to
    1294
    reverse the all-postal ballot proposals would make it virtually impossible for them to reorganise their arrangements. If that is true for Yorkshire, it must be true for the north-west as well.
    Mr. Leslie: My hon. Friend makes a salient point. I have heard that many of the suppliers and contractors who normally engage with returning officers are worried that, if this uncertainty continues, via the obstruction by Opposition parties, they may not be able to proceed.
    New ward boundaries have been introduced in many metropolitan areas following boundary reviews, and returning officers may well find it difficult to locate local polling stations within them. That could prove particularly difficult if the north-west is forced by the amendment to go back to conventional systems. Those returning officers would have to find the staff to ensure that the polling stations could run efficiently. There are all sorts of reasons why effectively forcing the north-west to go back on what was planned and return to the conventional system would create difficulties. It would be irresponsible for Opposition parties to force that situation.
    Mr. Hawkins: Should not returning officers have to wait until the legislation is on the statute book? If they are behaving as the hon. Member for Sheffield, Attercliffe (Mr. Betts) suggests, they are mistaken. They should wait until the legislation is in its final form, not jump the gun because they are under pressure from party political views expressed by Government Members.
    5.30 pm
    Mr. Leslie: The hon. Gentleman knows that we have been trying to resolve the matter for far longer than he suggests. If we had been able to resolve it far sooner, returning officers would not be asking questions about uncertainty. We have always been keen to ensure swift enactment of the measure but the Opposition parties' abuse of the powers of the other place has caused uncertainty. I hope that they will stop using the other place improperly to obstruct the Bill, allow its passage to continue and permit resolution so that four regions can be selected.
    Mr. David Borrow: Does my hon. Friend believe it reasonable for returning officers in the north-west to assume that, once the House of Commons has said that the region should be one of the postal vote pilots, they can plan on that basis, rather than assuming that the House of Lords will kibosh the whole thing?
    Mr. Leslie: As my hon. Friend says, an almost unprecedented constitutional situation is developing. There has been a significant amount of ping-pong between the two Houses on previous legislation, but the House of Lords rarely stands in the way of the will of the House of Commons, especially on elections policy. The root cause is clear: Conservative and Liberal peers have been instructed by their respective Front Benchers to use the revising powers of the other place to try to scupper legislation whenever the bandwagon appears and the

    1295
    opportunity arises. That could be their motivation for standing in the way of the north-west, especially, having more convenient voting mechanisms.
    Mr. Gordon Prentice: May I take my hon. Friend back to the letter that Sam Younger sent him on 4 March? The nub of the matter appears to be that the Electoral Commission said:
    "the rollout of all postal elections needs to be underpinned by a more robust statutory framework."
    What can my hon. Friend say to reassure me and others that that robust framework exists so that people who ask about fraud are satisfied that it will not happen under the new system?
    Mr. Leslie: My hon. Friend is right that we support piloting all-postal arrangements and that, as the Electoral Commission suggested, before we have a wider roll-out for local government elections nationwide, there may need to be changes to individual registration and so on. However, in the interim, it is important to begin to scale up the piloting of all-postal arrangements. There has been considerable piloting of all-postal arrangements in previous local elections. If we were not allowed to proceed with four regions, fewer people would vote on an all-postal basis than in 2003. That would not be scaling up, but scaling back and it would be perceived as a backward step.
    Mr. John Bercow: I fear that, in the course of a short speech, the Minister has already contradicted himself. He said that the other place was guilty of a procedural impropriety but went on to refer to its use of revising powers. He knows perfectly well that the other place has those powers and it has simply had the temerity, in his view, to use them. Why does not he admit that the real sin of the other place is to disagree with him?
    Mr. Leslie: The shadow Secretary of State for International Development is wrong on that point. As I said earlier, it is not simply a matter of a disagreement between the two Houses. The House of Commons made its view known on 8 March, reiterated it on 16 March, did so again on 24 March and here we are again. I hope that my hon. Friends will support the motion to disagree and that we will again reiterate the strong view of the elected House of Commons. If the hon. Gentleman is willing to say that there is no Conservative Whip—and no Liberal Democrat Whip—in the other place to thwart the will of the House of Commons in our democratic decision about elections policy, I shall be happy to give way to him. However, I suspect that there is a Whip because the Conservative and Liberal Democrat parties are pursuing a partisan motivation, on which I shall expand shortly. Will he say, on behalf of the shadow Secretaries of States, that there is no Whip?
    Mr. Bercow: The Minister elevates me beyond all reasonable heights of my ambition. He ought to know that whipping is not a matter for me; I am just a humble shadow Secretary of State for International Development.
    Mr. Leslie: I agree that the hon. Gentleman is indeed a humble shadow Secretary of State.
    1296
    What are the true reasons behind the Conservative and Liberal opposition, particularly to the north-west? As I have said, their motivation could well be simply scuppering legislation opportunistically. They may well not want a higher turnout in the local and European elections in the north-west of England. There is certainly no evidence that all-postal elections are any more prone to fraud than conventional elections, not least because there have been no convictions for fraud in all-postal elections in the north-west. I know that some noble Lords have referred to certain anecdotes, but they related particularly to the conventional system of election, which suggests that other problems, not associated with all-postal voting, might well be at the root of the issue.
    Sir Robert Smith: The Minister does a disservice to the other place, given the Electoral Commission's advice to the Government. Some of us have just come from Committee Room 11, where we have been considering the draft European Parliament orders. In that context, the Government have accepted in full the Electoral Commission's advice on constituency sizes. In one sphere, the Government accept that the commission's judgment is right and proper, but they reject it when it relates to the best way to conduct pilots.
    Mr. Leslie: If the hon. Gentleman's policy is always to adhere to the advice of the Electoral Commission, why did his colleague agree in an earlier debate to reinstitute the declaration of identity provision—the witness signature provision—against the advice of the commission? That was the subject of a Liberal Democrat amendment in the other place. It suits the Liberal Democrats to adhere to the commission's advice when they want to, but not when they do not. We have to consider the motivation of the Opposition parties for using the powers of the other place to thwart the decisions of the House of Commons.
    Chris Bryant: Is not the real impropriety the fact that the House of Lords is engaged in these actions on a time-limited piece of legislation? This is not a Bill that could come in next year or the year after; it is specifically time limited. That means that the Lords are abusing the convention of the House that they will deal with their business in a timely fashion. This could only have been considered timely if it had already been dealt with by now, because returning officers have to make decisions.
    Mr. Leslie: My hon. Friend could well be right. There are significant risks and dangers involved in the games being played by the Opposition parties. The returning officers in the north-west could face difficulties if those parties force them to go back on what they are already planning, and to return to conventional elections. We know for a fact that returning officers now want to proceed with all-postal voting. I hope that the Opposition parties will not leave the north-west in the lurch by forcing it to go back on its plans. There are significant dangers in going down that route. We know that there are significant benefits associated with all-postal voting, and that there are dangers associated with preventing such voting, particularly in the north-west. It

    1297
    is right for us to proceed with all-postal voting in those four regions, and I urge the House to disagree with the Lords in their amendment.
    Mr. Hawkins: Every time the Minister gets to his feet and speaks in a polite and moderate tone of voice, as he always does, I become more and more convinced that he believes in the elected dictatorship of a one-party state. He speaks about the House of Commons as though there were cross-party agreement here on this issue, but we and the Liberal Democrats in both Houses have always opposed the Government's proposals. Moreover, the Government have changed their mind. Until 16 December last year, they made it clear that they intended to have only three all-postal pilots. They could have three all-postal pilots—reluctantly conceded recently by the other place—if they wanted them now, but we see in this the heavy hand of the Deputy Prime Minister, who was bellowing at us from the Treasury Bench when we debated these measures the time before last and who is obsessed with having all-postal pilots in all the Labour heartlands for party political advantage to fit in with what he wants for the referendums later in the year.
    The game was given away just before what I might describe as round 7 of this heavyweight contest by a written answer in last Thursday'sHansard from the Under-Secretary of State, Office of the Deputy Prime Minister, the hon. Member for Corby (Phil Hope), at the same time as the other place was about to debate the matter for the umpteenth time. My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) asked:
    "To ask the Deputy Prime Minister when he last met members or officials of the Electoral Commission; what the purpose of that meeting was; and what the outcome was."
    The junior Minister, who was on the Treasury Bench a little earlier, gave this answer, which I can describe only as containing terminological inexactitude:
    "My right hon. Friend the Deputy Prime Minister met with members of the Electoral Commission on 3 March to discuss issues relating to the piloting of all-postal voting at the European Parliamentary and combined local elections in June, including how many regions should be involved."
    This is where it becomes rather more serious, because it continues:
    "Both parties agreed that the regions that the Office of the Deputy Prime Minister announced should use all-postal voting this year are each capable of running a successful pilot."—[Official Report, 24 March 2004; Vol. 419, c. 909W.]
    Since that meeting on 3 March, to which that answer refers, we have had not one but two letters to the Government. Despite my challenges last time we debated these measures and the time before, we have not seen the letters from Ministers to the Electoral Commission. I again challenge the Minister to put those letters, as well as minutes of all meetings that he, other Ministers or the Deputy Prime Minister have had with the Electoral Commission, in the Library of the House. Three times at the Dispatch Box I have asked him to do so, but each time his response has been silence.
    We know from both the Electoral Commission's replies that that answer from the hon. Member for Corby does not reflect what the Electoral Commission
    1298
    says. As we debated last week, and as has been set out in this place and the other place, the Electoral Commission, as recently as 23 March, said:
    "The considerations as set out in our December Report regarding the North West have not changed".
    The Electoral Commission sets out in detail in its report why it regards the north-west as unsuitable, and it has not changed its mind. In addition, the Electoral Commission goes on in that letter to say:
    "For the reasons set out in my letter of 4 March"
    that is, the letter sent after that meeting—
    "we are not persuaded of the merits of piloting in 4 regions."
    The Electoral Commission is still saying three regions and not the north-west. It has put compelling reasons why, and noble lords and baronesses in another place have set out convincing reasons why the north-west should not be chosen.
    The Government are obsessed with adding the north-west, which they originally intended not to do, and this Minister said not once or twice but about six times that the Government wanted three pilot regions. They want to add the north-west for their party political advantage and because the Deputy Prime Minister is obsessed by it.
    Andy Burnham: I fear that the hon. Gentleman has misrepresented the Electoral Commission's position. It said in its report that the north-west was potentially suitable. May I challenge him on this? Two weeks ago at the Dispatch Box, he made allegations of wholesale fraud—that is the phrase that he used—in the north-west. He referred specifically to the remarks of Lord Greaves and asked us to look them up, which I did. Is he aware that a report by Lancashire constabulary on those allegations found no evidence whatever of wrongdoing and that the file is closed? Does not his case against the north-west collapse due to that revelation?
    Mr. Hawkins: No, it does not. I heard Lord Greaves giving an interview on national radio after our debates last week, as I was driving back to my constituency. He has not changed his mind at all, and he was debating the issues with the hon. Member for Chorley (Mr. Hoyle). The Electoral Commission is saying that it has not changed its reasons, which were given on 23 March. It has not changed its view on the north-west; the views of the hon. Member for Leigh (Andy Burnham) are undermined by the Electoral Commission, which his Government set up.
    Mr. Geoffrey Clifton-Brown: My hon. Friend may already be aware as a result of the revelation from the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) that a statutory instrument has recently been discussed Upstairs that would reduce the number of MEPs in this country. The Government accepted in its entirety the Electoral Commission's recommendation on that. When we asked the Under-Secretary of State for Constitutional Affairs, the hon. Member for Tottenham (Mr. Lammy), who is currently on the Treasury Bench, why the Government accepted its recommendation in that respect but not in this one, he said that the two were different. Would my hon. Friend like to speculate on what the difference is?
    5.45 pm
    Mr. Hawkins: My hon. Friend is right, and I suspect that the difference is accounted for by the obsessions of the Deputy Prime Minister and the party political advantage of the Government party.
    Chris Bryant: The whole tenor of the hon. Gentleman's argument seems to be that the Deputy Prime Minister is trying to make sure that there is a postal ballot in Labour heartlands, because that will give party advantage to the Labour party. The strongest Labour heartland is Wales, which has not a single Tory representative in this House. If the hon. Gentleman's argument were true, surely Wales would be included in the pilot.
    Mr. Hawkins: The hon. Gentleman has not played much of a part in our many earlier deliberations on the Bill. Had he done so, he would have known that we debated extensively Wales and Scotland, and many of his hon. Friends from Scotland were—and, I imagine, still are—outraged that Scotland has not been included. They were not included because the Electoral Commission specifically recommended against them, in even stronger terms than it did against the north-west.
    Labour Members have this problem: they set up the Electoral Commission, and they are now picking and choosing only those recommendations that suit them. The biggest weakness in the Government's case is that the Government said originally—not once, not twice, but many times, through this Minister—that they intended only three electoral pilots. They were put out because the Electoral Commission originally recommended only two. They said that they would go ahead with a third. Only recently have they started to become obsessed with a fourth.
    The Minister has also been trying to rewrite the history of the battles between the two Chambers of this bicameral legislature. He sought to suggest that there is something unusual about ping-pong, as it is called, between the two Houses. As the hon. Member for Somerton and Frome (Mr. Heath) and I are well aware, that has happened towards the end of a legislative period pretty well every year since this Government came to power. Only last year, we were debating the Criminal Justice Bill, which was going backwards and forwards between the two Houses until the Government were forced to give way at the last minute, with ill grace, on the last day of the Session. I suspect that that will happen in this case. Just as we come to the Easter recess, the Government will be forced to go back to what the Electoral Commission recommends, and accept that the other place and the Electoral Commission are right. That is why we will stick to our guns, and the other place should stick to its guns.
    Mr. Kevin Barron: It is a few weeks since I spoke in any debate in relation to this Bill, although I listened to the last such debate. The last time that I spoke was on 8 March. The Opposition's arguments against including the north-west are those that they used against Yorkshire and Humber. We also found out, of course, that Yorkshire and Humber was included in the Opposition amendment in the other place last week. There is a lot of hypocritical talk in this Chamber about what the intentions of the other place are.
    1300
    I told the House on 8 March why I support the Bill and why all-postal ballots are good for democracy. They increase participation and I doubt whether they affect the result. They did not affect the result in my constituency last year, but 53 per cent. of people turning out is a lot better than 23 per cent. That example came from my constituency.
    Looking at the debate in the other place last week, there can be no doubt that the whole issue relates to party politics. My hon. Friend the Minister passed some comment about the official Opposition. Reading the debate, I do not put a lot of the problem down to the major Opposition party, because it does not seem to know what is taking place most of the time. All that it knows is when to support the amendments tabled by a minor Opposition party, the Liberal Democrats. That is when they all pile into the Division Lobbies, and that is why we have ended up in this position on—I think—three occasions.
    No one reading reports of debates on the Bill, especially debates in the other place, could doubt that this is about Liberal Democrat party politics relating not to Yorkshire and Humberside, the east midlands or the north-east, but to the north-west. I said that on 8 March, and it has been reaffirmed at least twice since then, when Members of the other place have sought to table amendments opposing the Bill.
    Mr. Russell Brown: I have looked at some of the figures and tried to draw conclusions from them. The hon. Member for Surrey Heath (Mr. Hawkins) spoke of parliamentary ping-pong, and that is what we have seen since the Government came to power in 1997 on, to the best of my knowledge, 13 occasions, involving 13 Bills that this Labour Government have tried to pass. Between 1979 and 1997, the other place tried to frustrate this House on three occasions. That tells its own story. Nor should my hon. Friend forget the role of the Cross Benchers, who have supported the Tories in 80 per cent. of cases.
    Mr. Barron: Perhaps my hon. Friend feels that Cross Benchers in the other place are not so independent of party politics in that respect. I shall keep my view of the other place out of the debate.
    This is all about Liberal Democrats and the north-west. I shall now address myself to the only two Liberal Democrats in the Chamber, the hon. Members for Somerton and Frome (Mr. Heath) and for West Aberdeenshire and Kincardine (Sir Robert Smith). I have said this repeatedly. I said it on 8 March, and it has been said before. Last week Lord Rennard said that the issue was,
    "I think, a very principled one—that no one party should choose different voting mechanisms for different places according to its own interest, based in this case on fears that the electorate will not turn out to support it."—[Official Report, House of Lords, 25 March 2004; Vol. 659, c. 851.]
    Let me tell both Liberal Democrats that I would think that disgraceful if it came from anyone involved in elective politics, but I can accept such views from people next door who have never been involved in elective politics, or have been involved only in elective politics that have failed. I do not think that they understand the issue: I do not think they understand what our

    1301
    democracy is about. I am not a mechanistic democrat, but I think that those who deny—knowingly—that they would prefer a 20 per cent. turnout to one of 40 or 50 per cent. do a disservice to local government and the European electorate, and to democracy. I believe that they are doing it on behalf of the Liberal Democrats in the north-west, and that they should be ashamed of themselves.
    Mr. Redwood: It is true that postal ballots increase turnout, so why have the Government not proposed universal postal ballots for this election?
    Mr. Barron: As the right hon. Gentleman knows, we are talking about a pilot. We have had this debate time and again. On 8 March he intervened on me to say that he was not so sure about postal ballots. He said:
    "such a widespread experiment cannot proceed until the real issues of impersonation, pressure and fraud are dealt with."—[Official Report, 8 March 2004; Vol. 418, c. 1308.]
    As I said then, most of the arguments against an all-postal ballot for any one, three or four regions could be used to oppose postal ballots in general.
    I have seen this in action in a small way. I think that participation is good and healthy, and I do not think that one political party will be affected more than another. In our last debate, I said that if the tide was against a political party, it would drown more quickly. That is especially true if the tide is stronger than usual.
    All the ping-pong is wrong. My hon. Friend the Member for Dumfries (Mr. Brown) said that the other place had challenged this House three times between 1979 and 1997. When I was elected in 1983, it was felt that a big majority was unhealthy and bad for democracy. I cannot remember the other place challenging that Government. It was all about party politics then, and we heard about not frustrating the will of the people. It seems to me that in considering this Bill. we could frustrate the will of the people.
    I do not know whether Ministers agree with my analysis, but my answer to the questions "Why today?" and "Why the north-west?" would be this. It is simple and logical to involve the north-west in June, because we all know that in October the north-west will vote in an all-postal ballot on whether to have a regional assembly. One thing that can be said of the logic is that it is consistent with what the Electoral Commission has said many times. Playing the hokey-cokey by having all-postal votes and then returning to the old system will denigrate electoral politics in this country, and be bad for turnouts. That is what Opposition Members and those in the other place propose, and they are wrong.
    Mr. Heath: Welcome to Groundhog Day, Madam Deputy Speaker. We are going through all the same arguments in the same way, with no more clarity or logic than before.
    The right hon. Member for Rother Valley (Mr. Barron) may find this odd, but I agreed with a great deal of what he said. He suggested that encouraging more people to vote was a good thing; I agree. He said that all-postal ballots appeared, on the basis of the evidence so far, to increase the number of votes; I agree. He said that
    1302
    it was right to organise pilot schemes so that we could assess how we might expand the process; I agree. He said that he did not believe that the democratic outcome of the elections would be affected; I agree, on the basis of the evidence that we have seen so far. He said that it was wrong for areas that had already had all-postal ballots to be prevented from having them this year. That is exactly the position in which my constituents will find themselves as a result of the Bill, which he supports. It will make it illegal for them to have an all-postal ballot in the European elections and the local authority elections in June. They had one last time because my Liberal Democrat-controlled authority allowed the Government's interests to be met.
    There is much on which the right hon. Gentleman and I agree; where we disagree is on the fundamental issue of who makes the recommendations on which we reach our decisions. We have said all along that we should use the Electoral Commission as an independent arbiter because that is safest in a democratic society.
    Mr. Watts: Will the hon. Gentleman give way?
    Mr. Heath: Not yet; the hon. Gentleman can intervene when he has listened to my argument.
    The safest option is for us to use the independent arbiter established by the Government, unless there are strong reasons for ignoring its advice. It would have to involve a consensus extending beyond any single party in this House. Our position has been consistent. When the Electoral Commission said that it could positively recommend only two regions, we said, "Fair enough—two regions will be involved." When it reviewed the situation and said that it could accept a third region, Yorkshire and Humberside, we went along with that and, in another place, tabled an amendment to extend the range of the scheme.
    6 pm
    Mr. Barron: My simple question is whether, if the Electoral Commission said that the electoral returning officer in the north-west should go ahead with a pilot there, the hon. Gentleman would believe that there should be a pilot in the north-west. That is the opposite argument to that used by his noble Friends in the other place.
    Mr. Heath: That is precisely not the case. The right hon. Gentleman will remember that when we last debated this issue the question was that the pilot areas should comprise those that the Electoral Commission could positively recommend, with no stipulation about how many there should be. The Government rejected that option and he voted against it, as he was not prepared to accept it.
    Andy Burnham: Does the fact that the Electoral Commission made a firm recommendation on two regions and said that others were potentially suitable not suggest to the hon. Gentleman that it was inviting the Government to make recommendations on which further regions should be included?
    Mr. Heath: I hope that the hon. Gentleman has by now read the most recent letter from the Electoral

    1303
    Commission, which makes it quite clear that that is not what it said. The commission said that it could not positively recommend the other regions, and it placed in third position, as runner up, Scotland, whose merits the Government have not for one moment appeared to consider. Instead, they have chosen two other regions.
    Mr. Russell Brown rose—
    Mr. Heath: I shall not give way, because I should like to make a little more progress.
    An important constitutional matter is involved in this debate. Much play has been made of the fact that this is an example of the unelected House acting as a block on the settled will of the elected House. Setting aside for the moment the fact that some of us strongly believe that the other place should not be an unelected House and are waiting rather impatiently for the Government to do something about that rather than simply wringing their hands because the Prime Minister will not agree with his party on the subject, do we not have to consider the basic constitutional issue that the almost paramount duty of the other place in a bicameral system is to protect our constitutional arrangements if they are under threat of abuse? If a future Government decided, on their own majority and without the support of any Opposition parties, that they wished to abolish or postpone elections or change the voting system off their own bat, I hope that every single Labour Member would expect the Lords to take an interest in that and to protect the constitution of this country, unwritten though it is.
    Andrew Bennett: Will the hon. Gentleman think carefully about the problem facing all those who will have to administer the election in the north-west? If his proposals went through, they would have to have a traditional election in which a large number of people would apply for postal votes because they were angry—leading to an exceptionally high number of postal votes. To run the two systems together is particularly difficult for electoral officers, so would it not be sensible to accept one system? It will be implemented at the very last minute, and it should be a postal system.
    Mr. Heath: We should not be in this position. The Government let the Bill lie on the Table for two months and did nothing with it. They then decided that everything had to be done in a hurry, and their position has become absurd. They jeopardised all the arrangements that returning officers have to make, including the printing of ballot papers. I am concerned about the Government's conduct.
    Chris Bryant: May I return the hon. Gentleman to the point that he made a few moments ago? He asked what would happen if a Government proposed to suspend elections indefinitely or for a considerable period, but I am sure that he knows, because it is a piece of Liberal legislation, that the Parliament Act 1911 specifically recommends which systems arise if a Government want to change the date of a general election. That is clear. Surely, the point is that we need a new Parliament Act to legislate properly on arrangements between the other
    1304
    place and this Chamber. This ping-pong, which completely flouts the Salisbury convention, brings the whole parliamentary system into disrepute.
    Mr. Deputy Speaker (Sir Alan Haselhurst): Order. For an intervention, that was an extremely long speech, and it took us further and further away from the narrower point that is at the heart of this matter.
    Mr. Heath: I take your advice on that, Mr. Deputy Speaker. The other place has not only a perfect right but a duty to lay a constraining hand on this House if a single party in it chooses to ignore the advice of the Electoral Commission and other parties represented in this Chamber. That is an important constitutional issue to which we must return at another stage.
    What is so bizarre about the whole situation is that, as the Bill stands, the Government have what they asked for. It is like a toddler in a supermarket who says, "I want three lollies. I want three lollies". The sensible mother says, "No, you can have two lollies the third would make you sick." The child throws all its toys out the pram and has an almighty tantrum, and eventually the parent reconsiders and says, "All right, all right; you can have three." What is the response of the toddler? He throws all his toys out the pram again and says, "I want four now. I want four. Three isn't good enough."
    How can we deal with a Government who behave in that way? The Under-Secretary's embarrassment is palpable, because neither he nor the Lord Chancellor is running this show. How demeaning it is for the Lord Chancellor—the Secretary of State for Constitutional Affairs—to have his actions constrained by the Deputy Prime Minister. It is the Deputy Prime Minister who goes along to talk to the Electoral Commission. That is nothing to do with his brief, but he chooses to do so. He is the one who writes letters to the commission—nothing to do with him, but he does so. He is the one who sits in on our debates and makes absurd comments from a sedentary position. They are nothing to do with him, but he does so.
    Mr. Leslie rose
    Mr. Heath: The Minister is going to say that he is not demeaned by that situation. He will have to give a pretty clear explanation of why not.
    Mr. Leslie: The Deputy Prime Minister has responsibility for local government. The June elections are for local government seats, so surely it is right for the Deputy Prime Minister to take an interest in them. Does the hon. Gentleman not recognise that the Deputy Prime Minister is elected, like all other Members in this House? Does the hon. Gentleman not see any virtue in the fact that we are elected, and should have our will and the decisions that we make in this House of Commons upheld?
    Mr. Heath: We are the masters now. The Minister has official responsibility for electoral arrangements, yet another Department interferes in everything that he does and says that he cannot have what he originally asked for. That is not joined-up government; it is

    1305
    bullying by the Deputy Prime Minister and the Labour party for their own objectives. That is what we object to so strongly.
    Mr. Bercow: The hon. Gentleman's characterisation of the Minister's lickspittle conduct is extremely effective. Does he agree that the historical musings of the hon. Member for Rhondda (Chris Bryant) about the Salisbury convention are wholly inapplicable in this case given the absence of a manifesto commitment? Does he recall that, on any of the three occasions during the Conservative government highlighted by the hon. Member for Dumfries (Mr. Brown), the Labour party complained about the behaviour of the upper House? I do not recall that.
    Mr. Heath: The hon. Gentleman invites me to do two things. First, he invites me to engage in a discussion with the hon. Member for Rhondda that Mr. Deputy Speaker has said is beyond the scope of this debate, so I shall not do so. Secondly, he invites me to support the view that another place without an elected mandate ought to frustrate the will of this House when it considers matters other than the constitution and the protection of human rights and liberty, which I think are its proper province. I am not prepared to do that, because I want reform of the other place and will not defend its present arrangements.
    I will, however, defend the right of another place, as constituted, to look dispassionately at legislation before it and to take a view—which is nothing to do with my arranging my troops at the other end. For heaven's sake, I could not even arrange my colleagues behind me. If more than one were here at the moment, I might try to do so.
    I am not in a position to tell my colleagues in the other place how to vote; they will reach their own judgment. At the moment, their judgment is that the Government are engaged in a process of bullying and inappropriate action that is against all the tenets of our constitutional settlement, and they are right to take that view. I just wish that the Government would accept that they have the Bill that they asked for in the first place, and that they would please stop throwing their toys out of the pram, and behave like a grown-up Government.
    Mr. Andrew Miller: I did not intend to speak in this debate, but I am moved to do so by some interesting distortions of the truth. I challenge any Member who served on the Standing Committee considering the Bill that gave birth to the Electoral Commission, or who participated in any of the subsequent stages, to tell me that any Member, at any stage, moved an amendment that sought to give the commission the power to instruct. [Interruption.] Stop chuntering over there! That never happened, and it was never the intention of this House—or of the upper House, so far as I can see—that the commission be given a power to instruct. It is there to give advice, and advice it has given—to the Government and to this House.
    Sir Robert Smith: Perhaps the hon. Gentleman should have been present in Committee Room 11, where the Minister said that the Government were taking
    1306
    instructions from the commission in respect of electoral boundaries because they were required to do so by European legislation. So it has already been stated in legislation that the commission should be supreme, and that it should be obeyed when giving advice in this area. We are saying that when such advice is given, it should be taken extremely seriously.
    Mr. Miller: The hon. Gentleman is right to raise the subject of boundaries, but it has nothing to do with the procedural process.
    The hon. Member for Somerton and Frome (Mr. Heath) said that the Lords have a duty to protect the constitution. There is one fundamental and overriding constitutional point that must take precedence over all else: that only one House is elected. We have yet to have in its entirety the debate on the nature of the second Chamber, what its powers ought ultimately to be, and whether, indeed, it should even exist. A few Members present voted for its abolition—[Interruption.] I hear some cheers from behind me. At this point the second Chamber has no ability constitutionally to put aside the powers of this House.
    As my right hon. Friend the Member for Rother Valley (Mr. Barron) hinted, the Conservatives are riding on the coat-tails of the Liberal Democrats—in this Chamber, in the upper House and, indeed, in the north-west. They have no policy of their own. They are looking for convenient electoral gain, and they seek to achieve it through a mechanism that would minimise turnout.
    Mr. Borrow: Does my hon. Friend find it extraordinary that not a single north-west Liberal Democrat Member is in the Chamber to explain why they are preventing their constituents from voting by post in June?
    Mr. Miller: My hon. Friend makes a powerful point, and what my right hon. Friend the Member for Rother Valley said was spot on. At local government level, Liverpool city council seems terrified of the concept of higher turnout. In what better place could we campaign for higher turnout than in Liverpool, where, regrettably, turnout has been far too low for many years? So far as Liverpool city council is concerned, the Liberal Democrats are frightened of a higher turnout.
    6.15 pm
    Andy Burnham: We are probably 10 weeks away from the elections. Does my hon. Friend agree that the most important voices now belong not to those in this Chamber or in the one down the Corridor, or to those in the Electoral Commission, but to the returning officers in the north-west and the regional returning officer? According to my information, they are all in favour of postal voting going ahead.
    Mr. Miller: My hon. Friend makes a very strong point and any right-thinking person will agree with him, but that does not mean that he will get unanimous support in this Chamber.
    I congratulate the hon. Member for Somerton and Frome on distancing himself last week from the outrageous statement of the Liberal Democrat Member of the European Parliament, Mr. Chris Davies, that

    1307
    people who want postal voting are lazy. Why does the hon. Gentleman not demonstrate his anger at that statement by voting with us tonight?
    Sir Patrick Cormack: Before making one or two brief points, I should point out to the hon. Member for Leigh (Andy Burnham) that elevating paid officials—the electoral registration officers—above Members of either House is rather strange parliamentary logic.
    The other place has as much right to take the stand that it has taken on this issue as it had to throw out Mrs. Thatcher's War Crimes Bill. One should remind Labour Members that the House of Lords has behaved with a degree of vigour and robustness, no matter which party has been in government. All that it is seeking to do on this occasion is to look properly at what the Electoral Commission is recommending. No matter what sophistry Labour Members indulge in, the fact is that the commission has said that it does not believe that there should be a pilot in the north-west.
    Andy Burnham: Will the hon. Gentleman give way?
    Sir Patrick Cormack: Not yet. The commission's statement is a fact, whatever arguments Labour Members might advance and whatever the Minister might say. Indeed, he has changed his mind, as my hon. Friend the Member for Surrey Heath (Mr. Hawkins) pointed out. The Minister took one line in December and is now taking a very different one although, admittedly, he has taken it for the past eight weeks. In taking that very different line, he is flying in the face of the commission's advice. This House is right to listen to that advice, and it would be far better advised to say, "Let us have three pilots," which would constitute a concession on the part of many. Frankly, I would rather have no pilots at all. I do not like the idea of compulsory postal voting, but I recognise the fact that the commission has been asked to make some recommendations, and that the figure of two pilots has been increased to three. However, I recognise—I ask the Minister to do likewise—that the commission does not believe that the north-west should have a compulsory postal ballot.
    Andy Burnham rose—
    Sir Patrick Cormack: Whatever the hon. Gentleman might say, he cannot change that fact. The advice is clear and unequivocal, in letters from the chairman of the commission, Mr. Sam Younger. It is a great pity that Mr. Younger, in whom I have great confidence, has been placed in this extremely difficult and embarrassing position.
    Mr. Redwood: Will my hon. Friend give way?
    Sir Patrick Cormack: I shall certainly give way to my right hon. Friend.
    Mr. Redwood: Does my hon. Friend not think that the Minister should apologise to the commission and to the returning officers who have been left in muddle, owing to this Government's delay and bungling?
    Sir Patrick Cormack: Not for the first time, I agree entirely with my right hon. Friend, whose reputation for
    1308
    incisive sagacity is exceeded by no one. Mr. Sam Younger and his colleagues, who seek to serve this country and the electoral system with objective, impartial advice, should receive an apology. We are now moving, because of the ridiculous timing—
    It being one hour after the commencement of proceedings on the Bill, MR. DEPUTY SPEAKER put forthwith the Question already proposed from the Chair, pursuant to Order [8 March].
    The House divided: Ayes 307, Noes 172.

    Division No. 112]

    [6:20 pm

    AYES

    Ainger, Nick

    Coleman, lain

    Allen, Graham

    Colman, Tony

    Anderson, Janet(Rossendale &

    Cook, Frank (Stockton N)

    Darwen)

    Cooper, Yvette

    Armstrong, rh Ms Hilary

    Corbyn, Jeremy

    Atherton, Ms Candy

    Corston, Jean

    Atkins, Charlotte

    Cousins, Jim

    Austin, John

    Crausby, David

    Baird, Vera

    Cruddas, Jon

    Banks, Tony

    Cryer, John(Homchurch)

    Barnes, Harry

    Cunningham, rh Dr. Jack

    Barron, rh Kevin

    (Copeland)

    Battle, John

    Cunningham, Jim(Coventry S)

    Bayley, Hugh

    Cunningham, Tony(Workington)

    Beard, Nigel

    Dalyell, Tam

    Begg, Miss Anne

    Davey, Valerie(Bristol W)

    Benn, rh Hilary

    David: Wayne

    Bennett, Andrew

    Davidson, Ian

    Berry, Roger

    Davies, Geraint(Croydon C)

    Betts, Clive

    Dawson, Hilton

    Blackman, Liz

    Denham, rh John

    Blears, Ms Hazel

    Dhanda, Parmjit

    Blizzard, Bob

    Dismore, Andrew

    Blunkett, rh David

    Dobbin, Jim(Heywood)

    Boateng, rh Paul

    Dobson, rh Frank

    Borrow, David

    Donohoe, Brian H.

    Bradley, rh Keith(Withington)

    Doran, Frank

    Bradley, Peter(The Wrekin)

    Dowd, Jim(Lewisham W)

    Bradshaw, Ben

    Drew, David(Stroud)

    Brennan, Kevin

    Eagle, Angela(Wallasey)

    Brown, rh Nicholas(Newcastle E

    Eagle, Maria(L'pool Garston)

    Wallsend)

    Ellman, Mrs Louise

    Brown, Russell(Dumfries)

    Ennis, Jeff(Barnsley E)

    Browne, Desmond

    Farrell y, Paul

    Bryant, Chris

    Field, rh Frank(Birkenhead)

    Buck, Ms Karen

    Fisher, Mark

    Burden, Richard

    Fitzpatrick, Jim

    Burgon, Colin

    Flint, Caroline

    Burnham, Andy

    Flynn, Paul(Newport W)

    Cairns, David

    Follett, Barbara

    Campbell, Alan(Tynemouth)

    Foster, rh Derek

    Campbell, Mrs Anne(C'bridge)

    Foster, Michael(Worcester)

    Campbell, Ronnie(Blyth V)

    Foster, Michael Jabez(Hastings

    Caplin, Ivor

    &Rye)

    Casale, Roger

    Gapes, Mike(llford S)

    Cawsey, Ian(Brigg)

    Gardiner, Barry

    Challen, Colin

    Gerrard, Neil

    Chapman, Ben(Wirral S)

    Gibson, Dr. Ian

    Chaytor, David

    Gilroy, Linda

    Clapham, Michael

    Godsiff, Roger

    Clark, Mrs Helen(Peterborough)

    Goggins, Paul

    Clark, Dr. Lynda(Edinburgh

    Griffiths, Jane(Reading E)

    Pentlands)

    Griffiths, Nigel(Edinburgh S)

    Clark, Paul(Gillingham)

    Griffiths, Win(Bridgend)

    Clarke, rh Tom(Coatbridge &

    Grogan, John

    Chryston)

    Hain, rh Peter

    Clelland, David

    Hall, Mike(Weaver Vale)

    Clwyd, Ann(Cynon V)

    Hall, Patrick(Bedford)

    Coffey, Ms Ann

    Hamilton, David(Midlothian)

    Cohen, Harry

    Hanson, David

    1309

    Harris, Tom(Glasgow Cathcart)

    McWilliam, John

    Havard, Dai(Merthyr Tydfil &

    Mahmood, Khalid

    Rhymney)

    Mahon, Mrs Alice

    Healey, John

    Mallaber, Judy

    Henderson, Doug(Newcastle N)

    Mandelson, rh Peter

    Henderson, Ivan(Harwich)

    Mann, John(Bassetlaw)

    Hendrick, Mark

    Marris, Rob(Wolverh'ton SW)

    Heppell, John

    Marsden, Gordon(Blackpool S)

    Hesford, Stephen

    Marshall, David(Glasgow

    Hewitt, rh Ms Patricia

    Shettleston)

    Heyes, David

    Marshall, Jim(Leicester 5)

    Hinchliffe, David

    Martlew, Eric

    Hodge, Margaret

    Merron, Gillian

    Hood, Jimmy(Clydesdale)

    Michael, rh Alun

    Hope, Phil(Corby)

    Milburn, rh Alan

    Hopkins, Kelvin

    Miliband, David

    Howarth, rh Alan(Newport E)

    Miller, Andrew

    Howells, Dr. Kim

    Moffatt, Laura

    Hoyle, Lindsay

    Mole, Chris

    Hughes, Beverley(Stretford &

    Moonie, Dr. Lewis

    Urmston)

    Moran, Margaret

    Hughes, Kevin(Doncaster N)

    Morris, rh Estelle

    Humble, Mrs Joan

    Mountford, Kali

    Hurst, Alan(Braintree)

    Mudie, George

    Hutton, rh John

    Mullin, Chris

    Iddon, Dr. Brian

    Murphy, Denis(Wansbeck)

    Illsley, Eric

    Murphy, Jim(Eastwood)

    Irranca-Davis, Huw

    Naysmith, Dr. Doug

    Jackson, Glenda(Hampstead &

    Norris, Dan(Wansdyke)

    Highgate)

    O'Brien, Bill(Normanton)

    Jackson, Helen(Hillsborough)

    O'Brien, Mike(N Warks)

    Jenkins, Brian

    O'Hara, Edward

    Johnson, Alan(Hull W)

    Diner, Bill

    Jones, Helen(Warrington N)

    O'Neill, Martin

    Jones, Jon Owen(Cardiff C1

    Organ, Diana

    Jones, Kevan(N Durham)

    Palmer, Dr. Nick

    Jones, Lynne(Selly Oak)

    Perham, Linda

    Jowell, rh Tessa

    Picking, Anne

    Joyce, Eric(Falkirk W)

    Pickthall, Colin

    Keeble, Ms Sally

    Pike, Peter(Burnley)

    Keen, Alan(Feltham)

    Plaskitt, James

    Keen, Ann(Brentford)

    Pollard, Kerry

    Khabra, Piara S.

    Pond, Chris(Gravesham)

    Kidney, David

    Pope, Greg(Hyndburn)

    Kilfoyle, Peter

    Pound, Stephen

    King, Andy(Rugby)

    Prentice, Ms Bridget(Lewisham

    King, Ms Oona(Bethnal Green &

    E)

    Bow)

    Prentice, Gordon(Pendle)

    Knight Jim(S Dorset)

    Primarolo, rh Dawn

    Kumar, Dr. Ashok

    Purchase, Ken

    Ladyman, Dr. Stephen

    Purnell, James

    Lammy, David

    Quin, rh Joyce

    Laxton, Bob(Derby N)

    Quinn, Lawrie

    Lazarowicz, Mark

    Rammell, Bill

    Lepper, David

    Rapson, Syd(Portsmouth N)

    Leslie, Christopher

    Reed, Andy(Loughborough)

    Levitt, Tom(High Peak)

    Reid, rh Dr. John(Hamilton N &

    Lewis, Terry(Worsley)

    Bellshill)

    Linton, Martin

    Robertson, Angus(Moray)

    Lloyd, Tony(Manchester C)

    Robertson, John(Glasgow

    Love, Andrew

    Anniesland)

    Lucas, Ian(Wrexham)

    Robinson, Geoffrey(Coventry

    McAvoy, Thomas

    NW)

    McCabe, Stephen

    Rooney, Terry

    McCafferty, Chris

    Ross, Ernie(Dundee W)

    McDonagh, Siobhain

    Roy, Frank(Motherwell)

    MacDonald, Calum

    Ruane, Chris

    McDonnell, John

    Ruddock, Joan

    MacDougall, John

    Russell, Ms Christine(City of

    Mclsaac, Shona

    Chester)

    Mackinlay, Andrew

    Ryan, Joan(Enfield N)

    McNamara, Kevin

    Salter, Martin

    McNulty, Tony

    Sarwar, Mohammad

    MacShane, Denis

    Savidge, Malcolm

    Mactaggart, Fiona

    Sedgemore, Brian

    McWalter, Tony

    Sheerman, Barry

    1310

    Sheridan, Jim

    Turner, Dr. Desmond(Brighton

    Short, rh Clare

    Kemptown)

    Simpson, Alan(Nottingham S)

    Twigg, Derek(Halton)

    Skinner, Dennis

    Tynan, Bill(Hamilton S)

    Smith, rh Andrew(Oxford E)

    Vis, Dr. Rudi

    Smith, rh Chris(Islington S &

    Walley, Ms Joan

    Finsbury)

    Ward, Claire

    Smith, Geraldine(Morecambe &

    Wareing, Robert N.

    Lunesdale)

    Watson, Tom(W Bromwich E)

    Smith, Jacqui(Redditch)

    Watts, David

    Smith, Llew(Blaenau Gwent)

    White, Brian

    Soley, Clive

    Whitehead, Dr. Alan

    Squire, Rachel

    Wicks, Malcolm

    Starkey, Dr. Phyllis

    Williams, rh Alan(Swansea W)

    Steinberg, Gerry

    Williams, Betty(Conwy)

    Stewart, David(Inverness E &

    Williams, Hywel(Caernarfon)

    Lochaber)

    Winnick, David

    Stewart, Ian(Eccles)

    Winterton, Ms Rosie(Doncaster C)

    Stinchcombe, Paul

    Wishart Pete

    Stoate, Dr. Howard

    Wood, Mike(Batley)

    Stuart, Ms Gisela

    Woodward, Shaun

    Sutcliffe, Gerry

    Woolas, Phil

    Taylor, rh Ann(Dewsbury)

    Wright, Anthony D.(Gt

    Thomas, Gareth(Clwyd W)

    mouth)

    Timms, Stephen

    Wright, David(Telford)

    Tipping, Paddy

    Wyatt, Derek

    Touhig, Don(Islwyn)

    Trickett, Jon

    Tellers for the Ayes:

    Truswell, Paul

    Mr. Fraser Kemp and

    Turner, Dennis(Wolverh'ton SE)

    Vernon Coaker

    NOES

    Ainsworth, Peter(E Surrey)

    Davies, rh Denzil(Llanelli)

    Allan, Richard

    Davies, Quentin(Grantham &

    Amess, David

    Stamford)

    Ancram, rh Michael

    Djanogly, Jonathan

    Arbuthnot, rh James

    Duncan, Alan(Rutland)

    Atkinson, David(Bour'mth E)

    Duncan, Peter(Galloway)

    Atkinson, Peter(Hexham)

    Evans, Nigel

    Bacon, Richard

    Fabricant, Michael

    Baldry, Tony

    Fallon, Michael

    Barker, Gregory

    Field, Mark(Cities of London &

    Baron, John(Billericay)

    Westminster)

    Barrett, John

    Flook, Adrian

    Beith, rh A. J.

    Forth, rh Eric

    Bellingham, Henry

    Foster, Don(Bath)

    Bercow, John

    Gale, Roger(N Thanet)

    Beresford, Sir Paul

    Gamier, Edward

    Blunt, Crispin

    Gibb, Nick(Bognor Regis)

    Boswell, Tim

    Goodman, Paul

    Bottomley, Peter(Worthing W)

    Gray, James(N Wilts)

    Brady, Graham

    Grayling, Chris

    Breed, Colin

    Green, Matthew(Ludlow)

    Brooke, Mrs Annette L.

    Greenway, John

    Browning, Mrs Angela

    Gummer, rh John

    Bruce, Malcolm

    Hammond, Philip

    Burns, Simon

    Burnside, David

    Harris, Dr. Evan(Oxford W &

    Burstow, Paul

    Abingdon)

    Butterf ill, Sir John

    Harvey, Nick

    Cable, Dr. Vincent

    Hawkins, Nick

    Cameron, David

    Hayes, John(S Holland)

    Campbell, rh Sir Menzies(NE

    Heald, Oliver

    Fife)

    Heath, David

    Chapman, Sir Sydney(Chipping

    Hendry, Charles

    Barnet)

    Hermon, Lady

    Chidgey, David

    Hoban, Mark(Fareham)

    Chope, Christopher

    Holmes, Paul

    Clappison, James

    Horam, John(Orpington)

    Clarke, rh Kenneth(Rushcliffe)

    Howard, rh Michael

    Clifton-Brown, Geoffrey

    Howarth, Gerald(Aldershot)

    Collins, Tim

    Jack, rh Michael

    Conway, Derek.

    Jackson, Robert(Wantage)

    Cormack, Sir Patrick

    Jenkin, Bernard

    Cran, James(Beverley)

    Johnson, Boris(Henley)

    1311

    Kennedy, rh Charles(Ross Skye &

    Ruffley, David

    Inverness)

    Russell, Bob(Colchester)

    Key, Robert(Salisbury)

    Sanders, Adrian

    Kirkbride, Miss Julie

    Sayeed, Jonathan

    Kirkwood, Sir Archy

    Selous, Andrew

    Knight, rh Greg(E Yorkshire)

    Shephard, rh Mrs Gillian

    Laing, Mrs Eleanor

    Shepherd, Richard

    Lait, Mrs Jacqui

    Simmonds, Mark

    Lamb, Norman

    Simpson, Keith(M-Norfolk)

    Lensley, Andrew

    Smith, Sir Robert(INAb'd'ns &

    Laws, David(Yeovil)

    Kincardine)

    Leigh, Edward

    Spelman, Mrs Caroline

    Liddell-Grainger, Ian

    Spink, Bob(Castle Point)

    Lilley, rh Peter

    Spring, Richard

    Loughton, Tim

    Stanley, rh Sir John

    Luff, Peter(M-Worcs)

    Steen, Anthony

    McIntosh, Miss Anne

    Streeter, Gary

    Mackay, rh Andrew

    Stunell, Andrew

    Maclean, rh David

    Swayne, Desmond

    McLoughlin, Patrick

    Swire, Hugo(E Devon)

    Malins, Humfrey

    Syms, Robert

    Maples, John

    Tapsell, Sir Peter

    Marsden, Paul(Shrewsbury &

    Taylor, Ian(Esher)

    Atcham)

    Taylor, John(Solihull)

    Mates, Michael

    Taylor, Matthew(Truro)

    Mawhinney, rh Sir Brian

    Taylor, Dr. Richard(Wyre F)

    Mercer, Patrick

    Taylor, Sir Teddy

    Mitchell, Andrew(Sutton

    Teather, Sarah

    Coldfield)

    Tredinnick, David

    Moore Michael

    Turner, Andrew(Isle of Wight)

    Moss, Malcolm

    Tyler, Paul(N Cornwall)

    Murrison, Dr. Andrew

    Tyrie, Andrew

    Norman, Archie

    Walter, Robert

    Oaten, Mark(Winchester)

    Waterson, Nigel

    O'Brien, Stephen(Eddisbury)

    Watkinson, Angela

    Opik, Lembit

    Webb, Steve(Northavon)

    Osborne, George(Tatton)

    Whittingdale, John

    Ottaway, Richard

    Wiggin, Bill

    Page, Richard

    Willetts, David

    Paice, James

    Willis, Phil

    Paterson, Owen

    Wilshire, David

    Pickles, Eric

    Winterton, Ann(Congleton)

    Portillo, rh Michael

    Winterton, Sir Nicholas

    Prisk, Mark(Hertford)

    (Macclesfield)

    Pugh, Dr. John

    Yeo, Tim(S Suffolk)

    Randall, John

    Young, rh Sir George

    Redwood, rh John

    Younger-Ross, Richard

    Rendel, David

    Tellers for the Noes:

    Robathan, Andrew

    Hugh Robertson and

    Robertson, Laurence(Tewk'b'ry)

    Mr. Mark Francois

    Question accordingly agreed to.
    Lords amendment disagreed to.
    Committee appointed to draw up Reasons to be assigned to the Lords for disagreeing to certain of their amendments to the Bill: Mr. Nick Hawkins. Mr. David Heath, Mr. Christopher Leslie, Laura Moffat and Ms Bridget Prentice; Three to be the quorum of the Committee.—[Mr. Heppell.]
    To withdraw immediately.
    Reasons for disagreeing to certain Lords amendments reported, and agreed to; to be communicated to the Lords.

Employment Relations Bill
As amended in the Standing Committee, considered.
Employment Relations Bill
  New Clause 4

    DISAPPLICATION OF QUALIFYING PERIOD AND UPPER AGE LIMIT FOR UNFAIR DISMISSAL
    'For section 154 of the 1992 Act substitute—
    "154 Disapplication of qualifying period and upper age limit for unfair dismissal
    Sections 108(1) and 109(1) of the Employment Rights Act 1996 (qualifying period and upper age limit for unfair dismissal protection) do not apply to a dismissal which by virtue of section 152 or 153 is regarded as unfair for the purposes of Part 10 of that Act.".'.—[Mr. Sutcliffe.]
    Brought up, and read the First time.
    6.36 pm
    The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe)I beg to move, That the clause be read a Second time.The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe):I beg to move, That the clause be read a Second time.
    Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss new clause 15—Burden of proof on employer to show reason for dismissal in trade union related cases—

    Section 154 of the 1992 Act (exclusion of requirement as to qualifying period, etc) is amended as follows.

    (2) After subsection (2) insert—

    "(3) On a complaint under section 152 or section 153 it shall be for the employer to show the reason (or, if more than one, the principal reason) for the dismissal.".'.
    Mr. Sutcliffe: Both new clauses relate to protections provided for by section 152 of the Trade Union and Labour Relations (Consolidation) Act 1992 against dismissal on grounds of trade union membership or activities. Section 153 of the 1992 Act provides similar protections against being unfairly selected for redundancy on grounds of trade union membership or activities.
    Currently, those important protections apply to all employees. In other words, the usual qualifying period of one year's service for bringing an unfair dismissal application does not apply in those cases. The usual upper age limit for unfair dismissal does not apply either. The disapplication of the qualifying period and the upper age limit is achieved by section 154 of the 1992 Act. It works by disapplying the qualifying period and the upper age limit "if it is shown" that the sole or principal reason for dismissal, or selecting the employee for redundancy, was an inadmissible reason under section 152 of the 1992 Act.
    The protections against dismissal on trade union-related grounds are long-standing rights. Indeed, they were among the first "day one" employment rights ever introduced, in the mid-1970s. Perhaps as a result, the language used in section 154 to disapply the qualifying period and upper age limit is peculiar to that section. It has not been followed by later provisions that have created day-one rights against unfair dismissal on other grounds.

    1313
    The wording of section 154 has caused problems. It has been interpreted by the courts as placing the onus on the employee that is complaining of unfair dismissal and who has under a year's service, to show that the employer's decision in dismissing him was taken for an inadmissible trade union reason. In other words, the burden of proof is on the employee to show the employer's reason for dismissal. That is intrinsically difficult for the employee to do, given his lack of detailed knowledge of the employer's behaviours and motivations. That approach contrasts sharply with all other cases of unfair dismissal where the burden of proof is on the employer to show the reason for the dismissal.
    In other words, the peculiar wording of section 154 has created an anomaly. Indeed, the burden of proof would vary where two employees—one with more than 12 months' service and the other with six months' service—complained of being dismissed for belonging to a trade union. In the first case, the burden of proof would rest on the employer and in the second it would rest on the employee. There are no justifiable reasons for such differential treatment. It is basically an accident of history.
    New clause 4 will rectify the anomaly by replacing the current version of section 154 with a new one that uses different wording drawn from other day-one rights to disapply the qualifying period and upper age limit. The new wording ensures that the burden of showing what the reason for dismissal was will now rest on the employer.
    New clause 15 also attempts to rectify that anomaly by inserting a new subsection into section 154 that provides that the burden of proof for the reason for the dismissal is on the employer. It does not, however, replace the "it is shown" wording that has caused difficulties for the courts. For that reason, the wording of new clause 4 is to be preferred.
    The number of individuals affected by the change is small. I am glad to say that cases of alleged dismissal on trade union grounds are few, but that is no reason why we should leave the current imperfect wording of section 154 as it is.
    Mr. Henry Bellingham: As the Minister pointed out, the new clause reverses the burden of proof and we do not necessarily have any difficulty with that, but we are very unhappy at the complete lack of consultation on the new clause with any of the key bodies.
    The Minister said that the so-called anomaly dated back to 1992, and if his legal advice has persuaded him that there is indeed an anomaly he is right to correct it. However, although there has been a lot of consultation on the Bill—it was published a long, long time ago and there have been various White Papers and endless discussions with organisations and bodies—most of the employer organisations did not see the new clauses until today. The Government tabled the new clauses only on Wednesday and did not tell those organisations, so they had only two and a bit working days to discover that the provisions had been tabled, which is not good enough.
    1314
    The Minister made great play of the fact that the Bill was about partnership and that there was a consensus-building process. He talked about always getting everybody on board and discussing things with all parties and when we began our consideration of the Bill the atmosphere was reasonably positive, because everyone felt that they had been consulted. However, as my hon. Friend the Member for Eddisbury (Mr. O'Brien) pointed out, the Government are hanging new provisions on this measure as though it were a Christmas tree. Such provisions could do not only positive things, as the Minister claims for the new clause, but many other things. The Minister told us not to panic because the Government would do nothing that was untoward or would break the spirit of consensus built up with the various organisations, yet unfortunately that is exactly what has happened.
    We are not especially enamoured of the changing of the burden of proof under new clause 4. As the Minister explains, it will be up to the employer to show that it was not trade union activity or involvement that led to either discipline or dismissal. He claims that there is an anomaly, but any change in the burden of proof is a serious matter, as it is a precious component of our legal system. Why did the Government not consult the employer organisations? Why were they left in the dark until this morning? He has created much ill will owing not to the substance of the new clause and the other proposals but to the lack of consultation.
    How many tribunal cases will be affected every year by the change in the burden of proof? That is a serious matter.
    Mr. John Gummer: Does my hon. Friend agree that when the Government make a superficially sensible proposal it is even more important to discuss it with those who have to deal with it? Although they think that they are producing something that will be very good, something might have been missed, which is why consultation is so important, even though most people might feel that the proposal seemed perfectly sensible.
    Mr. Bellingham: My right hon. Friend is right. He brings a huge amount of experience to the discussion, having done an excellent job not only when he served in the Minister's place some years ago but in more senior positions. The key is consultation—working things out with the various organisations. It is obvious that lawyers for various trade unions have been pushing the matter, so will the Minister tell the House why he did not properly consult the Institute of Directors, the Engineering Employers Federation, the British Chambers of Commerce and the CBI?
    John McDonnell: I welcome new clause 4, which is better worded than my proposed new clause 15. In the spirit of consensus, I merely point out that, in unfair dismissal cases that are trade union related, the new clause simply maintains consistency with other cases, where the burden of proof is with employers. It is on that basis that we should move forward. Whatever lack of consultation there may have been, there is general approval for such a provision and

    1315
    an awareness that it was required, especially since the case of Smith v. Hayle town council. It is an improvement in the law and should be greatly welcomed.
    Mr. Jonathan Djanogly: In relation to the comments that have just been made, I merely point out that although new clause 15 includes the words, "After subsection (2) insert", section 154 of the 1992 Act does not have a subsection (2).
    6.45 pm
    Mr. Sutcliffe: I am sorry that we have started off in a different vein from our time in Committee.
    The point about consultation was well made. We want to hold full consultation with everybody who is affected by the Bill, but Members will be aware that we held an important debate about the Wilson and Palmer judgment and its effect in bringing about significant changes in the rights to trade union membership. That also relates to issues such as those dealt with by new clause 4. The provision is not a bauble on a Christmas tree, as the hon. Member for North-West Norfolk (Mr. Bellingham) claimed earlier and during the debate on the programme motion last week. He ended his contribution to that debate by saying that he was not a happy camper, but I hope that we can make him a happy camper this evening by explaining that there were appropriate reasons for our proposals. A small number of tribunal cases are affected and I shall write to him with the number. In fact, we informed the CBI, the EEF and TUC that we would be tabling the provisions.
    I am grateful to my hon. Friend the Member for Hayes and Harlington (John McDonnell) for not pressing new clause 15. It is entirely sensible to put the burden of proof on employers for reasons that have been outlined and accepted, so I ask the House to accept the motion.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

  New Clause 5

    ADDITIONAL DUTIES ON EMPLOYERS INFORMED OF BALLOTS
    Paragraph 26 of Schedule A1 to the 1992 Act (duties of employer informed of requirement to arrange ballot on recognition etc) is amended in accordance with subsections (2) to (4).

    In sub-paragraph (1) for "three" substitute "five".

    After sub-paragraph (4) insert—

    "(4ZA) The fourth duty is to refrain from making any offer to any or all of the workers constituting the bargaining unit which—

    has or is likely to have the effect of inducing any or all of them not to attend any relevant meeting between the union (or unions) and the workers constituting the bargaining unit, and

    is not reasonable in the circumstances.

    (4ZB) The fifth duty is to refrain from taking or threatening to take any action against a worker solely or mainly on the grounds that he—

    attended or took part in any relevant meeting between the union (or unions) and the workers constituting the bargaining unit, or

    indicated his intention to attend or take part in such a meeting.

    1316

    (4ZC) A meeting is a relevant meeting in relation to a worker for the purposes of sub-paragraph (4ZA) and (4ZB) if—

    it is organised in accordance with any agreement reached concerning the second duty or as a result of a step ordered to be taken under paragraph 27 to remedy a failure to comply with that duty, and

    it is one which the employer is, by such an agreement or order as is mentioned in paragraph (a), required to permit the worker to attend.

    (4ZD) Without prejudice to the generality of the second duty imposed by this paragraph, an employer is to be taken to have failed to comply with that duty if—

    he refuses a request for a meeting between the union (or unions) and any or all of the workers constituting the bargaining unit to be held in the absence of the employer or any representative of his (other than one who has been invited to attend the meeting) and it is not reasonable in the circumstances for him to do so,

    he or a representative of his attends such a meeting without having been invited to do so,

    he seeks to record or otherwise be informed of the proceedings at any such meeting and it is not reasonable in the circumstances for him to do so, or

    he refuses to give an undertaking that he will not seek to record or otherwise be informed of the proceedings at any such meeting unless it is reasonable in the circumstances for him to do either of those things.

    (4ZE) The fourth and fifth duties do not confer any rights on a worker; but that does not affect any other right which a worker may have."

    For sub-paragraph (8) substitute—

    "(8) Each of the powers specified in sub-paragraph (9) shall be taken to include power to issue Codes of Practice—

    about reasonable access for the purposes of subparagraph (3), and

    about the fourth duty imposed by this paragraph.

    The powers are—

    the power of ACAS under section 199(1);

    the power of the Secretary of State under section 203(1)(a)."

    In paragraph 27(1) of that Schedule (remedial order in case of employer's failure to comply with duties under paragraph 26) for "three duties imposed" substitute "duties imposed on him".

    Paragraph 118 of that Schedule (duties of employer informed of requirement to arrange ballot on derecognition etc) is amended in accordance with subsections (6) to (8).

    In sub-paragraph (1) for "three" substitute "five".

    After sub-paragraph (4) insert—

    "(4A) The fourth duty is to refrain from making any offer to any or all of the workers constituting the bargaining unit which—

    has or is likely to have the effect of inducing any or all of them not to attend any relevant meeting between the union (or unions) and the workers constituting the bargaining unit, and

    is not reasonable in the circumstances.

    1317

    (4B) The fifth duty is to refrain from taking or threatening to take any action against a worker solely or mainly on the grounds that he—

    attended or took part in any relevant meeting between the union (or unions) and the workers constituting the bargaining unit, or

    indicated his intention to attend or take part in such a meeting.

    (4C) A meeting is a relevant meeting in relation to a worker for the purposes of sub-paragraph (4A) and (4B) if—

    it is organised in accordance with any agreement reached concerning the second duty or as a result of a step ordered to be taken under paragraph 119 to remedy a failure to comply with that duty, and

    it is one which the employer is, by such an agreement or order as is mentioned in paragraph (a), required to permit the worker to attend.

    (4D) Without prejudice to the generality of the second duty imposed by this paragraph, an employer is to be taken to have failed to comply with that duty if—

    he refuses a request for a meeting between the union (or unions) and any or all of the workers constituting the bargaining unit to be held in the absence of the employer or any representative of his (other than one who has been invited to attend the meeting) and it is not reasonable in the circumstances for him to do so,

    he or a representative of his attends such a meeting without having been invited to do so,

    he seeks to record or otherwise be informed of the proceedings at any such meeting and it is not reasonable in the circumstances for him to do so, or

    he refuses to give an undertaking that he will not seek to record or otherwise be informed of the proceedings at any such meeting unless it is reasonable in the circumstances for him to do either of those things.

    (4E) The fourth and fifth duties do not confer any rights on a worker; but that does not affect any other right which a worker may have."

    For sub-paragraph (8) substitute—

    "(8) Each of the powers specified in sub-paragraph (9) shall be taken to include power to issue Codes of Practice—

    about reasonable access for the purposes of subparagraph (3), and

    about the fourth duty imposed by this paragraph.

    (9)The powers are—

    the power of ACAS under section 199(1);

    the power of the Secretary of State under section 203(1)(a)."

    In paragraph 119(1) of that Schedule (remedial order in case of employer's failure to comply with duties under paragraph 118) for "three duties imposed" substitute "duties imposed on him".'.—[Mr. Sutcliffe.]

    Brought up, and read the First time.
    Mr. Sutcliffe: I beg to move, That the clause be read a Second time.
    Mr. Deputy Speaker: With this it will be convenient to discuss the following:
    Government new clause 6—Unfair practices in relation to recognition ballots.
    Government new clause 7—Unfair practices in relation to derecognition ballots.
    1318
    Government new clause 8—Unfair practices: power to make provision about periods before notice of ballot.
    New clause 2—Intimidation—
    'After paragraph 51 of Schedule A 1 to the 1992 Act insert—
    "Intimidation
    51A If during the union recognition procedure a union uses undue force or intimidating measures to get recognition then the CAC shall have the right to investigate this at the request of the employer or any worker and if such measures are found to have been used the CAC shall terminate the recognition procedure immediately.".'.
    Government amendments Nos. 4 to 6.
    Mr. Sutcliffe: The intimidation of workers during recognition and derecognition ballots has been repeatedly raised with the Government, both during the review of the Employment Relations Act 1999 and during the consideration of this Bill. Both unions and employers have brought to my attention cases of alleged intimidation and have called on the Government to act to prevent such behaviour.
    At the last sitting of the Standing Committee, I gave notice of our intention to move these amendments on Report. This is undoubtedly a difficult aspect, and many issues had to be considered before we could table the amendments. It has inevitably taken some time to complete the process, which explains why we could not table them sooner.
    Mr. Djanogly: In response to my question about this matter in Committee—I think that it was on 2 March—the Minister said that he would table a new clause shortly, so can he explain why we did not see it until late last week?
    Mr. Sutcliffe: I have tried to outline the difficulties involved and I hope that when the hon. Gentleman has heard what I have to say he will accept the reasons.
    The word "intimidation" covers a wide range of possible conduct, and new clauses 5, 6 and 7 deal with the main behaviours that cause offence, at the time when most intimidation is likely to occur—namely, during the period of a recognition or derecognition ballot. New clause 8 allows us to deal with behaviour at other stages of the recognition or derecognition process should that be thought necessary.
    Our objective, however, is not to stifle all campaigning activity. It is important that the workers concerned should hear from both the union and the employer in order to reach an informed decision on the important issue of recognition. However, that campaigning activity should be fair, and parties should not use underhand methods to influence the voting behaviours of the relevant work force.
    New clause 5 and amendment No. 4, which is consequential to it, deal with intimidatory behaviour by the employer at, or concerning, access meetings between the union and workers in the bargaining unit during the ballot period. Those are meetings held to enable the employer to satisfy the duty imposed upon him to allow the union reasonable access to workers in the bargaining unit.
    When an employer is informed by the Central Arbitration Committee that a ballot is to be held, he must comply with three duties, which are set out in

    1319
    paragraph 26 of schedule A1 to the 1992 Act, inserted by the 1999 Act. The first is to co-operate generally with the union and the qualified independent person appointed to conduct the ballot; the third is to give the CAC the names and home addresses of the workers in the bargaining unit, so that ballot papers can be sent to them; and the second is to give the union reasonable access to the workers in the bargaining unit, so that the union can inform the workers of the purpose of the ballot and seek their support and their views on the issues involved.
    New clause 5 deals with the potential for problems to arise when such access is granted. Unions have alleged that employers have sought to interfere with access meetings: for example, I have received complaints that employers have offered higher rates of overtime to workers to stay at their posts rather than attend an access meeting, or an employer may give workers the option of going home early when such a meeting is scheduled. There have also been complaints that employers have monitored who attended and who said what at access meetings. It is not for me to assess the accuracy of those allegations, and I do not want to be drawn into specific cases.
    Mr. Djanogly: Is the Minister honestly saying that if an employer allows an employee, of his own free will, to go home, that will be a breach of the legislation?
    Mr. Sutcliffe: The key element is the employer's purpose—the reason the individual was allowed to go home. If the hon. Gentleman allows me to continue, he will hear our reasons, and I am sure that he will fully support our aims.
    There is evidence that plainly shows that there is the potential for the sort of problem that I have described to arise. It has always been the Government's intention that access meetings should be private between the union and the workers in the bargaining unit, unless the employer or his representatives are invited to attend by the union. Likewise, at the time of the 1999 Act, we envisaged union access being free from the sorts of interference that I have just described. The statutory code of practice on access to workers during recognition and derecognition ballots, which we produced at that time, clearly sets that out, but the code merely provides guidance, which parties might take into account and which the CAC might consider when determining whether an employer has failed to allow access in accordance with the duty imposed on him. The code does not have the force of law and, in the light of experience, we feel that we need to provide explicit statutory provisions on those points.
    New clause 5 inserts into paragraph 26 of the recognition schedule new provisions that make it plain that interference with union access arrangements is not permissible. The clause places on employers during the ballot period two new obligations in addition to the three existing duties. They appear in the clause as the fourth and fifth duties. The fourth duty, set out in new sub-paragraph (4ZA) of the recognition schedule, is to refrain from making offers to workers to induce them not to attend a union access meeting. We recognise, however, that there might be circumstances in which it might be reasonable for employers to make such offers; the clause therefore allows for such exceptional
    1320
    circumstances at new sub-paragraph (4ZA)(b). For example, if the employer wanted to send workers on a training course that was important for their career development, or if it was essential to maintain a minimum staffing of machinery during access meetings, it might well be reasonable to make offers to the workers in question to attend training or monitor the machinery. The CAC would examine all the circumstances of the case and decide whether such behaviour was reasonable. We intend to issue a new code of practice that will give more detailed guidance on these matters, which the CAC must take into account. We will, of course, consult on the code in draft.
    The fifth duty is not to take action or make threats against workers for attending a union access meeting or for indicating that they plan to attend a meeting. Again, we have built in some necessary flexibility for employers by ensuring that action that was primarily taken for other reasons would not constitute a breach of the fifth duty. That would enable the employer to take action against a worker for their unacceptable behaviour—damaging the employer's property, for example—when attending a meeting.
    The new clause inserts a new sub-paragraph (4ZD) into the recognition schedule to ensure some privacy for access meetings. This makes it clear that an employer is in breach of his duty to provide reasonable access if he or his representative attends a meeting without being invited. It also makes it clear that the employer is in breach if he seeks to monitor what goes on at a meeting. Again, the provisions contain some necessary flexibility to provide for cases in which such attendance or monitoring is reasonable. Let me give an example of what might constitute reasonable behaviour in these circumstances. In some workplaces, it might be impossible, or even dangerous, to switch off security cameras in the room where an access meeting is held; so, if the union was prepared to hold the meeting in such a room, it might indeed be reasonable for the event to be filmed. Subsections (6) to (10) of new clause 5 impose the same duties in respect of derecognition ballots.
    The sanction for a failure to comply with either of the new duties is the same as the existing sanction for a failure to provide reasonable access. The CAC may order the employer to remedy the failure by taking whatever steps it considers appropriate. If the employer does not comply with that order, the CAC may award the union automatic recognition.
    Amendment No. 4 makes a consequential change to clause 5. Access allows the workers to get both sides of the picture, so that they can make a well informed decision when they come to cast their vote. Any attempt to undermine that access is unjustifiable. The majority of employers who go through the recognition procedure already observe the duties. The amendments will make it clear beyond doubt to the minority that certain behaviour is unreasonable in those circumstances.
    New clauses 6 and 7 and amendments Nos. 5 and 6 are closely linked and deal with standards of conduct during recognition and derecognition ballots. I have received complaints and evidence from both unions and employers about conduct that they believe is intended to frighten and intimidate workers into voting a particular way in the ballot. For example, I have received allegations of employers dismissing a union activist to

    1321
    undermine the union's campaign and to intimidate other workers; of union representatives making threatening visits to workers at their homes; of employers threatening reprisals such as the withdrawal of certain benefits if workers vote for recognition; and of both employers and unions making statements that grossly misrepresent, denigrate or even libel the other party. According to research for the TUC, US-style union-busting tactics are rare in this country; none the less, I am sure that intimidation can and does occur. I am concerned to make sure that it does not increase and to send a message that such behaviour is reprehensible and will not be tolerated.
    Our policy is based on a number of general principles. First, and importantly, the provisions are double-edged—they apply to both the employer and the union. As I have said, I have received representations from all sides of the debate. I note that the hon. Member for North-West Norfolk also believes that this is an important issue. I believe that it is only right and fair that the same standards of behaviour apply to both parties. Secondly, in identifying these practices, we have in part drawn upon rules of conduct for public general and local elections set out in the Representation of the People Act 1983. The unfair practices set out in new clause 6 are a reflection of conduct that is prohibited under that Act. I think the House will agree that the standards that apply in the elections that return us as Members of Parliament are an excellent starting point when setting standards of behaviour for democratic ballots in other settings.
    New clause 6 deals with recognition ballots. It introduces a duty on both employers and unions to refrain from engaging in unfair practices during the ballot period. A party will have committed an unfair practice if, with the purpose of influencing the ballot, it does any of the things listed in new paragraph 27A(2)(a) to (f). These are: offering inducements or bribes to workers to vote in a particular way or to abstain from voting; coercing or attempting to coerce workers to reveal how they intend to vote or how they actually voted after the event; dismissing or threatening to dismiss a worker; taking or threatening to take disciplinary action against a worker; subjecting or threatening to subject a worker to a detriment; or using and attempting to use undue influence.
    Let me make it clear that the Government support the right of all the parties—employers, unions and workers alike—to campaign for their preferred result in a recognition or derecognition ballot. We are not seeking to limit the right to engage in legitimate campaigning activity. The unfair practices that I have listed do not preclude people from legitimately trying to influence the result of the ballot, but they are designed to prevent people using conduct such as threats or deceit, rather than persuading people by the strength of their arguments. Nor are the Government suggesting that employers should not be able to dismiss or otherwise discipline workers during the ballot period if they are guilty of misconduct or poor performance. A dismissal or other disciplinary action will be an unfair practice only where it is done with a view to influencing the result
    1322
    of the ballot. Furthermore, for the CAC to find that a complaint is well founded, it must be satisfied that the practice in question changed—
    Mr. Djanogly: Is the Minister saying that even if there is gross intimidation, violence or other totally unacceptable behaviour, the ballot will not be affected—that it will all be forgotten? What will happen in such circumstances?
    Mr. Sutcliffe: No, I am not saying that. I have made it clear that we expect people to behave reasonably. If someone acts inappropriately or there is gross misconduct during the ballot period, the employer will be able to use his normal procedures to deal with the matter.
    We are saying that it works both ways. If the employer is doing things that are not proper in terms of the ballot, the union has the right to complain to the CAC.
    Jon Cruddas (Dagenham) (Lab): I welcome the clauses but I raise one point under paragraph 27B(6). Does my hon. Friend think that the provision could create an incentive for the employer to take action against the union, even where it had done nothing wrong, merely to protract the process?
    7 pm
    Mr. Sutcliffe: That is why we have placed great faith in the role of the CAC in determining motivation and the purpose for the actions of either the employer or the trade union. On that basis, the CAC will come to a decision. It is interesting that we have taken powers to go further in the period before the ballot if we feel that there is overwhelming evidence so to act.
    The CAC must be satisfied that the practice in question changed, or was likely to change, the voting intentions or actual voting behaviour of a worker. This is intended to discourage frivolous claims. We do not want either employers or unions to be punished for very minor transgressions that are unlikely to have affected anyone's vote. The Government will issue a code of practice that will give detailed guidance to the parties on what is acceptable conduct and what is not.
    Hon. Members will note that new clause 6 does not contain remedies for cases where a complaint of unfair practices is upheld by the CAC. Paragraph 27C contains instead a power for the Secretary of State to provide for sanctions and remedies by order. The Government's intention was to set out those sanctions in full in these new clauses and amendments. However, this is a complicated area. The sanctions will, among other things, allow the CAC to re-run a ballot where appropriate, and we want to consider further a number of complexities associated with that. It is my intention that, following more detailed consultation with stakeholders, the Government will propose amendments in the other place to put these sanctions in the Bill.
    Jon Cruddas: Is my hon. Friend able to say now whether the sanctions or remedies could include automatic recognition, which he mentioned earlier, in respect of activities before the 20-day ballot period?
    Mr. Sutcliffe: That is one of the things that will be considered during consultation. I am told by Opposition Members that they want to see consultation take place. [Interruption.] However, I am hearing noises that perhaps they do not want it to take place.
    New clause 7 introduces identical provisions making it an offence to use unfair practices in ballots on derecognition. Amendments Nos. 5 and 6 make consequential amendments to clause 11. They insert cross-references to the powers to make sanctions in new clauses 6 and 7.
    In addition, the Government have tabled new clause 8. It provides an order-making power for the Secretary of State to extend these rules of conduct to the earlier stages of the statutory recognition process.
    Alleged intimidation has occurred, in the main during the ballot period. This is understandable. That period is the critical point where workers decide whether they want union recognition. We recognise that parties, perhaps as a result of the protections that we are introducing for the ballot period, may be tempted to bring forward any intimidatory conduct to an earlier stage. That is why we want to be armed with the tools to respond quickly. Let there be no doubt that if evidence emerges of this happening on any scale, we will not hesitate to introduce further measures to ensure that workers can exercise their choice freely and without fear. Of course, if and when we exercise this power, we can draw on the experiences gained from the operation of these provisions during the balloting period.
    New clause 2 was tabled by Conservative Members but it has been grouped with the Government's new clauses and amendments. I am pleased that Opposition Members also recognise the importance of tackling intimidation during recognition applications. Of course, as always, their interest is one-sided. The new clause does not deal with the more prevalent form of intimidation by employers against workers and union members. As I have said, the Government believe that intimidation by any party is unacceptable. I hope that the hon. Member for North-West Norfolk agrees. I urge him not to press the clause.
    I have spoken for a long time and I am grateful to the House for its patience. However, these are detailed new clauses and amendments and I wished to explain them to the satisfaction of the House. The Government's new clauses are major amendments. I believe that they strengthen the Bill and safeguard the integrity of the statutory procedure. The issues that they address are of concern to everyone involved and I believe that the solutions that they present are balanced and reasonable. I am pleased to commend them to the House.
    Mr. Bellingham: I am grateful to the Minister for explaining the new clause and amendments in some detail. The hon. Gentleman rightly points out that they are extremely complicated. It is a great pity that we did not have them at an earlier stage, a view that is shared by many outside this place. Even at this stage, as the Minister said, they are not complete, as he has not finished his detailed work on some of them.
    1324
    As for new clause 5, as the Minister explained, there are at present three duties on the employer once the CAC has decided that there should be a ballot. The first is to co-operate with the ballot, the second is to provide access to the workers and the third is to supply names and addresses. There are two further duties. The first is to refrain from making any offer, and the second is to refrain from taking, or threatening to take, any action against a worker because he attended the meeting.
    The clause then sets out various other matters regarding the conduct of employers in respect of meetings to discuss recognition and derecognition. Most of that is pretty reasonable but I shall raise a couple of points. Sub-paragraph (4ZB) refers to the threat of action on the ground that the employee "attended … any relevant meeting". Let us take a situation in a small or medium-sized company where a trade union activist may want to attend a number of meetings. In addition, there may be two or three other activists in the company who also want to attend meetings. There might be three, four or five meetings. What would happen if the company said to perhaps two of those people who were attending the meetings that that was affecting their performance at work and that only one should attend? As the law stands, the employer would not be allowed to do that, even though he took the view, in good faith, that consistent attendance at the meetings by a number of employees was affecting their performance at work? Perhaps the Minister will comment on that.
    Sub-paragraph (4ZD) applies to the situation where an employer
    "seeks to record or otherwise be informed of the proceedings".
    What happens in a small or medium-sized company? It may be a family-owned business, where relations between management and employees are excellent. What happens if a managing director asks, en passant, "How did the meeting go last night?" Technically, he would be in breach of the new clause. What is the Minister's view on that? We are trying to stress the trust that is so often built up in small companies between management and employees. Often, in close-knit family businesses, there are no stand-offs. There is no suspicion. Unfortunately, in our judgment, the clause could make things worse. Perhaps the Minister will comment on those two points.
    New clauses 6 and 7 relate to unfair practices during ballots. The Minister said that paragraph 27A(1) and (2) is based on the Representation of the People Act 1983. I am slightly concerned about sub-paragraphs (a) to (f), where "undue influence" is mentioned. What exactly is undue influence? It is difficult to define. There is huge potential for litigation. Someone making an allegation to the CAC does not do so on oath; they merely make an assertion. We are concerned that the term "undue influence" may lead to a great deal of confusion and trouble.
    Apart from those comments, the two clauses may appear reasonable, but, as the Minister said, we are being asked to agree to clauses in which there is no mention of any penalties. The Minister says that he will return at a later stage to tell us what the penalties will be.

    1325
    It seems extraordinary that the Minister has brought the clauses forward—we are being asked to pass them—without there being any indication of what the penalties will be. For example, if the employer is at fault, presumably the penalty will be the CAC ordering immediate recognition. What happens if the employee is at fault? Will he have immediately to withdraw the application? If there has been a serious breach and there is a serious example of intimidation, would employees not be allowed to apply again for a certain period? None of that is answered.
    Paragraph 27C(1) is drawn extremely widely. It is the part of the clause that will enable the Secretary of State to come up with penalties in due course. Will that be even handed? We just do not know. It is a little shabby of the Minister to ask us to accept two important new clauses when the detail is not to hand. Why cannot the Government get it right? They have had long enough.
    Malcolm Bruce (Gordon) (LD): Does the hon. Gentleman agree that if the matter is to be resolved by means of a statutory instrument, it would be useful if the Minister gave us an undertaking to provide a draft statutory instrument so that we could debate it and possibly amend it, rather than being faced with an unamendable instrument?
    Mr. Bellingham: The hon. Gentleman is right. This part of the clause is very widely drawn and there is no indication of the Government's intentions. It would be extremely helpful if they gave a commitment along those lines.
    On new clause 8, the Minister spoke about research into intimidation. He mentioned that there was no large-scale intimidation, such as that which occurs in America. He believed there was research indicating that some firms used intimidatory practices. If he cannot tell the House what that evidence is, will he put a brief in the Library or write to my hon. Friend the Member for Eddisbury (Mr. O'Brien) to tell him what the evidence is?
    We are discussing complicated new clauses. The Engineering Employers Federation, the CBI and many other organisations that have not been properly consulted are not yet convinced. They do not say that the new clauses are bad. They merely ask whether the provisions are a sledgehammer to crack a problem that is not nearly as serious as the Minister maintains. If the Minister wants to persuade us, will he put some research material in the Library, or at least write to me?
    Jim Sheridan: If the hon. Gentleman is looking for evidence of employer intimidation, I can give him tangible evidence of employers telling employees that if they wish to join the union whose representatives are standing outside handing out the leaflets, they should let the employers know and those employers will help the employees on with their jackets. Is that not intimidation?
    Mr. Bellingham: I think the hon. Gentleman is talking about the Wilson and Palmer situation. We are discussing intimidating employees not about joining a union, but about voting in ballots. The Minister said that there was not widespread evidence, but he believed that malpractice was going on. He needs to sustain and justify his case.
    Mr. Sutcliffe: I have just remembered the meeting that the hon. Gentleman had with the TUC. He was good enough to tell me that they had had an excellent debate. I am sure they told him about "Bargain or Bust? Employer responses to union organising", a discussion pamphlet published by the TUC in October 2003. That contains examples of the cases that have been outlined. No doubt the Library will get the hon. Gentleman a copy.
    Mr. Bellingham: I am grateful to the Minister for pointing that out. My hon. Friend the Member for Eddisbury and I will look carefully at that document. For the record, we had a positive and constructive discussion with the TUC, with Brendan Barber and some of his colleagues. There are many issues on which we fully agreed. We intend to work together. They have asked our views because they want to work with us on a positive basis, although we told them that there are obviously some issues on which we probably will not agree.
    Finally, the Minister was rather scathing about new clause 2 and said that we cared only about the employer. In fact, we are trying to be even-handed. The penalty in our new clause is mild. It states that if there is intimidation by trade unions against employees or by employees against other employees,
    "the CAC shall terminate the recognition procedure immediately".
    We could easily have proposed a much tougher penalty. It is a mild new clause with limited scope, and it is intended to be even-handed.
    Mr. Bill Tynan: Will the hon. Gentleman give way?
    Mr. Bellingham: No. I shall draw my remarks to a close, as there is much debating to do over the next couple of hours. We are not happy with Government new clauses 6 and 7, and we shall press new clause 2 to a Division, if need be.
    7.15 pm
    Mr. Frank Doran: I welcome the new clauses. They deal with an important gap that the operation of the 1999 Act has thrown up in practice—serious intimidation, of which there is clear evidence in the case of a few employers.
    The principal case with which most of us are familiar concerns Sky Television at Livingston where employees were intimidated to the extent that they were threatened by the employer with relocation of the factory, wage reductions and a series of unscrupulous measures. On initial CAC examination, a majority of the work force was in favour of union recognition, but that became a thumping defeat for the union when the ballot went ahead. That is unacceptable, given that the relevant

    1327
    provisions of the 1999 Act were intended to operate as a disputes resolution procedure, to keep such cases clean and fair and to give everyone the opportunity of a say.
    I share the concerns expressed to the Minister by the TUC about how the Government have chosen to apply the intimidation processes. They have treated the trade union side and the employee side in exactly the same way as the employer side. The TUC presented a dossier to the Government, to which the Minister referred, as did the spokesman for the Opposition, the hon. Member for North-West Norfolk (Mr. Bellingham). The dossier details various abuses found by the trade union side. I know that the employers have made allegations against the union, but, as far as I am aware, no specific evidence has been presented against the union side or the employee side in any particular case, simply vague allegations. Yet the same regulations are to be applied on both sides.
    The union side is happy to accept that there should be a law against intimidation on both sides. The issue is how that should be applied. What the Government propose sounds fair and equitable, but it ignores the underpinning imbalance in the workplace between the employer, who owns the premises and employs the work force, and the union, which has only limited access to the work force in the case of a recognition ballot. One need only consider the Sky Television case in Livingston to see how that operates in practice. The employer was able to make threats and get information circulating round the work force that completely transformed the view of the work force.
    The employer can say that union recognition will mean lower wages, and he has the power to put that into practice. The union cannot do that. A union can only speculate that union recognition will increase wages. To introduce a clause that hits both sides equally on every point will have unintended, unfair consequences. It will always be the union that suffers from any delay in the balloting process.
    David Hamilton: Surely it can be recognised that a worker approaching a fellow worker has no power other than the power of persuasion, whereas a manager has the power to promote or demote an individual worker? That is an important distinction.
    Mr. Doran: That is exactly my point. All the power is with the employer, not with the union. If an employer says such things to an employee, the employee knows that the employer has the power to carry it out, which the union does not.
    There is no question but that intimidation by unions is unacceptable, but different wording is needed to capture it if it happens. I urge my hon. Friend the Minister to reconsider the matter and see whether a different form of words can be found to deal with that different problem when the Bill is debated in another place.
    Malcolm Bruce: We have had a useful debate and a number of important points have been raised. It is interesting that there is some slight tension between the Minister and his hon. Friends. The Minister says the Government must be even-handed and make the
    1328
    provision apply to any party, but, not surprisingly, Members, particularly those with a strong union connection, are trying to shift the balance more favourably towards the unions, and they quote some fair examples where that would be justified.
    Right from the start of the Bill, we have all acknowledged that the climate of industrial relations in this country has been transformed in the past 10 or 15 years, partly because of legislation that has democratised the trade union movement. Given the consultation that has taken place to bring the Bill to the House, and if the evidence was available, it is surprising and a little unfortunate that such detailed new clauses have had to be introduced so late m the process. I am not saying that that is not justified, but it puts those of us who are trying genuinely to scrutinise legislation in a slightly invidious position.
    The hon. Member for North-West Norfolk (Mr. Bellingham) referred to the example of a company in which there is no animosity and in which the natural tendency of a manager who knows that a recognition debate is going on is to say "How's it going?" The wording gives the impression that that could become an offence. The legislation has just arrived, and we have not had time to test out how it could apply and whether it could lead to slightly silly litigation that gets in the way of good employment relations.
    David Hamilton: The hon. Gentleman is drawing an important distinction. As a former trade union official who became chief executive of a small company, I remind him that the determining factor rests with the chief executive or the employer. I knew, when I spoke to an employee as an employer, as opposed to a trade union official, that I could intimidate them off the cuff. However, let me make this distinction: if the relationship between the employer and employee is good, there will never be a situation in which the employee takes the employer to task.
    Malcolm Bruce: I agree entirely, but we are entitled as legislators to look at what the Bill says and how it might be applied. It has already gone through my mind that I doubt that anybody will want to go to law in a good business with a constructive atmosphere, although it may take only one malicious individual to cause damage. All that I am concerned about is ensuring that the measure is not sloppily drafted and that it means what it says and does not create unnecessary problems. I think that that is a perfectly fair role for us to play in the House.
    I wish to repeat what I said in intervening on the hon. Member for North-West Norfolk about the orders, which the Minister said he would return to. The Minister made two points. The first was that further details would be brought before another place. I am afraid that that is a weary old comment. Even though we consult, we pass too many laws rather hurriedly at the end of the process, which is simply not a good way of making law. That is all that I am saying. Such a way of proceeding does not necessarily produce bad law, but it certainly does not help to produce good law; indeed, it is more likely to produce bad law, because proper consideration is not given.

    1329
    The more particular point relates to new paragraphs 27C(2) and 119C(2) to schedule Al to the Trade Union and Labour Relations (Consolidation) Act 1992, which both state:
    "An order under this paragraph may…

    amend this Schedule;

    apply any provision of this Schedule with such modifications…

    confer functions on the CAC;

    make provisions about the arrangement and conduct of further ballots;

    include supplementary or incidental provisions;

    make different provision for different cases or circumstances."

    A pretty substantial statutory instrument is being envisaged. As the Government have introduced the provision at such a late stage, it is reasonable to seek assurances. I welcome the Government's practice of publishing draft statutory instruments that can be scrutinised and debated by Select Committees and hon. Members, so that when the final secondary legislation comes before the House it will have been subjected to a form of preliminary scrutiny. We all agree that the weakness of the statutory instrument as it is proposed—of course, this is the case from the point of view of the House, not the Government—is that it is not amendable and that we can only vote yes or no. Given that the provision is being introduced late in the process and that it is fairly extensive, it is reasonable for us to ask the Government to give it further consideration.
    I understand the Minister's response to new clause 2, but, having considered it, I find it hard to take issue with what is proposed. In dealing with intimidation, it points to the "employer … or worker", so it contains reference to that point. One of the essential things that we are trying to do—this is a classic position for those on the Liberal Democrat Benches—is to get the balance right, as the Minister himself also said was necessary. If I may say so, that is something on which my party has a contribution to make.
    Jim Sheridan: Does the hon. Gentleman share the views of the Conservative Front-Bench spokesman, who said that it was perfectly acceptable to tell an employee that attending a trade union meeting could affect their performance? Many of us on the Labour Benches have heard those chilling words before and then suffered the consequences.
    Malcolm Bruce: I do not think that the hon. Member for North-West Norfolk made that remark, although he has not contradicted the hon. Gentleman. I do not accept such views, but I accept the comment that an employer is, by definition, in a different situation. Let us be clear. Historically, there have also been situations in which trade unionists and trade union activists have used intimidating processes and put pressure on people in other ways. The reality is that the faults have arisen on both sides, but the situation has improved enormously.
    When we finish our proceedings on the Bill—we support it and are not changing our position—we should not introduce legislation that upsets that balance, especially so late in the process. I am saying not
    1330
    that the measures before us upset the balance, but that they raise in my mind some legitimate and proper concerns that we should address.
    Mr. Tynan: My hon. Friend the Minister is to be congratulated on introducing the Government new clauses, which I think are a response to the discussion that took place in Committee. When we discussed intimidation in Committee, hon. Members in all parts of the House recognised that it was unacceptable. As the hon. Member for Gordon (Malcolm Bruce) said, the balance has to be got right. At present, the employers have all the cards and all the opportunities to intimidate people if they so wish. Only a small minority of employers need to be dealt with on that basis.
    I would like to make a point about definitions and to add to the request made for an explanation of the phrase "undue influence". I, too, would like the Minister to explain that term, but I would also like the Opposition spokesman to explain something. I tried to intervene on him in respect of new clause 2, which refers to circumstances in which
    "a union uses undue force or intimidating measures".
    I would be interested to hear what "undue force" and "intimidating measures" are. I have found that when a union tries to win a ballot, it will do everything it possibly can to convince people. That is usually done in a sensible way and on the basis of argument. If there was intimidation by a trade union, hon. Members in all parts of the House would say that it was unacceptable.
    I think that the balance must be got right, as has been said. In that respect, we must examine Government new clause 6 carefully, as there is a concern that it goes too far the other way and will create a situation in which the union will be unduly punished without having been involved in intimidation. I ask the Minister to look at that point.
    Mr. Djanogly: Having heard the debate thus far, my opinion is that a lot more work needs to be done on the new clauses in terms of their form and purpose. That view comes from having heard contributions from all parts of the House. I hope that the Minister will take that point away when the Bill heads to the Lords and think about it further.
    I wish to speak in support of new clause 2. There is more sense in the four lines of that new clause than in the four pages taken up by the Government's equivalents—new clauses 6 and 7.
    Mr. Tynan: If the hon. Gentleman believes that there is more sense in the four lines of new clause 2 than in the other provisions, will he explain the meaning of
    "undue force or intimidating measures"?
    Mr. Djanogly: The Minister himself gave the straightforward example of intimidatory visits to people's homes. That is a good example, and I accept it.
    The point about new clause 2 is that it does not deal with all aspects of work. It is very specific about the recognition procedure, and it applies only during the period when it is under way. Rather than dealing with a range of areas and issues, it is again specific about undue force and intimidation. As my hon. Friend the Member

    1331
    for North-West Norfolk (Mr. Bellingham) said, it is fair and concentrates on not only the company, but the workers, and is therefore balanced across the workplace.
    7.30 pm
    Importantly, the remedy introduced by new clause 2 is simple and does not relate to criminal or civil damages. I can see the complications for the Minister, but I still say that it is unacceptable not to introduce remedies. If new clause 2 bites, it is a declaration that the recognition procedure has ended, which is a simple, straightforward way to deal with the issue.
    In Committee and during today's debate, certain hon. Members have implied that unions never use violent or intimidatory behaviour, but the behaviour of certain unions over past years has shown that, if anything, militancy is again starting to increase dramatically. There were, for example, suggestions that retained firefighters were intimidated during the miners' strike. [Interruption.] I mean the fire strike. Wildcat, unofficial strikes have occurred at, for example, British Airways and the Post Office. The climate of industrial relations has changed over the past year, but few people would say that it has changed for the better. A new generation of union leaders has come to the fore, and they are, perhaps, less conducive to the Government's way of thinking than their predecessors.
    John McDonnell: British Airways headquarters is in my constituency, as is Heathrow. The unofficial action at Heathrow was voluntary action in which employees left their workplaces without any union policy or directive. Can the hon. Gentleman provide me with any evidence of intimidation, because none has been reported?
    Mr. Djanogly: The hon. Gentleman did not hear where I was coming from. The climate has changed dramatically, and I gave the Heathrow case as an example. It is bizarre that, despite 65 pieces of employment and union legislation, the unions are not grateful, but the more they get, the more they seem to retreat into militancy, which must create a conundrum for the Government.
    Jim Sheridan: On the Minister's example of union intimidation, I should be interested to hear what steps, if any, the trade unions took to sort out that business. Will the hon. Gentleman accept that the question of intimidation is enshrined in most, if not all, trade union rulebooks? There is ample evidence of members or potential members of trade unions being disciplined for taking any intimidatory action whatsoever.
    Mr. Djanogly: I have given a couple of examples, and I have some more, but they can wait—the GMB comes to mind.
    I want to address the Government new clauses, and in particular new clauses 6 and 7, which are extremely complicated. My particular concern is that new clauses 6 and 7 cover not only intimidation, but the effect of intimidation. If there has been intimidation but it does not affect the ballot, it will be ignored by the new clauses, which is conceptually wrong. Indeed, there should be
    1332
    disincentives to intimidation, and I cannot see how disincentives can be introduced unless intimidation has negative consequences.
    The second main point, which has been addressed previously, is that the Bill does not contain any remedies for intimidation, and I do not see how we can examine the effect of one without the other. Will the Minister at least clarify what the Government are thinking? Is the object to invalidate the ballot, not to allow the person or union that is doing the intimidation the chance to have a re-ballot or to punish the person who is doing the intimidation? Will the Government go down civil or criminal lines of remedy?
    It is particularly unfortunate that new clauses 5 and 8 were tabled towards the end of last week, because they contain totally new concepts. The Government have at least said that they accept in principle the idea of an intimidation clause, but new clauses 5 and 8 have come out of the blue. The Minister should tell us why those new clauses have been introduced, because I can see no reason for them.
    Mr. Sutcliffe: The debate has been interesting, and it clearly sets out the differences between the parties' attitudes towards employment relations and industrial relations. Intimidation, whether it is from unions or employers, will not be tolerated and we do not want to see it. As on Second Reading, my hon. Friends have exposed cases of intimidation, but Opposition Members have failed to come up with details of unions behaving badly.
    The example that I gave of a union visiting workers' homes was raised with the Government by the CBI, which provided anecdotal evidence. It said that it could back up that claim, and we wait to see whether it can. The unions have given evidence to me and to the publication in the Library, which is available if hon. Members want to pick it up.
    Mr. Tynan: Will my hon. Friend indicate the volume of evidence from the trade union against the volume of evidence from the CBI? I would be particularly interested to know what action was taken on intimidation in someone's home, which, as far as I am concerned, is a criminal offence, and I would have thought that criminal charges would have been brought.
    Mr. Sutcliffe: I am grateful to my hon. Friend, whose background makes him well versed in such matters. I do not want to be drawn down the line of who did what, because intimidation from either side is unacceptable.
    On giving notice of the new clauses, my hon. Friend the Member for Hamilton, South (Mr. Tynan) and other hon. Members were in Committee when I said that the Government would introduce new clauses on intimidation and that the matter would be complex. As the hon. Member for Gordon (Malcolm Bruce) says, we are trying to achieve a new attitude towards employment relations in the UK, and I think that he accepts that the Bill goes a long way to doing that. We are trying to move away from the existing adversarial culture to a culture in which people work together and understand the requirements of business. The trade unions play an increasingly large part in that process, which is evidenced by the number of FTSE 100 companies that are union organised, so the unions are generally a force for good.

    1333
    On union recognition procedure, we would initially like to see more voluntary agreements. So far, there have been more than 1,000 voluntary agreements, and it is a step in the right direction when employers and employees come together and go down the voluntary route. The statutory procedure covers situations in which that cannot happen, and is included as a minimum standard. It is reasonable to expect and accept that the Government's role should be to facilitate the smooth running of the statutory procedure, which is why I have said throughout that we must examine intimidation.
    In response to my opening remarks, the hon. Member for North-West Norfolk (Mr. Bellingham) said that the Government new clauses are pretty reasonable, but then he told us why they are unreasonable, and he did not make the case.
    Mr. Stephen O'Brien: Scrutiny.
    Mr. Sutcliffe: It seems to me that the spirit of scrutiny in Committee is different from the spirit of scrutiny on the Floor of the House—perhaps that is because of this environment.
    Mr. Djanogly: My hon. Friend the Member for Eddisbury (Mr. O'Brien) was not on the Committee.
    Mr. Sutcliffe: The hon. Gentleman says that his hon. Friend was not there. I would expect the Front Bench spokesperson to read about how the Committee developed and learn from interventions on both sides of the House about where we are going with employment relations and the new attitude that we are trying to achieve. As I said in response to the hon. Member for Gordon, the key purpose is to stop intimidation, whether on the union side or the employer side.
    The hon. Member for North-West Norfolk asked whether an employer can be penalised if he takes action against a worker for attending a meeting organised by the union at a time when he should be working. When the union and the employer make an access agreement, they will set out how many meetings should take place, when and where they should take place, how long they will last and which workers are entitled to attend which meetings. The new clause makes it clear that an employer can be penalised only if he takes action against a worker for attending a meeting that that worker was entitled to attend. The CAC would have a role in stopping frivolous cases and would consider the circumstances and the reasonableness of the situation, but initially the union and the employer would set out what meetings should take place.
    I was asked why an employer should not be allowed to attend a meeting with his staff held on his premises during working hours, because surely he has such a right. In many cases, unions are happy for employers to attend access meetings. Indeed, the code of practice on access makes it clear that, where possible, joint meetings can be beneficial. However, we must accept that in some cases workers will not want their employer to know that
    1334
    they support a union's campaign. They might not even want their employer to know that they are going along to a meeting to find out about recognition. They may fear that their employer will brand them as disloyal if they do so, and may be afraid to ask the questions that they really want answered if the employer is there. Unfortunately, the evidence is that on occasion anti-union employers victimise union members and supporters. That is why it is important that meetings between the union and the workers in the bargaining unit should be private.
    David Hamilton: Within that, there is a recognition that not employers, but management, attend union meetings along with workers because they are part of the structure. It is up to the local branch of the union to determine what is right. There are many thousands of cases where senior management attend meetings with the workers because they are part of that union.
    Mr. Sutcliffe: I agree entirely with my hon. Friend. In fact, I would advocate that, because that is where the case can be put freely as to the union's campaigning activities and the employer's view of those activities. It is likely that that relationship exists in most go-ahead companies that look to the future. Another crucial part of the Bill is the information and consultation directive, which opens up the opportunities for dialogue to take place and moves away from the adversarial situation.
    The hon. Member for Gordon suggested that surely it is okay for the employer to ask how a meeting went. Clearly it is, if his question is reasonable. If he says, "Did the meeting go well?", that is acceptable and there is no problem, but he may go further to ask for the names of the workers who were there and details of how the meeting went. The CAC would question the motivation behind that.
    I was asked to explain the definition of "undue influence." Undue influence is a concept borrowed from the Representation of the People Act 1983. It includes: the use of, or threat to use, force, violence or restraint; the infliction of, or threat to inflict, injury, damage, harm or loss; and the impediment of the free exercise of the vote by fraudulent device or contrivance. The term is designed to pick up a range of behaviours from violence and threats of violence to libellous statements. Whether a particular action constitutes undue influence will depend a great deal on the circumstances and manner in which it was taken and whether it was demonstrably intended to influence the ballot. The Government intend to bring forward a code of practice following consultation with interested parties to provide clear guidance to all the parties involved.
    We have been very conscious of the need to ensure that the jurisdictions of the CAC and the employment tribunal should remain separate. That is why we took care to ensure that the question that each court will have to consider is different. If a worker suffers detriment or dismissal for supporting or opposing recognition, he or she may seek individual redress at the employment tribunal. The union may seek collective redress from the CAC if that dismissal or detriment changed or was likely to change voting behaviours.

    1335
    7.45 pm
    We intend to consult in detail on sanctions. Consultation is the whole basis of this and previous Bills. We have a good reputation with employers and trade unions in terms of taking that approach. I accept that there is a fear that we have not gone through the full process, but we have tried to do so on all these matters. We propose adopting a structure that is very similar to that already in place for breaches of a union's access duties. Where the CAC finds that a complaint is well-founded, it will be able to issue an order against the guilty party that they should desist from the unfair practice in question and take steps to remedy the harm done. For example, they may be ordered to repudiate an earlier statement or to restore to a worker any loss incurred through a detriment. Once the CAC has issued a remedial order, if that party subsequently breaches the remedial order or commits another unfair practice, the CAC can issue a second sanction. If the employer is at fault, that second sanction, as for access, will be that the union is automatically recognised. If the union is at fault, the sanction will be that the union's application fails—that is the same sort of sanction that applies for other detriments. I believe that we are acting in a proper and responsible manner in relation to those few times when intimidation takes place.
    My hon. Friend the Member for Aberdeen, Central (Mr. Doran) asked us to go further—of course, we keep such matters under review—but generally welcomed our proposals. My hon. Friend the Member for Hamilton, South asked for the evidence on either side, and I hope that I explained what is being achieved.
    The performance of the hon. Member for Huntingdon ( Mr. Djanogly) is ever consistent in that in most cases, unfortunately, he sees only one side of the argument. New clause 2 is not balanced—it applies only to the employer side, and even it is weak in terms of the definition of available sanctions.
    Hon. Members will be aware that the Joint Committee scrutinises statutory instruments. I will try to give as much notice as possible in that respect, as I have throughout the passage of the Bill. I hope that hon. Members accept my assurances that when they are available they will have the opportunity to look at them.
    This has been a good debate. Intimidation is wrong in whatever form it appears. The new clauses represent a balanced set of measures that meet the requirement of telling employers or unions who want to use underhand tactics that that is inappropriate. I commend the new clauses to the House.
    Question put and agreed to
    Clause read a Second time, and added to the Bill.

  New Clause 6

    UNFAIR PRACTICES IN RELATION TO RECOGNITION BALLOTS
    'After paragraph 27 of Schedule A1 to the 1992 Act insert—
    27A

    Each of the parties informed by the CAC under paragraph 25(9) must refrain from using any unfair practice.

    A party uses an unfair practice if, with a view to influencing the result of the ballot, the party—

    offers anything to a worker entitled to vote in the ballot in return for the worker's agreement to vote in a particular way or to abstain from voting,

    1336

    coerces or attempts to coerce a worker entitled to vote in the ballot to disclose—

    whether he intends to vote or to abstain from voting in the ballot, or

    how he intends to vote, or how he has voted, in the ballot,

    dismisses or threatens to dismiss a worker,

    takes or threatens to take disciplinary action against a worker,

    subjects or threatens to subject a worker to any other detriment, or

    uses or attempts to use undue influence on a worker entitled to vote in the ballot.

    The duty imposed by this paragraph does not confer any rights on a worker; but that does not affect any other right which a worker may have.

    Each of the following powers shall be taken to include power to issue Codes of Practice about unfair practices for the purposes of this paragraph—

    the power of ACAS under section 199(1);

    the power of the Secretary of State under section 203(1)(a).

    27B

    A party may complain to the CAC that another party has failed to comply with paragraph 27A.

    A complaint under sub-paragraph (1) must be made on or before the first working day after—

    the date of the ballot, or

    if the ballot is held on more than one day, the last date on which votes can be cast in the ballot.

    Within the decision period the CAC must decide whether the complaint is well-founded.

    A complaint is well-founded if—

    the CAC finds that the party complained against used an unfair practice, and

    the CAC is satisfied that the use of that practice changed or was likely to change, in the case of a worker entitled to vote in the ballot—

    his intention to vote or to abstain from voting,

    his intention to vote in a particular way, or

    how he voted.

    The decision period is—

    the period of 10 working days starting with the day after that on which the complaint under subparagraph (1) was received by the CAC, or

    such longer period (so starting) as the CAC may specify to the parties by a notice containing reasons for the extension.

    If, at the beginning of the decision period, the ballot has not begun, the CAC may by notice to the parties and the qualified independent person postpone the date on which it is to begin until a date which falls after the end of the decision period.

    27C

    The Secretary of State may by order make provision about the consequences of a decision that a complaint under paragraph 27B is well-founded.

    An order under this paragraph may, in particular—

    amend this Schedule;

    apply any provision of this Schedule with such modifications as may be specified in the order;

    confer functions on the CAC;

    make provision about the arrangement and conduct of further ballots;

    include supplementary or incidental provisions;

    make different provision for different cases or circumstances.

    1337

    An order under this paragraph shall be made by statutory instrument.

    No such order shall be made unless a draft of it has been laid before Parliament and approved by a resolution of each House of Parliament.".'.—[Mr. Sutcliffe.]

    Brought up, read the First and Second time, and added to the Bill.

  New Clause 7

    UNFAIR PRACTICES IN RELATION TO DERECOGNITION BALLOTS
    'After paragraph 119 of Schedule A1 to the 1992 Act insert—
    "119A

    Each of the parties informed by the CAC under paragraph 117(11) must refrain from using any unfair practice.

    A party uses an unfair practice if, with a view to influencing the result of the ballot, the party—

    offers anything to a worker entitled to vote in the ballot in return for the worker's agreement to vote in a particular way or to abstain from voting,

    coerces or attempts to coerce a worker entitled to vote in the ballot to disclose—

    whether he intends to vote or to abstain from voting in the ballot, or

    how he intends to vote, or how he has voted, in the ballot,

    dismisses or threatens to dismiss a worker,

    takes or threatens to take disciplinary action against a worker,

    subjects or threatens to subject a worker to any other detriment, or

    uses or attempts to use undue influence on a worker entitled to vote in the ballot.

    The duty imposed by this paragraph does not confer any rights on a worker; but that does not affect any other right which a worker may have.

    Each of the following powers shall be taken to include power to issue Codes of Practice about unfair practices for the purposes of this paragraph—

    the power of ACAS under section 199(1);

    the power of the Secretary of State under section 203(1)(a).

    119B

    A party may complain to the CAC that another party has failed to comply with paragraph 119A.

    A complaint under sub-paragraph (1) must be made on or before the first working day after—

    the date of the ballot, or

    if the ballot is held on more than one day, the last date on which votes can be cast in the ballot.

    Within the decision period the CAC must decide whether the complaint is well-founded.

    A complaint is well-founded if—

    the CAC finds that the party complained against used an unfair practice, and

    the CAC is satisfied that the use of that practice changed or was likely to change, in the case of a worker entitled to vote in the ballot—

    his intention to vote or to abstain from voting,

    his intention to vote in a particular way, or

    how he voted.

    1338

    The decision period is—

    the period of 10 working days starting with the day after that on which the complaint under subparagraph (1) was received by the CAC, or

    such longer period (so starting) as the CAC may specify to the parties by a notice containing reasons for the extension.

    If, at the beginning of the decision period, the ballot has not begun, the CAC may by notice to the parties and the qualified independent person postpone the date on which it is to begin until a date which falls after the end of the decision period.

    119C

    The Secretary of State may by order make provision about the consequences of a decision that a complaint under paragraph 119B is well-founded.

    An order under this paragraph may, in particular—

    amend this Schedule;

    apply any provision of this Schedule with such modifications as may be specified in the order;

    confer functions on the CAC;

    make provision about the arrangement and conduct of further ballots;

    include supplementary or incidental provisions;

    make different provision for different cases or circumstances.

    An order under this paragraph shall be made by statutory instrument.

    No such order shall be made unless a draft of it has been laid before Parliament and approved by a resolution of each House of Parliament.".'.—[Mr. Sutcliffe.]

    Brought up, read the First and Second time, and added to the Bill.

  New Clause 8

    UNFAIR PRACTICES: POWER TO MAKE PROVISION ABOUT PERIODS BEFORE NOTICE OF BALLOT
    'After paragraph 166A of Schedule A1 to the 1992 Act (which is inserted by section 12) insert—
    166B

    The Secretary of State may by order provide that, during any period beginning and ending with the occurrence of specified events, employers and unions to which the order applies are prohibited from using such practices as are specified as unfair practices in relation to an application under this Schedule of a specified description.

    An order under this paragraph may make provision about the consequences of a contravention of any prohibition imposed by the order (including provision modifying the effect of any provision of this Schedule in the event of such a contravention).

    An order under this paragraph may confer functions on the CAC.

    An order under this paragraph may contain provision extending for the purposes of the order either or both of the following powers to issue Codes of Practice—

    the power of ACAS under section 199(1);

    the power of the Secretary of State under section 203(1)(a).

    An order under this paragraph may—

    include supplementary or incidental provisions (including provision amending this Schedule), and

    make different provision for different cases or circumstances.

    An order under this paragraph shall be made by statutory instrument.

    1339

    No such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

    In this paragraph "specified" means specified in an order under this paragraph.".'.[Mr. Sutcliffe.]

    Brought up, read the First and Second time, and added to the Bill.

  New Clause 1

    DIGNITY AT WORK
    'Every employee shall have the right to dignity at work, and if the terms of the contract under which a person is employed do not include that right they shall be deemed to include it.

    An employer commits a breach of the right to dignity at work of an employee if, during his employment with the employer, that employee suffers harassment or bullying or any act, omission or conduct which causes him to be alarmed or distressed, including (but not limited to) any of the following—

    behaviour on more than one occasion which is offensive, abusive, malicious, insulting or intimidating;

    unjustified criticism on more than one occasion;

    punishment imposed without reasonable justification;

    changes in the duties or responsibilities of the employee to the employee's detriment without reasonable justification.

    Every employer shall provide a written Dignity at Work Policy outlining each employee's right to dignity at work, which must include the following—

    an explanation of the statutory right of all employees to dignity at work and a statement that breaches of that right will not be tolerated;

    examples of the types of behaviour which do not conform with the right to dignity at work and of conduct which may lead to disciplinary action;

    a clear statement of the procedure for bringing complaints and the manner in which they will be dealt with, which must include a commitment that complaints of a breach of the right to dignity at work will be taken seriously, investigated objectively and dealt with in confidence and must allow the complainant to be represented by a representative of his choice at all stages;

    designation of a competent person to whom complaints should be made and who shall fulfil the functions allotted to the competent person by this Act;

    a clear statement of the disciplinary procedure to be followed against employees who infringe the Policy, which statement shall comply with the provisions of the ACAS Code of Practice on Disciplinary Practice and Procedures in Employment (1977);

    details (including names and contact telephone numbers) of designated persons available to counsel, assist and advise individuals bringing complaints or who are the subject of complaints;

    arrangements for training in the Policy all those occupying any position of managerial authority, and all employees of the Policy;

    annual monitoring of the operation of the Policy, to be reported to senior management, and to include a summary of all complaints made under the Policy (with names of complaints kept confidential unless the complainant agrees otherwise); and

    arrangements for consultation with trade union and safety representatives on the operation of the Policy, its implementation and any revision of the Policy in the light of its operation in practice.'.—[Valerie Davey.]

    Brought up, and read the First time.
    Valerie Davey: I beg to move, That the clause be read a Second time.
    The need for the Government to be more proactive in promoting and ensuring dignity at work for all employees at every level has been reiterated from the Back Benches of this Chamber and the House of Lords since at least 1996. I am pleased to have the opportunity briefly to consider new clause 1 and raise again the serious anxiety about the widespread nature of bullying in the workplace.
    All Members of Parliament must know through their surgeries of cases of constituents experiencing bullying at work and being unable to voice that experience and seek a resolution. When we first heard about those often desperate cases, most of us were unaware of the scale of the problem. In November 2001, the Manchester school of management and the university of Manchester institute of science and technology published the report entitled, "Destructive Conflict and Bullying at Work". Five thousand people in 70 workplaces responded to the survey, which showed that one in 10 people—10 per cent.—had experienced bullying in the previous six months and that one in four—25 per cent.—had experienced bullying in the previous five years.
    Subsequent evidence from trade unions confirmed that, despite years of campaigning against bullying, it remains a persistent and extensive problem. I want to identify and thank especially Amicus-MSF and Chris Ball, the national secretary, for persistently bringing the matter back to public attention, for producing good material for the use of members and officers and for drafting policies for employers and organisations. That experience led to the union concluding:
    "The size of the problem cannot be overstated."
    Amicus, and the Andrea Adams Trust, which is the only charity that responds to the counselling needs of those who have been bullied, encouraged the all-party dignity at work group to seek statutory action. I want to put on record my appreciation of the work of both organisations.
    Further, more recent evidence has come in response to the new clause from the Royal College of Nursing, which offers its support and reports that its "Working well" survey showed that, in 2002, one in six nurses had been bullied in the workplace. It wants
    "additional protection for employees and redress for those who suffer bullying in the workplace."
    Until last week, the Government's response on each occasion had been concerned words but limited action.
    In response, dare I say it, to the new clause, which I tabled only a fortnight ago, the reaction was almost instantaneous and remarkably proactive. I offer my sincere congratulations to my right hon. Friend the Secretary of State on her announcement last week that, together with Amicus, the Government will launch the world's largest project to stamp out bullying and discrimination at work.
    Alongside the need to support individuals, the Government have recognised that some 5 million people are affected, that 13.5 million working days are lost through stress and that the cost to the economy is £4 billion every year. The project has been launched to

    1341
    provide supportive advice and training to organisations that are trying to tackle bullying, train employees as counsellors, devise and promote a voluntary charter on dignity at work, promote examples of excellent employers in the United Kingdom and produce a benchmark that enables organisations to measure their success in achieving dignity at work and a "ban bullying" pack. The Government are working initially with Amicus and 10 leading employers, including British Aerospace, Royal Mail, Legal and General and British Telecommunications.
    Although I understand that another 180 employers will join the project in the autumn, it is voluntary. However, it is far-reaching and extensive. The partnership with Amicus means that great experience will be brought to it, and that will be invaluable.
    I remind the Government that other European countries have followed the legislative route and I hope that the project will be compared with the work in other countries. However, in the light of what the Government have produced and are doing, I would seek to withdraw the new clause on the understanding—and with an assurance—from the Minister that the project will be monitored and that, should good practice not prove as infectious as we all hope, the Government will reconsider the possibility of legislation and revisit the new clause or a similar provision later.
    Mr. Deputy Speaker: Order. The hon. Lady cannot move and withdraw the clause in the same speech. I have to take it that she is moving the clause in the speech. We can then put the Question, on which the Minister and perhaps other hon. Members may wish to comment. Has the hon. Lady concluded her speech?
    Valerie Davey: May I simply say that I am minded to withdraw the new clause and thank you for your advice, Mr. Deputy Speaker?
    Mrs. Eleanor Laing: It may not have been in order for the hon. Member for Bristol, West (Valerie Davey) to mention at this stage her intention to withdraw the new clause, but since she has expressed it, I welcome it. Although I entirely agree with her sentiments and intentions, I disagree with the idea that passing further legislation will achieve them. The new clause is too prescriptive. Clearly, I do not have to make that argument because she acknowledges its validity.
    New clause 1 would place an enormous burden on employers and employees to understand what constitutes a dignity at work policy and the way in which it would be enforced. That applies especially to a small workplace in a small or medium-sized firm that does not employ many human resources people. It cannot be good for industry to employ more people to deal with further regulations than it does to manufacture goods and services. Business and industry should be about the latter, not keeping to the letter of complicated laws.
    I commend the hon. Lady for presenting the matter for discussion in the House and drawing it to the Minister's attention. The thrust of her comments is
    1342
    right. She has outlined the problem well but, unfortunately, new clause 1 is not the solution—would that it were. If the solution to the enormous problem that she described was passing such a law, we would all be pleased. Employers and employees alike would be pleased if we could eradicate the dreadful problem of bullying by merely writing something in statute.
    Most employers want to be good employers and most employees want to be good employees because it is far preferable if everybody gets on well. Employers want to encourage their employees by being good employers because that is how to get the best out of their work force. It is as simple as that.
    The hon. Lady was right to talk about dignity. How terribly undignified, therefore, that many people heard last week on radio and television that they would be made redundant. On Second Reading, the Secretary of State said:
    "I am not prepared to have our workers hear on the radio that they will lose their jobs or find that they have already lost their jobs through a text message."—[Official Report, 14 January 2004; Vol. 416, c. 821.]
    So it is not all right for workers to suffer the indignity of hearing about the loss of their job by text message or on the radio or television, but it is all right if they hear it in the Budget. That is hardly a dignified way for the Government to treat large parts of their work force. If the Government backed their words with actions, many of the problems that we have been discussing throughout the passage of the Bill could be eradicated immediately.
    It would be bad jurisprudence to pass new clause 1 into law, as it would be difficult to enforce. It is bad in principle to make laws that cannot be enforced and would be unclear. However, I join the hon. Lady in asking the Government to take seriously the problem that she outlined, which we would all like solved.
    8 pm
    Mr. Sutcliffe: I am grateful to my hon. Friend the Member for Bristol, West (Valerie Davey) for tabling the new clause and for commending the Government's decisions over the last couple of weeks to work with the trade union Amicus on bullying. I agreed with a great deal of what the hon. Member for Epping Forest (Mrs. Laing) had to say, but if she is so keen on information and consultation, she will have explain to employees why her party will vote against the principles and proposals surrounding those issues later this evening. I am happy to give my hon. Friend the assurance that she seeks, and I ask her to withdraw her new clause.
    Valerie Davey: I beg to ask leave to withdraw the motion.
    Motion and clause, by leave, withdrawn.

  New Clause 2

    INTIMIDATION
    'After paragraph 51 of Schedule Al to the 1992 Act insert—
    "Intimidation
    51A If during the union recognition procedure a union uses undue force or intimidating measures to get recognition then the CAC shall have the right to investigate this at the request of the

    1343
    employer or any worker and if such measures are found to have been used the CAC shall terminate the recognition procedure immediately.":.—[Mr. Bellingham.]
    Brought up, and read the First time.
    Motion made, and Question put, That the clause be read a Second time:—[Mr. Bellingham.]
    The House divided: Ayes 152, Noes 309.

    Division No.114]

    [9:35pm

    AYES

    Ainsworth, Peter(E Surrey)

    Burns, Simon

    Amess, David

    Burnside, David

    Ancram, rh Michael

    Butterfill, Sir John

    Arbuthnot, rh James

    Cable, Dr. Vincent

    Atkinson, David(Bour'mth E)

    Calton, Mrs Patsy

    Atkinson, Peter(Hexham)

    Cameron, David

    Bacon, Richard

    Carmichael, Alistair

    Baldry, Tony

    Chapman, Sir Sydney(Chipping

    Barker, Gregory

    Barnet)

    Baron, John(Billericay)

    Chope, Christopher

    Barrett, John

    Clappison, James

    Beith, rh A. J.

    Clarke, rh Kenneth(Rushcliffe)

    Bellingham, Henry

    Clifton-Brown, Geoffrey

    Bercow, John

    Collins, Tim

    Beresford, Sir Paul

    Conway, Derek

    Blunt, Crispin

    Cormack, Sir Patrick

    Boswell, Tim

    Cotter, Brian

    Brady, Graham

    Davies, Quentin(Grantham &

    Brooke, Mrs Annette L.

    Stamford)

    Browning, Mrs Angela

    Davis, rh David(Haltemprice &

    Bruce, Malcolm

    Howden)

    Burnett, John

    Djanogly, Jonathan

    1373

    Dorrell, rh Stephen

    Norman, Archie

    Doughty, Sue

    O'Brien, Stephen(Eddisbury)

    Duncan, Alan(Rutland)

    Osborne, George(Tatton)

    Duncan, Peter(Galloway)

    Ottaway, Richard

    Fabricant, Michael

    Page, Richard

    Fallon, Michael

    Paice, James

    Flook, Adrian

    Paterson, Owen

    Gale, Roger(N Thanet)

    Pickles, Eric

    Gamier, Edward

    Portillo, rh Michael

    George, Andrew(St. Ives)

    Prisk, Mark(Hertford)

    Gibb, Nick(Bognor Regis)

    Pugh, Dr. John

    Goodman, Paul

    Randall, John

    Gray, James(N Wilts)

    Redwood, rh John

    Grayling, Chris

    Rendel, David

    Greenway, John

    Robathan, Andrew

    Grieve, Dominic

    Robertson, Laurence(Tewk'b'ry)

    Gummer, rh John

    Rosindell, Andrew

    Hague, rh William

    Ruffley, David

    Hammond, Philip

    Russell, Bob(Colchester)

    Hancock, Mike

    Sanders, Adrian

    Harvey, Nick

    Sayeed, Jonathan

    Hawkins, Nick

    Selous, Andrew

    Hayes, John(S Holland)

    Shephard, rh Mrs Gillian

    Heald, Oliver

    Shepherd, Richard

    Heath, David

    Simmonds, Mark

    Heathcoat-Amory, rh David

    Simpson, Keith(M-Norfolk)

    Hoban Mark(Fareham)

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

    Holmes, Paul

    Kincardine)

    Horam, John(Orpington)

    Spelman, Mrs Caroline

    Howard Michael

    Spink, Bob(Castle Point)

    Howarth, Gerald(Aldershot)

    Stanley, rh Sir John

    Jack, rh Michael

    Streeter, Gary

    Jackson, Robert(Wantage)

    Stunell, Andrew

    Jones, Nigel(Cheltenham)

    Swayne, Desmond

    Key, Robert(Salisbury)

    Syms, Robert

    Kirkbride, Miss Julie

    Taylor, Ian(Esher)

    Kirkwood, Sir Archy

    Taylor, John(Solihull)

    Knight, rh Greg(E Youkshire)

    Taylor, Dr. Richard(Wyre F)

    Laing, Mrs Eleanor

    Teacher, Sarah

    Lait, Mrs Jacqui

    Thurso, John

    Lamb, Norman

    Tredinnick, David

    Lansley, Andrew

    Turner, Andrew(Isle of Wight)

    Letwin, rh Oliver

    Tyler, Paul(N Cornwall)

    Liddell-Grainger, Ian

    Tyrie, Andrew

    Lilley, rh Peter

    Walter, Robert

    Loughton, Tim

    Watkinson, Angela

    Luff, Peter(M-Worcs)

    Webb, Steve(Northavon)

    McIntosh, Miss Anne

    Whittingdale, John

    Mackay, rh Andrew

    Wiggin, Bill

    Maclean, rh David

    Willetts, David

    McLoughlin, Patrick

    Willis, Phil

    Malins, Humfrey

    Wilshire, David

    Maude, rh Francis

    Winterton, Ann(Congleton)

    Mawhinney, rh Sir Brian

    Winterton, Sir Nicholas

    May, Mrs Theresa

    (Macclesfield)

    Mercer, Patrick

    Young, rh Sir George

    Mitchell, Andrew(Sutton

    Younger-Ross, Richard

    Coldfield)

    Moore, Michael

    Tellers for the Ayes:

    Moss, Malcolm

    Hugh Robertson and

    Murrison, Dr. Andrew

    Mr. Mark Francois

    NOES

    Ainsworth, Bob(Cov'try NE)

    Barron, rh Kevin

    Alexander, Douglas

    Battle, John

    Allen, Graham

    Bayley, Hugh

    Anderson, Janet(Rossendale &

    Beard, Nigel

    Darwen)

    Begg, Miss Anne

    Armstrong, rh Ms Hilary

    Bell, Sir Stuart

    Atherton, Ms Candy

    Benn, rh Hilary

    Atkins, Charlotte

    Bennett, Andrew

    Austin, John

    Benton, Joe(Bootle)

    Baird, Vera

    Berry, Roger

    Banks, Tony

    Best, Harold

    Barnes, Harry

    Betts, Clive

    1374

    Blackman, Liz

    Field, rh Frank(Birkenhead)

    Blears, Ms Hazel

    Fisher, Mark

    Blizzard, Bob

    Fitzpatrick, Jim

    Borrow, David

    Flynn, Paul(Newport W)

    Bradley, rh Keith(Withington)

    Follett, Barbara

    Bradley, Peter(The Wrekin)

    Foster, rh Derek

    Bradshaw, Ben

    Foster, Michael(Worcester)

    Brennan, Kevin

    Foster, Michael Jabez(Hastings

    Brown, rh Nicholas(Newcastle E

    & Rye)

    Wallsend)

    Gapes, Mike(llford S)

    Brown, Russell(Dumfries)

    Gardiner, Barry

    Browne, Desmond

    Gerrard, Neil

    Bryant, Chris

    Gibson, Dr. Ian

    Buck, Ms Karen

    Gilroy, Linda

    Burden, Richard

    Godsiff, Roger

    Burgon, Colin

    Goggins, Paul

    Burnham, Andy

    Griffiths, Jane(Reading E)

    Caborn, rh Richard

    Griffiths, Nigel(Edinburgh S)

    Cairns, David

    Griffiths, Win(Bridgend)

    Campbell, Alan(Tynemouth)

    Hain, rh Peter

    Campbell, Mrs Anne(C'bridge)

    Hall, Mike(Weaver Vale)

    Campbell, Ronnie(Blyth V)

    Hall, Patrick(Bedford)

    Caplin, Ivor

    Hamilton, David(Midlothian)

    Casale, Roger

    Hanson, David

    Cawsey, lan(Brigg)

    Harman, rh Ms Harriet

    Challen, Colin

    Havard, Dai(Merthyr Tydfil &

    Chapman, Ben(Wirral S)

    Rhymney)

    Chaytor, David

    Healey, John

    Clapham, Michael

    Henderson, Doug(Newcastle N)

    Clark, Mrs Helen(Peterborough)

    Henderson, Ivan(Harwich)

    Clark, Dr. Lynda(Edinburgh

    Hendrick, Mark

    Pentlands)

    Hermon, Lady

    Clark, Paul(Gillingham)

    Hesford, Stephen

    Clarke, rh Charles(Norwich S)

    Hewitt, rh Ms Patricia

    Clarke, rh Tom(Coatbridge &

    Heyes, David

    Chryston)

    Hinchliffe, David

    Clelland, David

    Hodge, Margaret

    Clwyd, Ann(Cynon V)

    Hoey, Kate(Vauxhall)

    Coaker, Vernon

    Hood, Jimmy(Clydesdale)

    Coffey, Ms Ann

    Hope, Phil(Corby)

    Cohen, Harry

    Hopkins, Kelvin

    Coleman, lain

    Howarth, rh Alan(Newport E)

    Colman, Tony

    Howells, Dr. Kim

    Cook, Frank(Stockton N)

    Hoyle, Lindsay

    Cook, rh Robin(Livingston)

    Hughes, Beverley(Stretford &

    Corbyn, Jeremy

    Urmston)

    Cousins, Jim

    Hughes, Kevin(Doncaster N)

    Crausby, David

    Humble, Mrs Joan

    Cruddas, Jon

    Hurst, Alan(Braintree)

    Cryer, Ann(Keighley)

    Hutton, rh John

    Cryer, John(Hornchurch)

    Iddon, Dr. Brian

    Cunningham, rh Dr. Jack

    Illsley, Eric

    (Copeland)

    Ingram, rh Adam

    Cunningham, Jim(Coventry S)

    Irranca-Davies, Huw

    Cunningham, Tony(Workington)

    Jackson, Glenda(Hampstead &

    Dalyell, Tam

    Highgate)

    Darling, rh Alistair

    Jackson, Helen(Hillsborough)

    Davey, Valerie(Bristol W)

    Jamieson, David

    David, Wayne

    Jenkins, Brian

    Davidson, Ian

    Johnson, Alan(Hull W)

    Davies, rh Denzil(Llanelli)

    Jones, Helen(Warrington N)

    Davies, Geraint(Croydon C)

    Jones, Jon Owen(Cardiff C)

    Dawson, Hilton

    Jones, Kevan(N Durham)

    Dhanda, Parmjit

    Joyce, Eric(Falkirk W)

    Dismore, Andrew

    Keeble, Ms Sally

    Dobbin, Jim(Heywood)

    Keen, Alan(Feltham)

    Dobson, rh Frank

    Kemp, Fraser

    Donohoe, Brian H.

    Khabra, Piara S.

    Doran, Frank

    Kidney, David

    Dowd, Jim(Lewisham W)

    Kilfoyle, Peter

    Drew, David(Stroud)

    King, Andy(Rugby)

    Eagle, Angela(Wallasey)

    Knight, Jim(S Dorset)

    Eagle, Maria(L'pool Garston)

    Kumar, Dr. Ashok

    Ellman, Mrs Louise

    Ladyman, Dr. Stephen

    Ennis, Jeff(Barnsley E)

    Lammy, David

    Farrelly, Paul

    Laxton, Bob(Derby N)

    1375

    Lazarowicz, Mark

    Primarolo, rh Dawn

    Lepper, David

    Purchase, Ken

    Leslie, Christopher

    Purnell, James

    Levitt, Tom(High Peak)

    Quin, rh Joyce

    Lewis, Ivan(Bury S)

    Rammell, Bill

    Lewis, Terry(Worsley)

    Rapson, Syd(Portsmouth N)

    Linton, Martin

    Raynsford, rh Nick

    Lloyd, Tony(Manchester C)

    Reed, Andy(Loughborough)

    Love, Andrew

    Reid, rh Dr. John(Hamilton N &

    Lucas, lan(Wrexham)

    Bellshill)

    McAvoy, Thomas

    Robertson, John(Glasgow

    McCabe, Stephen

    Anniesland)

    McCafferty, Chris

    Robinson, Geoffrey(Coventry

    McCartney, rh lan

    NW)

    McDonagh, Siobhain

    Rooney, Terry

    MacDonald, Calum

    Ross, Ernie(Dundee W)

    McDonnell, John

    Roy, Frank(Motherwell)

    MacDougall, John

    Ruane, Chris

    McFall, John

    Ruddock, Joan

    McIsaac, Shona

    Russell, Ms Christine(City of

    Mackinlay, Andrew

    Chester)

    McNamara, Kevin

    Ryan, Joan(Enfield N)

    McNulty, Tony

    Salter, Martin

    MacShane, Denis

    Sarwar, Mohammad

    Mactaggart, Fiona

    Savidge, Malcolm

    McWalter, Tony

    Sawford, Phil

    McWilliam, John

    Sedgemore, Brian

    Mahmood, Khalid

    Sheerman, Barry

    Mahon, Mrs Alice

    Sheridan, Jim

    Mallaber, Judy

    Short, rh Clare

    Mann, John(Bassetlaw)

    Marris, Rob(Wolverh'ton SW)

    Simpson, Alan(Nottingham S)

    Marsden, Gordon(Blackpool S)

    Skinner, Dennis

    Marshall David(Glasgow

    Smith, rh Andrew(Oxford E)

    Shettleston)

    Smith, Geraldine(Morecambe &

    Marshall, Jim(Leicester S)

    Lunesdale)

    Marshall-Andrews, Robert

    Smith, Jacqui(Redditch)

    Martlew Eric

    Smith, Llew(Blaenau Gwent)

    Meacher, rh Michael

    Soley, Clive

    Meale, Alan(Mansfield)

    Squire, Rachel

    Merron Gillian

    Starkey, Dr. Phyllis

    Michael, rh Alun

    Steinberg, Gerry

    Miliband, David

    Stewart, David(Inverness E &

    Miller, Andrew

    Lochaber)

    Moffatt, Laura

    Stewart, lan(Eccles)

    Mole, Chris

    Stinchcombe, Paul

    Moonie, Dr. Lewis

    Stoate, Dr. Howard

    Moran, Margaret

    Stringer, Graham

    Morris, rh Estelle

    Stuart, Ms Gisela

    Mountford, Kali

    Sutcliffe, Gerry

    Mudie, George

    Taylor, rh Ann(Dewsbury)

    Mullin, Chris

    Thomas, Gareth(Clwyd W)

    Murphy, Denis(Wansbeck)

    Thomas, Gareth(Harrow W)

    Murphy, Jim(Eastwood)

    Timms, Stephen

    Naysmith, Dr. Doug

    Tipping, Paddy

    O'Brien, Bill(Normanton)

    Touhig, Don(Islwyn)

    O'Brien, Mike(N Warks)

    Trickett, Jon

    O'Hara, Edward

    Truswell, Paul

    Olner, Bill

    Turner, Dennis(Wolverh'ton SE)

    O'Neill, Martin

    Turner, Dr. Desmond(Brighton

    Organ, Diana

    Kemptown)

    Palmer, Dr. Nick

    Twigg, Derek(Halton)

    Perham, Linda

    Tynan, Bill(Hamilton S)

    Picking, Anne

    Vis, Dr. Rudi

    Pickthall, Colin

    Walley, Ms Joan

    Pike, Peter(Burnley)

    Ward, Claire

    Plaskitt, James

    Wareing, Robert N.

    Pollard, Kerry

    Watson, Tom(W Bromwich E)

    Pond, Chris(Gravesham)

    Watts, David

    Pope, Greg(Hyndburn)

    White, Brian

    Prentice, Ms Bridget(Lewisham

    Whitehead, Dr. Alan

    E)

    Wicks, Malcolm

    Prentice, Gordon(Pendle)

    Williams, rh Alan(Swansea W)

    Prescott, rh John

    Williams, Betty(Conwy)

    Price, Adam(E Carmarthen &

    Williams, Hywel(Caernarfon)

    Dinefwr)

    Winnick, David

    1376

    Winterton, Ms Rosie(Doncaster

    Wright David(Telford)

    C)

    Wyatt, Derek

    Wood, Mike(Batley)

    Woodward, Shaun

    Woolas, Phil

    Tellers for the Noes:

    Wright, Anthony D.(Gt

    Mr. John Heppell and

    Yarmouth)

    Mr. Nick Ainger

    Question accordingly negatived.

  New Clause 3

    APPEALS
    'After paragraph 171 of Schedule A1 to the 1992 Act insert—
    "Appeals
    171A Any of a union or a company or a relevant worker may appeal against any decision of the CAC to the High Court.".'.[Mr. Mr. Bellingham.]
    Brought up, and read the First time.
    Mr. Bellingham: I beg to move, That the clause be read a Second time.
    The only route of appeal from the Central Arbitration Committee is judicial review. My argument is simple and I shall not go into great detail: surely there is a need to build a simple mechanism into statute to allow appeal to the High Court. After all, an appeal to the High Court can be made from the Employment Appeal Tribunal.
    One of my concerns is that the CAC is being asked to do more and more. With the inclusion in UK law of the EU information and consultation directive, there will be many more referrals to the CAC. I take the view, as do my hon. Friends, that more protection should be given to employers—and, indeed, employees and trade unions alike—in taking appeals to the High Court. I appreciate that things are improving, but I looked at some CAC cases from the past few years and I have to say that often the CAC does not spell out its decisions clearly or comprehensively.

    1347
    On a number of occasions, all that the CAC has said is:
    "In our industrial relations experience, this is our decision".
    If we are not to have a right of appeal to the High Court, the Minister should certainly ask the CAC to be much clearer and to spell out in much more detail the background to and reasoning behind its decisions. I ask him to consider the new clause carefully.
    Mr. Djanogly: I support the new clause, which would give unions—as well as all companies and all workers for that matter—the right to take an appeal against a CAC decision to the High Court. The workings of statutory recognition are complex and the procedures, as we have deduced over the past two months, can be complicated.
    In deciding between the parties, the CAC sometimes has to make value judgments. I accept that the CAC is a worthy body and that it normally gets it right, but in those less frequent examples where one side is not happy with the decision—presumably in an industrial conflict—there should be a right of appeal.
    In Committee, the Minister said that the CAC annual report notes that it has a satisfaction rating of 80 per cent. That is borne out in the report, which also notes that the response rate to the survey was only 40 per cent. In considering the judicial powers of the CAC, the people consulted might not want to go too public on their attitudes towards it, because it could judge them. Does the Minister know whether the CAC or an independent third party collected that data? That would be relevant to our consideration of whether an appeal would be fair. From what my hon. Friend has said, and from the statistics as given, such an appeal would be right.
    Mr. Sutcliffe: I am grateful for the hon. Gentlemen's contributions to the debate.
    As the hon. Member for North-West Norfolk (Mr. Bellingham) explained, the new clause concerns whether there should be a mechanism for appeals against decisions of the Central Arbitration Committee in addition to the possibility of seeking a judicial review on any such decision. While in many areas of law it is useful to have a right of appeal to a higher authority when one party feels aggrieved about a court's decision, the Government think that it would be inappropriate in this case, in which there are statutory recognition procedures. The CAC must make a large number of judgments in the course of its consideration of an application. An additional right of appeal against individual decisions of the CAC would introduce serious delays into the process, particularly if it had to be halted until the appeal was heard. It would encourage legalism and the type of legal wrangling that undermined recognition procedures in the 1970s. Such delays are not neutral and in most cases favour the employer.
    Most importantly, the CAC is a specialist body operating in a specialist area, as hon. Members have accepted. Its decisions often turn on the application of its members' industrial relations expertise and experience. No appeal court—including the High Court—could match that. That view was judicially
    1348
    endorsed in both the High Court and Court of Appeal in the Kwik-Fit judicial review. In the High Court, Mr. Justice Elias stated that
    "courts do not have the relevant expertise, nor is it desirable that these procedures should become a happy hunting ground for lawyers."
    In the Court of Appeal, Lord Justice Buxton agreed with this statement and added that
    "the CAC was intended by Parliament to be a decision making body in a specialist area that is not suitable for the intervention of the courts."
    Of course, the CAC's decisions can be challenged through judicial review. There have been only six applications for judicial review, four of which proceeded to a full review. In only two of those cases was the CAC found to have acted improperly in any way. The outcome of those few cases demonstrates that the CAC has used sound judgment in interpreting the extent and nature of its powers.
    In addition, the amendment is defective in that it refers to the "company'" not the "employer". It thereby ensures that employers that are not companies have no right of appeal. The hon. Member for Huntingdon (Mr. Djanogly) asked about the response rate to the survey on the CAC. Unless I receive some in-flight information, I cannot give him that answer now, but I will write to him in due course—[Interruption.] I think that the CAC has its own information, but I will clarify that, as he also asked that question in Committee.
    The new clause would damage the smooth functioning of the recognition procedure for little discernible benefit, and is also defective. I hope that I have answered the hon. Gentleman's concerns and that he will withdraw his amendment.
    Mr. Bellingham: I am grateful for the Minister for those remarks. In his customary charming way, he has explained why he does not like the amendment and feels that it is technically undesirable. I forgot to declare my interest as a barrister—he mentioned a happy hunting ground for lawyers, and I take on board his point. I reject his criticism of the High Court, which is made up of a large number of judges with huge expertise. In the light of what the Minister said, however, I beg to ask leave to withdraw the motion.
    Motion and clause, by leave, withdrawn.

  New Clause 9

    RIGHT TO STRIKE
    'For subsection (2) of section 221 of the 1992 Act (restrictions on grant of injunctions and interdicts) substitute—
    "(2) No injunction or interdict shall be granted to restrain exercise of the right to strike by a trade union or any workers.".'.—[John McDonnell.]
    Brought up, and read the First time.
    John McDonnell: I beg to move, That the clause be read a Second time.
    Madam Deputy Speaker (Sylvia Heal): With this it will be convenient to discuss the following:
    New clause 11—Dismissal in connection with participation in official industrial action—
    '(1) Section 238A of the 1992 Act (dismissal in connection with participation in official industrial action) is amended as follows.
    (2) In subsection (1) for "employee" substitute "worker".
    (3) For subsections (2) to (8) substitute—
    "(2) For the purposes of subsection (1) above a worker takes protected industrial action if he reasonably believes he is so doing.
    (3) The obligations on the worker to work and on the employer to give consideration therefore under the contract under which a worker works shall be suspended by operation of law for that period during which the worker takes protected industrial action and shall in no circumstances be or be regarded as broken by reason of his taking protected industrial action.
    (4) The Secretary of State shall make regulations which shall apply to deal with the consequences of suspension of contracts in accordance with subsection (3) so as to protect the various interests of workers and employers and in particular to ensure the preservation of the contract and the restoration of the obligations thereunder when the protected industrial action concludes.
    (5) Loss of pay during industrial action (whether protected or not) shall never be greater than the sum which the worker would have earned had he not taken the industrial action.".'.
    New clause 12—Right to strike ( No.2)—
    '(1) The 1992 Act is amended as follows.
    (2) Before section 219 (but after the cross-heading immediately preceding that section) insert—
    "218A Right to strike
    (1) A trade union has the right, and it shall be lawful, to call for or to support or encourage workers to take industrial action as a means of resolving or seeking to resolve any dispute or as a means of achieving or seeking to achieve any object which relates to any workers' interests at work including (without prejudice to the generality of the foregoing) economic and social matters which affect any workers or the trade union or on which the trade union has a policy.
    (2) Every worker has the right, and it shall be lawful, to take industrial action as a means of resolving or seeking to resolve any dispute or as a means of achieving or seeking to achieve any object which relates to any workers' interests at work including (without prejudice to the generality of the foregoing) economic and social matters which affect any workers or the trade union or on which the trade union has a policy.
    (3) In this Act 'industrial action' shall include the act of peacefully assembling and of picketing or refusing to cross a picket.".
    (3) Omit sections 219, 220, 222 to 235A and 240 to 246.'.
    New clause 13—Ballots on industrial action—
    '(1) The 1992 Act is amended as follows.
    (2) Before section 226 (but after the cross-heading immediately preceding that section) insert—
    "225A Ballots on industrial action
    (1) The rules referred to in section 3(2)(a) shall contain provisions requiring a ballot to be held (save in exceptional or emergency situations) of members which the trade union reasonably identifies as those likely to be invited by it to take industrial action and those rules shall be approved by the Certification Officer as reasonable, and such approval shall not be unreasonably withheld.
    (2) No person or body other than a member of the union concerned may bring legal action which relies to any degree on an allegation that the balloting obligations of the union have not been met."
    (3) Omit sections 226 to 234A.'.
    New clause 17—Industrial action: deduction from wages—
    'When a worker has taken part in official industrial action, the employer may not make a deduction from the worker's wages in respect of that action which exceeds the amount which the worker would have earned if he had not taken part in that action.'.
    Amendment No. 10, in page 18, line 38, leave out Clauses 21 to 23.
    Amendment No. 11, in page 48, line 47 [Schedule 2], leave out from beginning to end of line 3 on page 49 and insert—
    'Sections 219 and 220.Sections 222 to 235A.Sections 240 to 246.'.
    Amendment No. 12, in page 48, line 47 [Schedule 2], leave out from beginning to end of line 3 on page 49 and insert—
    'Sections 226 to 234A.'.
    John McDonnell: I realise that we have less than an hour left in this debate, so I shall try to be as brief as possible, as I know that Members want to reach amendment No. 1, which is the last on the selection list.
    This group represents an attempt to place in British law the right to strike. New clause 11 looks at the right to strike, new clause 12 is on secondary action and picketing, new clause 13 is on balloting, new clause 17 reiterates new clause 11 on deduction from wages, and new clause 9 relates to issues about injunctions.
    The basis of the discussion leads on from the Second Reading debate, to which many Members contributed. As Members are aware, the right to strike does not exist in British law. The only protections that strikers have are as a result of breaches of individual contracts of employment by industrial action, which is based on a legal immunity built up over time. That is in complete contradiction to the international agreements signed by successive Governments—the International Labour Organisation conventions, the Council of Europe social charter, and the international covenant on economic, social and cultural rights.
    This is an attempt to address in some way the extension of the immunities allowed to people who take industrial action. It does not strike at the heart of the Government's failure to abide by international conventions, which would require the right to strike to be legislated for in this country. In most European countries, lawful strike does not break the contract of employment but merely suspends it, so it is unlawful to sack a worker on lawful strike, and the courts will prevent it. Were that the law here, there would be no need for the complex unfair dismissal rules to protect strikers that we have debated at length over the last 15 to 20 years. New clause 11 attempts to arrive at a clarification of the right to strike.
    In the last debate in 1999, there was an attempt to extend immunities with the eight-week rule. The Friction Dynamics dispute demonstrated that that protection was inadequate. This Bill yet again applies further conditions to ameliorate the eight-week rule and enhance the protections, but in my view will also prove inadequate. In the Friction Dynamics case, it was demonstrated that many of the protections outlined in this Bill were already taken into account by the appeal tribunal. What we really need is an amendment to delete

    1351
    section 238A and provide that, when a worker is engaged in industrial action called by a trade union—lawfully, of course—pursuant to section 219, such industrial action shall not in any circumstances be held to constitute a breach of the contract of employment, but instead shall suspend the obligations under the contract of both the employee and the employer during the currency of the industrial action.
    Since the industrial action breaches the contract of employment, the worker is not entitled to be paid for time while taking industrial action. That would obviously equally apply if the contract were suspended during the action. Nowadays, however, employers often deduct wages on an unfair daily basis when the sum deducted is more than the worker would have earned had she or he performed all her or his duties that day. The new clause provides for a worker taking industrial action not to be penalised by losing more than the sum that would have been earned had he or she not taken such action. That, indeed, is the purport of new clauses 11 and 17.
    At present, the immunity allowed to a worker taking strike action protects that worker from specific torts in common law. One protection that it does not give is the ability to take action very specifically unrelated to the worker's direct employment. Industrial action is protected against that limited range of torts only if it is in contemplation of furtherance of a dispute that is wholly or mainly related to the terms and conditions of employment, or to other matters specified in the legislation such as job losses, disciplinary issues and trade union recognition or derecognition. If, according to a court, the union's predominant motive falls outside such statutory trade dispute issues, the immunity will be lost.
    8.30 pm
    New clause 12 would extend the immunities. Sections 219 and 244 of the 1992 Act would be deleted, and it would be provided that
    "A trade union has the right, and it shall be lawful, to call for or to encourage workers to take industrial action as a means of resolving any dispute &#x2026; to any workers' interests at work including &#x2026; economic and social matters which affect the worker or the trade union or on which the trade union has a policy."
    In other words, when a trade union was pursuing a particular policy not specifically related to the company involved but more widely related to the economic and social conditions in an area, such action would be lawful.
    Under current UK law, a trade dispute must be between employees and their own employer. If the relevant dispute is between another employer and his employees, it is unlawful for a union to call for sympathetic or so-called secondary action. My proposals support the ILO and the Council of Europe, which have condemned that blanket ban. The new clause would enable secondary action to take place, and workers taking such action would be protected from unfair dismissal.
    The Government have written into British law a guaranteed ability to assemble peacefully, under the Human Rights Act 1998. New clause 12 would enable pickets to assemble peacefully to attempt to persuade
    1352
    people not to cross a picket line. The Bill does not deal with that problem. Section 222 of the 1992 Act should be amended to give workers the right to assemble peacefully under the Human Rights Act, and to picket any place of work.
    New clause 13 deals with ballots. Even when industrial action falls within the narrow statutory definition of a trade dispute, a trade union will lose immunity if it fails to comply with the highly complex procedures requiring a fully postal strike ballot and so forth, which we have discussed in the context of a series of employment and trade union-related measures over the last six years. Pre-ballot and pre-strike notices in due form must be sent to the employer in a dispute, in accordance with the strict timetable set out. The employer will therefore be able to injunct the union if the procedures are not adhered to.
    The Bill goes some way towards overcoming a number of problems of detail relating to balloting procedures, but it should be for workers and their unions to decide how best to ascertain collective views. Workplace ballots might be more suitable in some circumstances, but in emergencies a ballot might have to come after action had taken place. That is demonstrated by industrial action in my constituency at British Airways and elsewhere. My new clauses would place the onus on the certification officer to clarify and verify the procedures set out in the union's rules to ensure that they allowed for democratic participation by members in decisions on industrial action, but would not allow employers themselves to intervene to injunct individual unions or prevent action. It would be up to individual trade unionists to injunct or take up the issue with their unions.
    A range of restrictions already exist to impede fair deliberation about industrial action. A further problem in current industrial action law is the use of interlocutory injunctions. That emergency procedure does not require the claimant to prove the alleged facts either beyond all reasonable doubt or on the balance of probabilities. It is sufficient for the employer to assert facts that, as long as they appear credible, will be accepted by the court, notwithstanding that the union has evidence to the contrary. The employer need not even demonstrate that its case is stronger than the union's; it is enough to show a serious issue to be tried. If credible facts are asserted and an arguable case under law is demonstrated, the court will more or less automatically grant an injunction if the balance of convenience favours it. In practice, the court will almost invariably grant the injunction to stop the industrial action, unless the union shows that the employer's legal argument is unsustainable, because the balance of convenience invariably tilts in the employer's favour.
    The Council of Europe's economic and social rights committee has condemned that lack of balance between employer and trade union, as has the International Labour Organisation's committee of experts. The Bill does not deal with that matter, but new clause 9 would ensure that
    "No injunction or interdict shall be granted to restrain exercise of the right to strike by a trade union or any workers"
    unless there is a full trial.
    Much has been said about the need for balance between employer and worker. These new clauses and amendments would endorse the legal right to strike,

    1353
    which the Government have accepted in one international treaty after another, and balance the legal strengths of employer and worker in the discussions and deliberations leading up to industrial action.
    Mr. Djanogly: Injunctions have probably saved an enormous amount of time and cost for all parties concerned. New clause 9 would allow a strike to go ahead and its rights and wrongs to be considered later. That would be a recipe for mayhem, albeit legal mayhem, and would involve enormous costs—probably the bankrupting of unions—with very little being achieved.
    I take it that, however long a strike lasted, workers' rights would be fully protected, presumably even if the company went into insolvency as a result. New clauses 12 and 13 would give a right to strike on the broadest possible terms. I think that they technically maintain the difference between official and unofficial action, but the concepts are merged to such an extent that there is little difference between them. Given that the ballot could be undertaken by the union with no one except its own members able to complain to the courts about the ballot process, I do not see how it would be meaningful at all.
    Having briefly addressed the new clauses, I can safely say that I am not in favour of any of them.
    Hywel Williams: I rise to speak briefly about the experience of my constituents involved in the Friction Dynamics strike, to which the hon. Member for Hayes and Harlington (John McDonnell) referred earlier. I shall not go into the details of the strike, but it pointed up the weaknesses of current legislation, especially the eight-week rule. At an earlier stage, I welcomed clause 21 as a partial answer, and the extension period in relation to lockouts is certainly welcome. However, I suspect that if clause 21 is passed, bad employers will continue in their intransigence up to and beyond a period of 16 weeks. If that had happened in the case in my constituency, I presume that my constituents would still be picketing today, three years after the start of their strike.
    I tend to think that the abolition of the eight-week rule would encourage bad employers to come to the table, which is what good employers do anyway. No commercial undertaking wants to extend a strike unless it has a particular motivation for doing so, as we saw in the case of Friction Dynamics. As I said, where there is no lockout, the eight-week rule will still apply. Had Friction Dynamics' management played their cards rather more carefully, the strike would have continued and they would not have been found guilty by an industrial tribunal. So the situation would have been the same as before the various discussions that took place about the Friction Dynamics strike. Plaid Cymru's position remains the same: if a strike is lawful for eight weeks, we see no reason why the protection should not be applied during the ninth and further weeks, and we regard the Employment Relations Act 1999 as a compromise that needs to be looked at again.
    Mr. Sutcliffe: I thank my hon. Friend the Member for Hayes and Harlington (John McDonnell) for the brevity with which he spoke to the new clauses and
    1354
    amendments, notwithstanding the seriousness of the issues that he raised. I am grateful to him for recognising that time is against us.
    This is a large group of new clauses and amendments that would radically change the law on industrial action, and the law on the consequences to the individual of taking industrial action. As my hon. Friends have said, the amendments would rewrite the law on industrial action. At a stroke, they would delete virtually all of part 5 of the Trade Union and Labour Relations (Consolidation) Act 1992, substituting it with a few new sections that provide rights to trade unions and their members, but which systematically ignore the interests of employers and society at large.
    I do not intend to address the detail of the new clauses and amendments as we have little time. Instead, I shall address the more fundamental question that my hon. Friend is really asking me to address: whether a total reworking of these provisions is required. This body of law was mainly constructed during the 1980s, but its basic principles have been in place for a great deal longer. We know that unions resisted these changes when they were introduced. Some resented the interference in their internal affairs and the resulting democratisation of their decision-making procedures; many resented the more limited immunities against legal action that were introduced. However, unions have generally learned to live with the provisions. Their members have benefited from the greater control over their unions' decisions that the law has required. Employers have benefited from knowing that they cannot be dragged into industrial disputes that have nothing to do with them; and, more generally, society has benefited from less widespread and less damaging industrial action.
    The new clauses and amendments seek to take us back to the days of the 1960s and 1970s, when strikes significantly damaged our economy and the way in which we lived. They would reintroduce an entitlement to take secondary action, and would encourage wildcat strikes and other forms of damaging unofficial action. We want to frame the law in a way that deals with the realities of today's labour market, so it would be a profound mistake to turn the clock back. For these reasons, the Labour party made it plain in its 1997 manifesto that it would retain the key elements of the changes introduced in the 1980s. We will honour that commitment.
    Some might argue that the current law is imbalanced and puts unions in an impossibly weak position vis-à-vis the employer; I do not believe that that is the case. If that were so, employers would never deal with unions or choose to settle their disputes with them voluntarily. The evidence suggests that the strike weapon remains a potent one if union members really support it. Only in a minority of cases is a successful vote in favour of industrial action actually followed by a strike or another form of industrial action. Employers prefer to resolve their differences voluntarily, rather than incurring the cost and disruption of industrial action.
    My hon. Friend pointed to the International Labour Organisation's conventions and similar international instruments. It is fashionable in some quarters to interpret our international obligations in this area in the widest possible way. The truth is that the various treaties are drafted in very general terms and are capable of a

    1355
    wide range of interpretations. Those interpretations vary with each member state's industrial relations practices and traditions. Although it is true that some ILO advisory bodies have criticised our law on industrial action, we have always tried to answer those criticisms with reasoned arguments. We are convinced that we comply with our international obligations. The ILO gives due regard to our opinions, and understands that it is perfectly possible for different parties to interpret in good faith the implications of its conventions in different ways. As a result, the ILO's governing body has never formally reprimanded us for failing to comply with key conventions 87 and 98. Our standing with the ILO is as high as ever.
    New clauses 11 and 17 and amendment No. 10 deal with the consequences for individuals of taking industrial action. New clause 10 and amendment No. 10 would delete the provisions in the Bill that strengthen the protection for employees taking lawfully organised, official industrial action. In their place, new clause 11 introduces an entirely new protective regime.
    8.45 pm
    The basic aim of the new clause is to ensure that the protection is indefinite. We have already debated that issue many times, during our consideration of the Bill and during the passage of the Employment Relations Act 1999. Indeed, the issue was looked at in detail during our review of that Act. Our position is that we need to put a time limit on the period during which it is automatically unfair to dismiss someone taking industrial action. In industrial action law, we need to balance the legitimate interests of the employer and those of union members. That might not immediately appeal to my hon. Friend, but the Government want to create a fair regime for all interested parties and not just for one. Eight weeks is, in our judgment, a fair period. It covers the overwhelming majority of stoppages, 98 per cent. of which are dealt with within that period.
    The case of Friction Dynamics was mentioned by the hon. Member for Caernarfon (Hywel Williams), who supported us in Committee by recognising that we were tidying up the position on lock-out days and by accepting that we were asking both sides to take reasonable steps to resolve the dispute. We wanted to toughen up the position so that a Friction Dynamics situation could not happen again: both sides would have to prove that they tried reasonably to resolve the dispute. The action that took place has been condemned on both sides of the House.
    The Bill will strengthen the protections introduced in the 1999 Act in a targeted way that will resolve problems that have arisen in practice. The provisions may not meet everyone's aspirations in the union movement, but I believe that they are generally seen as an advance.
    New clause 17 places limits on the deductions from pay that employers may make when their employees take industrial action. That issue arose in the tertiary education sector, where the unions believe that employers made excessively large deductions. I think I am right in saying that the issue has not affected many other sectors, so it is not a matter that was highlighted in the representations that we received in preparing the Bill or during the review of the Employment Relations Act.
    1356
    I am not yet convinced that the issues need to be specifically addressed in industrial action law. Of course, there are already entitlements for workers to complain to employment tribunals about unauthorised deductions from pay. I hope that those existing protections would help the workers concerned in those cases, although I recognise that the breach of contract that occurs when workers take industrial action might complicate the position.
    The new clause contains a simple rule of thumb for deductions, but I am not sure that it provides the right answer. For example, there may be a legitimate case for employers to make some proportionate reduction to holiday pay or to make some adjustment to the calculation of an employee's length of service for pension purposes.
    In conclusion, I am not yet convinced that there is a problem that needs to be dealt with—or, if there is, that new clause 17 provides the right solution. However, I would be happy to meet my hon. Friend if he believes that it is a sufficiently serious issue.
    For reasons that I have explained, I do not wish to speak to the amendments in any further detail. Unfortunately, I find myself in agreement with many of the comments made by the hon. Member for Huntingdon (Mr. Djanogly), which is an unusual occurrence in this place. I ask my hon. Friend to withdraw his new clause.
    John McDonnell: With such a resounding welcome for the new clauses, I beg to ask leave to withdraw the motion.
    Motion and clause, by leave, withdrawn.

  New Clause 10

    COLLECTIVE BARGAINING
    '(1) Omit paragraph 7 of Schedule Al to the 1992 Act.
    (2) In paragraph 35(1) of that Schedule—
    (a) after "agreement", insert "supported by a majority of workers within the relevant bargaining unit";
    (b) after "to", insert "and does";
    (c) after "bargaining", insert "in relation at least to pay, hours and holidays";
    (d) for "any" substitute "a substantial number of".'.—[John McDonnell.]
    Brought up, and read the First time.
    John McDonnell: I beg to move, That the clause be read a Second time.
    Madam Deputy Speaker: With this we may take the following amendments: No. 8, in page 9, line 3, leave out Clause 8.
    No. 9, in page 49, line 10 [Schedule 2], after 'paragraphs', insert '7'.
    John McDonnell: The new clause and associated amendments deal with a problem that has arisen in several disputes, which I would like briefly to outline. It first occurred in a dispute leading to the case of OILC v. Wood Group Engineering (North Sea) Ltd. in August 2003. Despite the fact that the overwhelming majority of the core workers on the Brent oil platforms were OILC

    1357
    members and wanted the union to negotiate with their employer, Wood Group Engineering (North Sea) Ltd. on their behalf, the application was refused on the ground that the employer set the workers' terms and conditions by reference to a collective agreement between the Offshore Contractors Association and the Amalgamated Engineering and Electrical Union and the GMB. That was held to debar the OILC from seeking recognition.
    The same problem occurred in the case of NUJ v. Mirror Group Newspapers plc, where a claim for recognition by the National Union of Journalists at the Racing Post was rejected by the Central Arbitration Committee. As in the previous case, the NUJ was about to finalise a deal with the employer, who decided instead to make a recognition deal with the British Association of Journalists—a tiny union that at the time had not a single member at the Racing Post. It claimed to have one, whose name it had forgotten, at the time of the CAC hearing some months later, despite the employer circulating letters from the BAJ begging journalists to join and offering free subscriptions. At the time of the hearing, the BAJ had not carried out any collective bargaining on behalf of the workers in that firm, who shunned the BAJ. In the view of many, that was a breach of article 11 of the European convention on human rights, which allows workers the right to be heard via their trade union. The new clause would ensure that a trade union that has a majority of a work force as members is not frustrated by an employer rushing into agreement with another organisation, which may have no membership or a minuscule membership in that firm, in advance of a CAC hearing and decision.
    As the law stands, it grants representation to the first corner, not to the most representative organisation. The amendment would put the Government's legislation in line with international law, but at the same time would accept the democratic wishes of the majority of the individuals working for a particular company who could demand to be represented by the union of their choice.
    Mr. Djanogly: On a technical point, I do not believe that there is a paragraph 7 or 35 to schedule A1 to the 1992 Act—perhaps the hon. Gentleman was referring to the Employment Relations Act 1999; he may wish to clarify that point. At present, the recognition process applies only when a company has at least 21 workers and the new clause would open up union recognition in any company, however few workers it had. That would be an utter disaster for most small businesses, and for the competitive state of our economy.
    In any event, the statistics do not show union recognition in small companies to be a relevant consideration. The Minister told us in Committee that only 12 applications for statutory recognition came from companies with 21 to 30 employees—less than 5 per cent. of the whole. Barely 10 per cent. of applications came from companies with between 31 and 50 employees. Companies do not appear interested in union recognition with that number of employees, and neither do the employees. Unions might not be
    1358
    interested in becoming involved at that level, probably because of the cost implications with so few members. For companies with fewer than 50 employees, none of the parties appears interested in recognition and to that extent, instead of the figure of 21 being struck out of the legislation, it should be raised to 50.
    Mr. Tynan: In a way, I support the proposition that has been put before us. Everyone is nasty about trade unions, and, at present, if companies have fewer than 21 employees they are excluded from trade union recognition. However, if Opposition Members recognised the value that trade unions can bring to a company, they would better understand industrial relations in this country. We start from different points of view. It is thought that unions are bad if they are involved in a small, family company, because that is not the way business should be done.
    In my former life as a trade union official, I often found that small companies recognised the worth of trade unions and negotiated with them, on not an official but an ad hoc basis. They had no objection to their employees being members of a trade union. If we exclude companies where there are fewer than 21 workers, we do a disservice to those who want union recognition. Union recognition is not bad—it can be a good thing.
    Mr. Djanogly: No one is saying that people should not be members of a trade union—that is their right; we are talking about recognition.
    Mr. Tynan: That is where we differ from Opposition Members. If 20 people in a company want to join a trade union and we are agreed that they have that right, I can see nothing wrong in the employer recognising those 20 people as a bargaining unit. Perhaps we should consider extending bargaining rights where there are fewer than 21 people in a business, although I realise that is not on the agenda tonight.
    There has been considerable discussion with the TUC and employers, but we need to send the message that in future we shall continue to look at the needs of workers in companies. There are some very bad small employers and a trade union is needed to defend their workers, who are treated very badly. I hope that Opposition Members do not condone bad employers who treat their workers badly.
    Mr. David Drew: Rather than looking at the negatives, does my hon. Friend agree that we should look at the positives? For example, the Government's policies on stakeholder pensions could offer trade unions in small companies a valuable way to organise the work force to help employers understand why pensionability is vital for their workers.
    Mr. Tynan: I do not disagree with my hon. Friend.
    In Committee, we discussed a range of issues relating to trade union membership and how we would deal with them. We accepted that the Bill is a good one. Yes, there is room for amendment, and we should be signalling to the Minister that we may have to revisit some aspects in the future. I support the new clause, but I hope that it is withdrawn, because I understand the points that have

    1359
    been made. The Minister should take careful note of what has been proposed, however; perhaps we can move in that direction in the future.
    Malcolm Bruce: When the hon. Member for Hayes and Harlington (John McDonnell) introduced the new clause, he gave two examples. The second seemed to be a blatant illustration of the abuse that the provision would address, but I was rather puzzled by his first example, which sounded more like an inter-union dispute; indeed, the North sea problems rose from it. Operational working is such that contractors move on and off platforms. I am not arguing for or against the Wood offshore case, but the company presumably argued that it already had an established agreement with a trade union and was on the platform for the duration of a particular contract, but that the OILC was trying to get in on the act. That may not have been so, but that is how it sounded.
    John McDonnell: No one was aware that the union agreement actually existed.
    Malcolm Bruce: Presumably, the management were aware of it. The point is that there are particular problems for the organisation of North sea workers.
    The hon. Gentleman's second example was central, however. It is important that the Minister acknowledge the fact that there was a wholly self-interested attempt to destroy the legitimate aspiration of the work force to have the union they wanted. We must address the fact that managements could undermine not only the spirit of unionism but the fundamental principle that people have the right to belong to the union of their choice.
    9 pm
    Mr. Sutcliffe: In view of the time, I shall race through my response, although that is not to underplay the seriousness of the issues that my hon. Friend the Member for Hayes and Harlington (John McDonnell) has raised.
    Let me say to the hon. Member for Huntingdon (Mr. Djanogly) and my hon. Friend the Member for Hamilton, South (Mr. Tynan) that the Government do not oppose recognition in companies with fewer than 21 workers. The argument is whether there should be statutory procedures in respect of such companies, and the evidence given to the hon. Gentleman exposes the position in that respect. However, I am sure that we shall return to the matter, in connection with rights to have a companion during dispute resolution procedures and so on.
    The hon. Member for Gordon (Malcolm Bruce) spoke about offshore oil rigs and he is right to say that we should not be drawn into inter-union disputes. The case is—or used to be—governed by the TUC's Bridlington principles and is a matter for the TUC.
    As for the case involving the NUJ and Mirror Group Newspapers, my hon. Friend the Member for Hayes and Harlington will know that judicial review is likely, so I cannot say anything at this stage. However, I acknowledge the issues that have been raised.
    On collective agreements, we in the UK have a culture of voluntary procedures that does not exist elsewhere. There are matters to examine—for example, sweetheart
    1360
    deals with employers—but I hope that, having put the issues on the record, my hon. Friend will withdraw his new clause.
    John McDonnell: I am happy to beg to ask leave to withdraw the motion.
    Motion and clause, by leave, withdrawn.

  New Clause 14

    EFFECT OF CONTINUATION OF CONTRACT ORDER ON TRANSFER OF UNDERTAKINGS
    Section 130 of the Employment Rights Act 1996 (c.26) (order for continuation of contract of employment) is amended as follows.

    After subsection (1)(a) omit the word "and".

    After subsection (1)(b) insert—

    "and
    (c) for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 1981,"'—[John McDonnell.]
    Brought up, and read the First time.
    John McDonnell: I beg to move, That the clause be read a Second time.
    I seem to be trying to write the next piece of Government legislation on employment relations. Let me zip through this new clause as well.
    Several hon. Members have continuing problems with the operation of the Transfer of Undertakings (Protection of Employment) Regulations 1981. Section 129 of the Employment Rights Act 1996 provides for a special form of relief in the case of dismissal for trade union-related activities, and a person who claims unfair dismissal on those grounds may also make an application to the tribunal for interim relief. On an interim relief application, if the tribunal considers that the individual has better than even chances of success at the full hearing, the tribunal can make a continuation of contract order under section 129. That means that the contract is deemed to continue and the employer must continue to pay wages and other benefits due under the contract from the date of termination of the contract until the complaint of unfair dismissal is determined or settled.
    That is an important remedy for those who are dismissed on trade union-related grounds, especially as claims for unfair dismissal can take many months to be determined in tribunal. However, in the recent case of Dowling v. M E Ilic Haulage Ltd., the business was sold on after a continuation order was made. An application was made to join the transferee—the business that had bought the business—as a respondent, but the tribunal accepted the transferee's argument that the effect of a continuation of contract order was limited to the payment of pay and benefits, and continuity of employment; it did not mean that the contract continued, so the applicant's employment did not transfer on the business being sold and the transferee could not be joined as a respondent.
    The Employment Appeal Tribunal has upheld the decision and there is no application to appeal. Therefore, as the law stands, where a continuation of contract order has been made, the employee is extremely

    1361
    vulnerable if the business is sold on. We must bear in mind the fact that the transferor may have only small funds or even be insolvent, whereas the transferee will generally be viable and able to meet any awards or even to reinstate the employee if he succeeds in his claims. The new clause stipulates that the continuation of contract order has effect for the purposes of the TUPE regulations. That, in turn, means that the transferee can be joined as a respondent, and if the application is successful, the employee can be reinstated to or claim compensation from the transferee.
    Although it would make a minor amendment, the new clause could bring great relief and overcome a technical problem.
    Mr. Sutcliffe: As my hon. Friend says, the new clause is designed to extend the effect of a tribunal order made under section 129 of the Employment Rights Act 1996. The effect of an order under section 129 for the continuation of a contract of employment is dealt with in section 130, which provides that the contract should continue in force for the purposes of pay, pension rights, continuity of employment and other such matters. The new clause would add another category to those specified in section 130 by providing that a contract that a tribunal orders to continue in force would do so for the purposes of the TUPE regulations. In my opinion, the addition is unnecessary. The TUPE regulations already have the effect of preserving rights that arise pursuant to the contract of employment. That protection extends to statutory employment rights arising pursuant to the contract of employment.
    I sympathise with the spirit in which the clause was tabled, but, as I have already explained, there is no need for it. I respectfully ask my hon. Friend to withdraw it.
    John McDonnell: I beg to ask leave to withdraw the motion .
    Motion and clause, by leave, withdrawn.

  New Clause 16

    EXCLUSION OR EXPULSION FROM TRADE UNION
    ' Section 174 of the 1992 Act (right not to be excluded or expelled from trade union) is amended as follows.

    In subsection (2)(d) for "entirely attributable to his conduct" substitute "in accordance with the rules of the union relating to exclusion or expulsion unless the consequence of exclusion or expulsion is that the excluded or expelled person is for that reason denied or deprived of employment or unless the exclusion or expulsion is unlawful.".

    Omit subsection (4).'.—[John McDonnell.]

    Brought up, and read the First time.
    John McDonnell: I beg to move, That the clause be read a Second time.
    Madam Deputy Speaker: With this it will be convenient to discuss amendment No. 26, in page 48, line 40 [Schedule 2], at end insert—
    'Section 174(4).'.
    John McDonnell: I shall be exceedingly brief. The new clause and the amendment deal with the right of trade
    1362
    unions to exclude members. That obviously relates to the case of Mr. Steff and ASLEF. Mr. Steff was a member of the British National party.
    The new clause gives effect to article 11 of the European convention on human rights and fundamental freedoms, which is part of UK law by reason of the Human Rights Act 1998. Article 11 explains that a person can be excluded from an association as long as that does not result in a disproportionate penalty or unlawful discrimination. The only right to prevent somebody joining a union is if that would result in a disproportionate penalty—for example, loss of employment—or if it would be contrary to the law on discrimination on the grounds of race, sex, gender and so on. The purpose behind the new clause is to put into the Bill, simply and clearly, the ability of a trade union to determine which person can join. At the same time, it prevents a union from discriminating against people if it would result in loss of employment or offend existing legislation.
    Mr. Sutcliffe: My hon. Friend will know that in Committee I introduced a new clause—it is now clause 28—to give unions the latitude to deal adequately with political activists who pursue a racist or xenophobic political agenda. Our main aim was to ensure that unions could deal effectively with the kind of far-right political activists who are infiltrating their ranks and sowing the seeds of hatred and intolerance. At the same time, we wanted to protect the essential freedom of individuals to belong to a political party. I believe that there is widespread support for the Government in tackling this issue.
    Amendment No. 31 deletes the existing clause 28 so that new clause 16 can take effect. New clause 16 aims to achieve some of the same effects but does so in a different way. The new clause aims to give unions greater latitude by ensuring that they can exclude or expel individuals as long as it is within the union's rules to do so, and as long as it is lawful to do so and the exclusion or expulsion does not result in the individual being denied or deprived of employment.
    Both clause 28 and my hon. Friend's amendments cover similar territory. In many respects, we share common objectives. However, I believe that our clause is to be preferred. My hon. Friend's amendments go too far and would threaten important freedoms.
    New clause 16 would give unions a wide-ranging freedom to exclude or expel. However, the amendment would take no account of the need to protect essential freedoms for individuals to belong to a political party. Our proposals provide for unions to expel on grounds of political party activities. We believe that is fair. New clause 16 would provide for unions to expel or exclude on those grounds or on the grounds of just belonging to a political party.
    I recognise that this issue has a number of human rights implications. It concerns rights of association both for existing union members and aspiring union members. It also raises issues about rights of expression. This is a delicate area. As I have said, I believe that our proposals strike the right balance.
    The new clause also refers directly to the "rules of a union". In Committee, questions were raised as to whether the use of this term, in relation to the remedies

    1363
    that are available when an individual is excluded or expelled, is broad enough to cover the aims and objectives of the union in promoting diversity and opposing discrimination. Such objects or aims are not always expressed as union rules. We think that this is an issue that needs to be addressed in clause 28. We are therefore holding discussions with the TUC with a view to bringing forward amendments in the other place. I urge my hon. Friend to withdraw the new clause and related amendments.
    John McDonnell: I beg to ask leave to withdraw the motion.
    Motion and clause, by leave, withdrawn.

  New Clause 18

    PROTECTION OF JOURNALISTS
    'After section 104C of the Employment Rights Act 1996 (c.18) insert—
    "104D Journalists
    An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed, if the reason (or, of more than one, the principal reason) for the dismissal is that—

    the employee works as a journalist and,

    refused (or proposed to refuse) to carry out any act that would amount to a contravention of the Press Complaints Commission Code of Practice that applies at that time.".'.—[John McDonnell.]

    Brought up, and read the First time.
    John McDonnell: I beg to move, That the clause be read a Second time.
    Journalists have come under pressure in recent times with regard to their employment, as a result of their courage in standing by their code of practice as agreed by the Press Complaints Commission. A number of journalists have made it clear to their employers that they wish to uphold the status of their profession by adhering to the code of practice, which ensures, for example, that they do not misrepresent, that they do not identify or in any way contribute to the identification of victims of sexual assault, and that they protect their confidential sources.
    The new clause introduces into British law a conscience clause to protect that area of employment. The clause would ensure that any attempt to dismiss a journalist for refusing to break the Press Complaints Commission code of practice would be unlawful and therefore actionable in law in respect of compensation. The issue has come up on a number of occasions. There is a case that is currently sub judice so we cannot refer to it, but the National Union of Journalists believes that the matter should be debated adequately and that we should return to it later.
    Mr. Sutcliffe: Let me stress that the Government always deplore arbitrary and unfair dismissals. The unfair dismissal legislation, which is generally considered to be working well, has been carefully drawn up to ensure that employees are protected against unfair treatment. For a dismissal to be fair, an employer must not only have dismissed the employee for a fair reason, but must have acted reasonably in doing so. As hon. Members know, the legislation also specifies certain
    1364
    particularly serious reasons for dismissal that are regarded as automatically unfair. These include, for instance, pregnancy or maternity, and trade union membership, non-membership or activities. My hon. Friend seeks to add to these reasons.
    Before any additions to the list of automatically unfair reasons are considered, however, we must be clear that they are both necessary and appropriate, and I do not believe that the addition proposed by my hon. Friend fits either criterion, although I am sympathetic to his underlying concern. I understand that the Press Complaints Commission code of conduct applies to editors and publishers, as well as to those who work for them. A publisher or editor's dismissal of a journalist for declining to breach a code of conduct that applies equally to both parties is most unlikely to be considered a fair one by an employment tribunal, and to that extent the amendment is unnecessary.
    I also understand, however, that exceptions to some of the code's provisions can be made in exceptional circumstances, and to that extent the amendment is inappropriate. It assumes, in effect, that no breach is ever defensible, and thus that no journalist should ever be called to account by his employer for refusing to depart from its recommendations. That goes too far in constraining employers. I hope my hon. Friend will accept these points. In view of the ample protection provided by the existing legislation, I invite him to withdraw the new clause.
    John McDonnell: I beg to ask leave to withdraw the motion.
    Motion and clause, by leave, withdrawn.

  Clause 5

    UNION COMMUNICATIONS WITH WORKERS AFTER ACCEPTANCE OF APPLICATION
    Amendment made: No. 4, in page 7, line 29, leave out `(4)' and insert
    '(4ZE) (which is inserted by section (Additional duties on employers informed of ballots))'.—[Mr. Sutcliffe.]

  Clause 11

    POWER TO AMEND SCHEDULE Al TO THE 1992 ACT
    Amendments made: No. 5, in page 11, line 10, after `7(6),', insert `27C,'.
    No. 6, in page 11, line 10, after `29(5),', insert `119C,'.—[Mr. Sutcliffe.]

  Clause 24

    INDUCEMENTS RELATING TO UNION MEMBERSHIP OR ACTIVITIES
    John McDonnell: I beg to move amendment No. 15, in page 21, line 8, leave out from `(1) to 'of' in line 9 and insert
    'An employer shall not make an offer or a threat to any worker with the purpose or the effect'.
    Madam Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 16, in page 21, line 35, after 'worker', insert 'or a trade union'.
    [Madam Deputy Speaker]
    No. 22, in page 21, line 36, leave out 'his' and insert `the worker's'.
    No. 17, in page 21, line 36, leave out 'him' and insert `the worker'.
    No. 18, in page 21, line 39, leave out
    'which is recognised by his employer'.
    No. 19, in page 22, line 14, after 'worker', insert 'or a trade union'.
    No. 21, in page 22, line 15, leave out 'his' and insert `the worker's'.
    No. 20, in page 22, line 15, leave out 'him' and insert `the worker'.
    No. 23, in page 24, line 32 [Clause 26], leave out subsection (2) and insert—
    '(2) For subsection (1) substitute—

    "A worker has the right not to be subjected to any detriment as an individual by any act, or any deliberate failure to act, by his employer done on the ground that—

    he was or sought to become a member of an independent trade union,

    he took part or sought to take part in the activities of an independent trade union at an appropriate time,

    he made use of or sought to make use of trade union services at an appropriate time,

    he failed to accept an offer made in contravention of section 145A or 145B, or

    he was not a member of any trade union or of a particular trade union or one of a number of particular trade unions.".'.

    No. 13, in page 24, line 32, after '(1),' insert
    'after "purpose" insert "or with the effect", after "part" in paragraph (b) insert "or seeking to take part",'.
    No. 14, in page 24, line 34, after 'use', insert
    'or seeking to make use'.
    No. 24, in page 25, line 4, leave out 'worker's "making use" ' and insert
    'worker having "made use of or sought to make use of".'.
    No. 25, in page 25, line 9, leave out from 'as' to end of line 10 and insert
    'subjecting the worker to detriment on that ground is to be treated as subjecting him to a detriment within subsection (1)(c)'.
    No. 28, in page 25, leave out lines 11 to 14.
    No. 29, in page 25, line 15, leave out '(2C)' and insert `(1)(d)'.
    No. 7, in page 25, line 18, at end insert—
    '(4A) After subsection (4), insert—
    "(4A) The payment of higher wages or higher rates of pay or overtime or the payment of signing on or other bonus or the provision of other benefits having a monetary value to other workers employed by the same employer shall not constitute a detriment to any worker not receiving the same or similar payments or benefits so long as—

    there is no inhibition in the contract of employment of the worker receiving the same from being a member of any trade union, and

    the said payments of higher wages or rates of pay or overtime or bonuses or the provision of other benefits are in accordance with the terms of a contract of employment and reasonably relate to the services provided by the worker under that contract.".'.

    No. 30, in page 25, line 20, at end insert—
    '(5A) In subsection (1) of section 148 of the 1992 Act, before the word 'purpose' insert "grounds on which, or, as the case may be,".'.
    John McDonnell: Time does not permit a full debate of the issues covered by the amendments, so I shall refer to only one element. It was pointed out on Second Reading that, as the Bill is framed, it is almost impossible to interpret the meaning of "purpose". An employee would have to demonstrate that an employer was subjecting the employee to a detriment for the purpose of preventing or deterring the worker from performing a protected activity or penalising the worker for doing so. Already we struggle in courts of law to demonstrate the purpose. The employer need only give some vaguely plausible reason in order to wriggle out of the provisions of the current legislation. I urge a re-examination of the clause to see whether we can tighten it and incorporate in the legislation the true spirit of the judgment in the Wilson and Palmer case.
    9.15 pm
    Mr. Sutcliffe: I appreciate my hon. Friend's brevity in dealing with a major issue in respect of the judgment in the Wilson and Palmer case.
    The Government believe that we have clearly set out our position in clauses that were discussed earlier. We think this is an issue around purpose. I was happy to meet Mr. Wilson of the Wilson and Palmer case, who is satisfied with what the Government have done. I ask my hon. Friend to seek leave to withdraw the amendment, as while I accept that there is a variance between us, the Government have moved some way towards incorporating the Wilson and Palmer judgment.
    John McDonnell: I met Mr. Wilson as well on Friday, and I think that he has set his video recorder for this debate. I do not think that he is completely ecstatic with the Bill as it is now proposed, and I am sure that he would back further amendments. Perhaps we can discuss that at a later time. I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Mr. Bellingham: On a point of order, Madam Deputy Speaker. My hon. Friend the Member for Epping Forest (Mrs. Laing) would like to speak to our amendment No. 7.[ Interruption.] She was present at the start of the debate. Would it be possible for her to speak to amendment No. 7?
    Madam Deputy Speaker: I did not see the hon. Lady in her place trying to catch my eye.
    Mr. Djanogly: On a point of order, Madam Deputy Speaker. Not only did my hon. Friend the Member for

    1367
    Epping Forest (Mrs. Laing) stand up to catch your eye, but so did I, so I would appreciate it if that could be put on the record as well.
    Madam Deputy Speaker: Both hon. Members were standing, but it was at the point when the hon. Member for Hayes and Harlington (John McDonnell) was withdrawing his amendment. I thought that we were moving to the next debate.
    Mrs. Laing: On a point of order, Madam Deputy Speaker. I fully appreciate that the hon. Member for Hayes and Harlington (John McDonnell) was withdrawing amendment No. 15, but it was my intention to propose amendment No. 7, which stands on the amendment paper in my name and those of my hon. Friends.
    Madam Deputy Speaker: I have to advise the hon. Lady that we have now come to amendment No. 3, and although she stood up, it was not clear that she wished to speak. There was no indication that she wished to speak on that particular amendment. I have to say that we have now reached amendment No. 3.

  Clause 34

    INFORMATION AND CONSULTATION: GREAT BRITAIN
    Brian Cotter: I beg to move amendment No. 3,
    in page 30, line 9, at end insert—
    '(1A) The Secretary of State shall consult such persons as he considers appropriate on the establishment of works councils as an arrangement suitable for informing and consulting employees and shall publish the responses received pursuant to those consultations, together with guidance on best practice for works councils, before making the regulations referred to in subsection (1).'.
    I wish to mark a card for this amendment, which the Liberal Democrats consider extremely important. As the Minister will know from discussions in Committee, we consider that works councils are important not only for employees, but for employers, in ensuring that companies are run well and with the full co-operation and help of their employees. In view of the lateness of the hour, I say to the Minister that I hope that he has taken on board our arguments and that he will accept that we have a valid argument and at least recognise that the works council approach has merit and is worth consideration.
    Mr. Sutcliffe: There are two aspects to the amendment. On the consultation aspect, the implementation of the information and consultation directive has been the result of extensive consultation, as the hon. Gentleman knows. The amendment would impose a statutory requirement not only when the regulations are made initially, but whenever they may be amended in future, which would not be desirable. The Department already follows Cabinet Office guidelines on public consultation and publishes the results of such consultations, so a statutory obligation would not improve things in practice.
    1368
    In the case of the information and consultation regulations, we are well aware that the implementation of the directive represents a particularly significant landmark in UK industrial relations, so it is very important that we approach the implementation in a positive and constructive manner. For the first step, we published the discussion document in July 2002, and we held a series a round-table discussions up and down the country with a wide range of individual businesses and their representatives, unions and employment experts, to discuss how best to approach implementation of the directive in the UK. Building on that initial consultation, the Government held discussions with the CBI, the TUC and a range of other organisations about the details of implementation.
    An agreed framework for implementing the directive was published on 7 July 2003, together with draft legislation, on which we invited comments, and a further series of round-table discussions were held around the country with a similar mix of experts. I attended five of those discussions myself, other Ministers were present at other events, and copies of the responses to the two consultations are available in the Department of Trade and Industry library. The responses indicate strong and broad support for our approach to implementation, and since the second consultation closed in November officials have been working with a range of stakeholders to refine and improve the regulations. We intend to publish a Government response to the consultation before the summer.
    I am grateful to the hon. Member for Weston-super-Mare (Brian Cotter) for raising guidance. The Government have always intended that regulations should be accompanied by guidance. We know that it is very important to all the parties who will be affected by the Bill that guidance is available in advance of the legislation coming into force. We therefore intend to publish draft guidance that will explain how key concepts in the legislation are intended to work in practice. In addition, ACAS will produce best practice guidance that is designed to help information and consultation practitioners get to grips with some of the main issues involved in setting up and running information and consultation procedures. In those circumstances, and notwithstanding what the hon. Member for Weston-super-Mare has said about the importance of works councils, which may be included in the consultation process, I ask him to withdraw the amendment.
    Brian Cotter: I thank the Minister for his answer. We still feel that works councils are important, but, in the light of his comments, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Mr. Bellingham: I beg to move amendment No. 1, in page 41, line 5, leave out Clause 46.
    Conservative Members are not against union modernisation, and we are certainly not against trade unions—in fact, we are making a real effort to reach out to them. As I pointed out earlier, the Minister got wind of a meeting that my hon. Friend the Member for

    1369
    Eddisbury (Mr. O'Brien) and I had the other day with Mr. Brendan Barber. The meeting was constructive, and we have a great deal in common.
    The Minister has said on a number of occasions that the unions have shown remarkable resilience. They are modernising, but the key point is whether the state should fund the process. The Chancellor made it clear in his Budget that the country's finances are fully stretched—borrowing is soaring and a black hole is opening up—but the Government still spend our money with irresponsible abandon. The original budget for the Scottish Parliament was £44 million, but the cost is now more than £400 million, and there are also the Electoral Commission, the supreme court and now the modernisation fund.
    Our concern is that there is no ceiling or limit on the money for the modernisation fund. Clause 116A states:
    "The Secretary of State may provide money".
    The Minister has stated that the sum will be between £5 million and £10 million over several years, but the commitment is open-ended.
    Furthermore, the Minister said in Committee that the money may be spent only on specific items, and the clause mentions various items and initiatives that it can be used for. Clause 116A(3) states:
    "Money may be provided in such a way as the Secretary of State thinks fit".
    Mr. Sutcliffe: The hon. Gentleman will surely remember the partnership fund and the working partnership fund, which his party supported. We have set out the union modernisation fund in exactly the same way as the partnership fund.
    Mr. Bellingham: The DTI partnership fund discusses match funding, but there is no match funding in the Bill. If the Minister were following the rules of the partnership fund, the unions would have to put up a pound for every pound the Government put up.
    Mr. Sutcliffe: Just to be clear, we followed not the rules of the fund, but the way in which it was introduced.
    Mr. Bellingham: We are still not satisfied. There should be an equal pool of money. We do not want clause 46 to go ahead, but, if it does, it should be even-handed. Many employer organisations want to modernise, reach out to their members and introduce new ways of communicating and dealing with their members, but there is no money for them. The clause is in no way even-handed: it is completely one-sided. The Minister has said on many occasions that the essence of the Bill is even-handedness, but this provision is not even-handed; it is biased and unnecessary. How do we know that the money is not a sop or a bung to the trade unions? That is why we tabled the amendment to delete the clause.
    Rob Marris: The hon. Member for North-West Norfolk (Mr. Bellingham) set out three concerns: first, the way in which the money might be spent; secondly, the amount of money, there being no cap; and, thirdly, the lack of
    1370
    even-handedness. It surprises me that he did not table an amendment to that effect instead of one that would delete clause 46 altogether. That suggests to me that his true motives are not those that he specified and that he has another agenda—to do down the unions.
    Mr. Djanogly: To answer the hon. Gentleman's last point, the reason such an amendment was not tabled is that the Government inserted the provision in Committee at the last minute, so we had no alternative.
    I am grateful to be able to speak on this bung clause—the sort of law that most people would not believe could be introduced. It is unbelievable that the Government are not saying how much they will give to the unions. Will it be £5 million or £10 million? Presumably £6.4 million would be the benchmark, as that is the amount that the unions provided to the Labour party last year.
    John Mann: The money that unions give as donations is governed by their political fund ballot rules. Is the hon. Gentleman aware of those rules?
    Mr. Djanogly: I am indeed.
    Do unions need modernisation in the first place? They probably do. In January, ASLEF wrote to 40 of its employees listing penalties, including the sack if they went on strike, and derecognition of the GMB union. It looks as though ASLEF does need a bit of modernisation. Last year, the GMB had its own problems. A leaked report shows that 60 employment tribunal cases lodged against the GMB cost it some £4 million. They included cases of sexual harassment, bullying, discrimination, and unfair dismissal; and it had a £19 million deficit in its employee pension fund to boot—no wonder The Guardian reported that it must rank among the worst employers in Britain. Unions probably do need a bit of modernisation, but the question is: should the taxpayer pay for it? My answer would be no.
    John Mann: I appreciate that the hon. Member for Huntingdon (Mr. Djanogly) is rather too young to recall some of the activities of previous Governments, but it may help him if I remind him of the moneys given in the late 1980s by the Department of Trade and Industry under Lord Tebbit for the modernisation of trade unions. The hon. Gentleman may also be interested to know that from 1979 to 1992, under successive Governments, the education Department gave money for the modernisation of trade unions.
    Mr. Bellingham: During the course of the Conservative Administrations, well over £20 million was given to the trade unions for specific ring-fenced items such as running secret ballots, but this money is completely open-ended.
    John Mann: The hon. Gentleman is not too young, but again he gets it wrong. When I applied for money from those two Departments and from others such as the Department of Employment, there was no ring-fencing. The forms were absolutely clear that it was money for modernisation. This is a fine tradition, and I back the proposal.
    9.30 pm
    Mr. Sutcliffe: I am pleased that we reached the amendment because the discussion demonstrates again the Conservative party's prejudice against trade unions. Conservative Members talk about being pro-trade union. They have held two meetings with Brendan Barber, and I am pleased that they have got into dialogue but I wonder whether they spoke to the unions about modernisation.
    Conservative Members' attitude is unsurprising but deeply disappointing because the Bill has tried to foster a new mood of co-operation and a culture change. However, we have the same old Tories saying the same old things about trade unions. I tried to give assurances and explanations in Committee, and I believed that Opposition Members agreed with me about the structure that we were trying to achieve. That certainly applied to Liberal Democrat Members, who opposed the money resolution but accepted some of the points that I made about the culture.
    Some trade unions have amalgamated for a variety of reasons. We require a modern approach to employment relations, and that means that trade unions must have the skills to deal with the modern environment. The idea that the money will be used for donations to trade unions is not correct. The suggestion that the money is a bung is simply untrue and part of the scare stories that Conservative Members have presented.
    Rob Marris: Will my hon. Friend clarify a point that the hon. Member for Huntingdon (Mr. Djanogly) made? He appeared to suggest that Conservative Members had not had time to table a reasoned amendment to clause 46 commensurate with their views of it.
    Mr. Sutcliffe: I am grateful to my hon. Friend for raising that point. From day one of the Committee proceedings, the hon. Member for Huntingdon (Mr. Djanogly) attacked the trade union movement in any way that he saw fit. He stuck to the employers without speaking to them. If he had spoken to them, he would realise that they are impressed by the new culture that the Government are introducing. There is a framework agreement on information and consultation.
    The law on political forums is contained in the Trade Union and Labour Relations (Consolidation) Act 1992, which was tightly drawn. Neither the clause that we are considering nor any provisions in our previous Bill have changed that legal framework. Unions cannot spend money on political objects, including donations to political parties, unless they have established a separate political fund for that purpose. They are prevented by law from using money from their general fund for such purposes. I therefore ask the hon. Member for North-West Norfolk to apologise for describing the money as a bung.
    Mr. Bellingham: I shall not apologise because the Minister said that approximately £6 million would be paid to the unions for modernisation. Would not it be better if the £6 million that the trade unions pay the Labour party were used for that modernisation?
    Mr. Sutcliffe: I do not understand the hon. Gentleman's point. It is clear that we are entering a new era of employment relations.
    1372
    I must apologise to the House because I made a slip of the tongue in the debate on the money resolution when I said that employers' organisations, especially the EEF, had received money for structural changes. That was not correct, and I apologise for it. They had received money for projects. Indeed, £500 million has gone into developing business projects, and that is right. It is a commendable exercise by the Government to enhance and develop business and its activities.

    However, we also need to tackle the other side of the equation. As I said earlier, the number of amalgamations between unions has meant that they have experienced a reduction in numbers. It is important that union officials can understand company balance sheets and work out the issues that affect the future of companies, especially, for example, the information and consultation directive.
    It is vital to approach the matter in an adult and consensual way and for the fund to be set up in the same way as the partnership fund. It is also vital that there should be much consultation in the summer with employers and employers' organisations. Their representatives will sit on bodies to determine the allocation of the funds in the same way as happened with the partnership fund. The yah-boo-sucks politics of Conservative Members shows that they do not want to have a serious look at the fund; they simply want to scaremonger. They do not support the need for modernisation. They have approached the issues in this part of the Bill in a very negative way, and have not understood the opportunities that exist for a modern approach to employment relations by ensuring that both unions and employers have the same capabilities, and that the highly productive, high-performance workplaces that we want can be achieved. We are going through a critical period of global competition, and the union modernisation fund will be a positive step towards ensuring that trade unions—
    It being three hours after the commencement of proceedings on consideration of the Bill, MR. SPEAKER, pursuant to Order [25 March], put forthwith the Question already proposed from the Chair.
    The House divided: Ayes 157, Noes 315.
    Question accordingly negatived.
    Order for Third Reading read.
    9.51 pm
    The Secretary of State for Trade and Industry (Ms Patricia Hewitt): I beg to move, That the Bill be now read the Third time.
    I shall begin by drawing attention to the Register of Members' Interests. Like all my hon. Friends, I am proud to be a member of a trade union. I am also proud of the fact that in Britain today there are more people in work than ever before—28 million. We have slashed long-term adult unemployment to below 140,000. In 1986, it stood at nearly 1.5 million. We have slashed long-term youth unemployment to about 20,000. Back in 1986, 300,000 young people were on the dole. We have lower unemployment rates than any other G7 economy, and in the last seven years 1.8 million new jobs have been created in our economy, seven out of 10 in the private sector. That has confounded all our critics, including Conservative Members who said that our policies to re-regulate the labour market would be a disaster for jobs. The opposite has proved to be the case, and the measures that we introduced in our first term are working well. We are building on those measures in the Bill.
    Mr. Redwood: Can the Secretary of State tell us what has happened to manufacturing jobs since the Government took office? Does that not demonstrate just how much damage some of their regulations have caused?
    Ms Hewitt: That is a bit much, coming from a former Minister in a Conservative Government who devastated manufacturing industry and manufacturing jobs in constituencies up and down the country and did not give a toss for the workers who were thrown out of work. I regret to say that, in many sectors, manufacturing employment has continued to fall. As the right hon. Gentleman is no doubt aware, there has been a global downturn, which has made life for manufacturing exporters exceedingly difficult. I am glad to say, however—and I hope that the right hon. Gentleman welcomes this—that manufacturing is now turning the corner. With a strong and stable economy, historically low interest rates, specific measures such as investment assistance and our wonderful Manufacturing Advisory Service, we are helping more manufacturing companies to become competitive. The right hon. Gentleman's party failed to provide such help.
    Getting people into work is essential, especially after the unemployment created by the Conservative party, but far more is needed in the modern world. We must have the conditions that will create more good jobs, better jobs and better workplaces. We know that the best businesses in our country operate on the basis of partnership between management and the work force—partnership with a recognised trade union where there is

    1377
    one, but partnership in every case. Among the most important of the Bill's provisions are the measures on information and consultation. They give effect to the information and consultation directive but do so in a way that suits our particular circumstances in the United Kingdom. Our provisions on information and consultation will help to create, in larger workplaces, a culture of partnership in which employees are informed, involved and committed to the success of their business.
    Mr. Djanogly: What the Secretary of State says is not reflected in the Bill. The fact is that under the Bill, all that information and consultation is to be done by statutory instrument. She has not said how consultation or the directive will be put into effect, and if she would like to say now how that will happen, I should be grateful.
    Ms Hewitt: The hon. Gentleman must surely notice that the Bill provides precisely the statutory authority that will bring information and consultation into effect and, in so doing, will end the absolute scandal that too many members of our work force have had to put up with: that of hearing from the radio in the morning, or, as in one notorious case, by text message to their mobile phone, that they are to lose their job. We will not put up with that. We have worked with the CBI and the TUC to agree a framework for the implementation of the information and consultation directive, and I very much welcome the fact that Digby Jones has said on that:
    "We have reached this agreement…through constructive dialogue and discussion. It's exactly the spirit in which we all want new rules on information and consultation to operate in workplaces across Britain."
    That approach with the social partners is a model of the approach already being used by the best businesses, which we want more of our businesses to adopt. I pay tribute to the work of both those organisations in reaching that agreement.
    I also express my gratitude to hon. Members for their close interest in the Bill and the energy that they have displayed during its passage.
    Mr. Bellingham: On both sides?
    Ms Hewitt: There have been many constructive contributions, and I had the pleasure of reading the contributions that the hon. Gentleman made in Committee. I pay tribute to him for the spirit in which he moved, and then withdrew, several amendments. I also pay tribute to the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Bradford, South (Mr. Sutcliffe) for the excellent work that he has done in shepherding the Bill through.
    We have had an extensive consultation process on the Bill, and we will continue to listen, particularly as we finalise some of the clauses that we have added more recently. We have never lost sight of the need to keep the costs to business to a minimum, and nothing that we have added to the Bill during its passage will add significantly to those costs.
    I shall highlight the changes that we have made to the Bill since its introduction. First, we are absolutely clear that we will not tolerate intimidation or bullying by
    1378
    employers or, indeed, by trade unions during recognition ballots. We will not have in Britain the kind of union-busting tactics that I am afraid have become all too commonplace in the United States. They are, fortunately, rare in our country, but we have listened to concerns raised during the Bill's passage, and we have responded with the new clauses, moved by my hon. Friend the Under-Secretary, that have been added today.
    Secondly, we are not prepared to allow racists to hide behind membership of a political party to infiltrate trade union ranks. Clauses now in the Bill provide greater scope, quite properly, and in a way that complies with the Human Rights Act 1998, to root out that pernicious element and to exclude and expel it from trade union membership.
    Thirdly, we will not allow rogue employers or, indeed, trade unions to flout the rules on lawfully organised industrial action. I promised on Second Reading that we would look closely at the Friction Dynamics case. That case was not only unusual but, fortunately, unique, and as a result of our consideration of the experience of the Transport and General Workers Union members at Friction Dynamics we have now tightened the legal definitions so that we will not see a repeat of employees being locked out of their workplace while the employer pays little more than lip service—if it can even be called that—to their statutory obligations. Again, we have strengthened the Bill in that respect.
    Fourthly, we recognise the valuable role of modern trade unions in the modern workplace. They play a crucial role in helping to raise productivity, skills levels and the quality of our businesses' output. They can be partners with business in creating high performance, high productivity workplaces. Those are the only kind of workplaces that have a long-term future in an increasingly competitive global environment.
    The modernisation fund that we have just debated on Report will give trade unions targeted funding to help them keep up in the rapidly changing labour market, and to make step changes in the way in which they work. I want to add my assurances to those that my hon. Friend the Member for Bradford, South has given both this evening and in Committee: this is not money for trade union recruitment, or money that can be used for industrial action. Nor can it be used for the political purposes covered by the political funds, which are entirely separate, separately constituted by law, and cannot receive money from a trade union general fund.
    As my hon. Friend said, we shall of course consult fully on the plans for the fund, in order to ensure a robust set of rules, proper procedures and accountability, and so on. We will draw on the excellent existing model of the partnership at work fund, through which an independent advisory board makes recommendations on bids for money. We will not prejudge the consultation process, but that model certainly provides a transparent and accountable method of allocating funds. The modernisation fund will account for between £5 million and £10 million, spread over several years. It will help trade unions to plan better for the long term, to think more strategically and to contribute better to our long-term economic success as a multiracial and diverse society.

    1379
    The Bill takes another important step towards accomplishing our vision of full and fulfilling employment, and it reinforces the framework of fair standards at work that we have established over the past five years. It builds on the vital achievements of the national minimum wage, which was recently increased again, protection for part-time workers, paid paternity leave, the doubling of the length of maternity leave, the new rights to family friendly working, and the trade union recognition to which I have referred. It also leaves untouched the fundamentals of the trade union recognition system that we put in place in our first term: the small firms threshold, the voting threshold and the voluntary agreements.
    We consulted extensively on those arrangements before the enactment of the Employment Relations Act 1999, and we know from our review that they are working. They have significantly increased, and are continuing to increase, the number of workplaces and workers covered by collective agreements, thereby helping to protect those workers, and helping—even more importantly—to create the partnership at work that I spoke of earlier. Business and employees are happy with them, and the number of stoppages at work due to labour disputes is at a record low. There were a mere 133 stoppages in 2003—the lowest figure since records began in 1920. I cannot go back quite as far as 200 years, as my right hon. Friend the Chancellor did recently, but it is a pretty good record, given the history of industrial relations in our country.
    Mr. Djanogly: That record sounds excellent until one considers the number of unofficial days off for last year. On doing so, 2003 turns into the worst year since 1997.
    Ms Hewitt: I notice that the hon. Gentleman does not make a comparison with the number of days lost under the Conservatives, especially in respect of the Royal Mail, for which I have a particular responsibility. Industrial relations are continuing to improve, despite all the scare stories from the Opposition at the time of the 1999 Act. We know that, crucial to success in a competitive global economy is the ability of Government, business, employees and their trade unions to work together on skills in high-performance workplaces and to ensure that we sustain the economic stability that has underpinned the extraordinary achievement on employment that we have delivered.
    I believe that it is an excellent Bill and I commend it to the House.
    10.5 pm
    Mr. Stephen O'Brien: I draw the House's attention to my entry in the Register of Members' Interests. I should also like to say that I draw on many years of experience in manufacturing industry, working positively and constructively with all those in the business in which I was engaged—including union members, union officials, individual employees and employers. It gives me great pleasure to thank my hon. Friends the Members for Huntingdon (Mr. Djanogly), for Epping Forest (Mrs. Laing) and for Hexham (Mr. Atkinson), who served so diligently in Committee, and I pay tribute to the extraordinary hard work and scrutinising effectiveness of my hon. Friend the Member for North-West Norfolk (Mr. Bellingham).
    1380
    There are real and urgent problems facing British industry today, and it is against that background that we must debate Third Reading. Productivity has halved since 1997, the total trade deficit rose to an unprecedented £18.8 billion last year and the British Chambers of Commerce informs us that the cost of regulation has shot up by an astonishing £9 billion in the last 12 months alone. The annual cost of poor skills amounts to an estimated further £10 billion.
    In that context, it speaks volumes about the priorities of the Government and the Secretary of State that we are not debating any of those vital issues, but another Employment Relations Bill, for which there is scant demand, least of all from those engaged at all levels working in British business. We know that there is little demand because the Bill arose from a Government-commissioned review of the Employment Relations Act 1999. According to the regulatory impact assessment published alongside the Bill,
    "The main conclusions of the review are that the legislation is generally working well".
    If the Government's own conclusion is that the current legislation is working well, is it not strange that they have decided to use primary legislation essentially to fine-tune an Act passed just four years earlier?
    In that context, it speaks volumes about the priorities of the Government and the Secretary of State that we are not debating any of those vital issues, but another Employment Relations Bill, for which there is scant demand, least of all from those engaged at all levels working in British business. We know that there is little demand because the Bill arose from a Government-commissioned review of the Employment Relations Act 1999. According to the regulatory impact assessment published alongside the Bill,
    "The main conclusions of the review are that the legislation is generally working well".
    If the Government's own conclusion is that the current legislation is working well, is it not strange that they have decided to use primary legislation essentially to fine-tune an Act passed just four years earlier?
    Precisely as I predicted in my Second Reading speech, the Bill has turned out to be a Christmas tree—an unadorned framework on which interest groups, specifically the unions, have been invited to hang their favourite baubles. Precisely because that was my original suspicion, I asked the Secretary of State on Second Reading whether she would
    "assure the House that additional measures will not be introduced by Government amendment, or conceded by them, with the exception of those that she has already flagged and on which we have had a constructive exchange"—[Official Report, 14 January 2004; Vol. 416, c. 832.]
    Let me place on record, before Labour Members attempt to make any potentially mischievous or even grossly misrepresentative points, that what was then flagged was the Government amendment introduced after Second Reading, which resulted in what is now clause 28, dealing with the exclusion and expulsion from trade unions of racists. We said then that we would consider that positively, particularly when we had a chance to explore the detail, because Conservative Members are equally determined to root out racism. However, the clause does not refer to the British National party, only to "a political party" and to "excluded conduct" of an individual. That could have been achieved either through union rules or, failing that, by a statutory instrument brought under the authority of the 1999 Act. It does not justify the Government in bringing in wholly new primary legislation.
    The Secretary of State refused to give me the guarantee that I sought on introducing or conceding additional measures. Instead, we have seen a host of late

    1381
    amendments, a great many of which were tabled just five days ago in a deliberate attempt to downgrade the House's opportunities for scrutiny and for outside organisations such as the CBI, the British Chambers of Commerce, the Engineering Employers Federation, the Federation of Small Businesses, the Forum of Private Business and many others.
    Let me say to all those who study the record—if asked, those who worked with me when I worked within a large unionised industry, would confirm it—that I am not, nor have ever been, anti-trade unions or anti-trade unionists.
    Because this is a short debate, I have time to focus only on the most scandalous of the late amendments—the Government's bung to the unions. The regulatory impact assessment accompanying the Bill states that the quantified benefit to the unions is between £75,000 and £108,000. The RIA was signed off on 3 December 2003. On 10 February 2004, the Minister for Employment Relations, Competition and Consumers announced that he was tabling a new clause that would
    "make funds available to independent trade unions and federations of trade unions to modernise their operations."
    He also said that he envisaged that
    "the size of the fund would be in the region of &#x00A3;5 million—£10 million in total, with expenditure spread over several years, probably beginning in 2005–06."—[official Report, 10 February 2004; Vol. 417, c. 67WS.]
    That happens to coincide with what we understand to be the £5 million to £10 million that the unions, from the hard-won earnings of trade unionists, give to the Labour party. Such a fundamental alteration to the Bill, so vaguely phrased and coming after the signing off of the RIA, constitutes a total abuse of the parliamentary process.
    Furthermore, it is evident that the Government have proposed this measure at great, uncapped cost to the taxpayer, having given no thought to the nature, structure, mandate or time limit of the so-called union modernisation fund.
    Mr. Redwood: Will my hon. Friend comment on how wide-ranging clause 46 is? As I understand it, the money can be applied for any existing purpose or any new, unspecified purpose. It could not be any wider.
    Mr. O'Brien: My right hon. Friend puts his finger on the inadequate opportunity that the House has had to scrutinise the proposal. The proposal is vague, it was introduced after Second Reading and I am sure that the other place will wish to scrutinise it with great care and consideration.
    If I am wrong in what I have said, I invite the Secretary of State to intervene to correct me. Would she care to clarify the expenditure limit of the fund? Or will she confirm that effectively it has none? What is the time limit of the fund? Or will she have to confirm that it has none? As the Government know, it is not possible to amend a new clause in Committee. Why are the Government so reticent about providing a clear and
    1382
    accountable definition? Is it all part of the Government's embarrassed desire to avoid spelling out the extent of the bung?
    Mr. Archie Norman: Does my hon. Friend also accept that this case is a clear illustration of the need for some form of external, objective audit of regulatory impact assessments? It is a classic case of the regulators assessing their own performance, being vague and, in this instance, virtually negligent in so doing.
    Mr. O'Brien: My hon. Friend anticipates my tribute to his ten-minute Bill on the issue, to which the Government have paid no attention. It would ensure a degree of independence and impartiality so that the Government could not up the benefits of a Bill but seek to diminish the costs.
    What is the justification for subsidising union modernisation but not a charity or voluntary organisation? Come to think of it, what is the Secretary of State's definition of modernisation, besides its habitual use by new Labour to mask yet again its absence of principle? It defines everything it sees as rotten so that it can justify the use of precious parliamentary time on it as necessary and useful. What processes will the Secretary of State put in place to ensure that the unlimited quantity of money goes exclusively towards the purposes of modernisation, whatever they may be? I am not surprised that we have heard no satisfactory answers to any of those questions. What is clear is that the only calculation that the Government have made is a cost-benefit analysis of throwing a sop to their friends and paymasters in an attempt to tame them ahead of the general election. That is the real regulatory impact assessment at the front of ministerial minds, not the version that they have provided for display in the Library.
    I note that the Government have made great play of the support of the CBI for the Bill. However, the CBI has made clear its views on the union modernisation fund, which was of course introduced after Second Reading and after it had given its approval to the contents of the Bill. The CBI believes that
    "the Government should not subsidise inefficient unions or union recruitment campaigns through its proposed union modernisation fund."
    The Minister attempted to suggest that such purposes have been excluded, but the Government have not defined what is included. Lack of precise definition is part of the problem. The CBI also says:
    "It is disappointing that the Government has taken this step given the low incidence of union membership in both the private and public sectors."
    That gives rise to the question of how much information the Government provided about the amendment and how much consultation took place between the Government and the CBI. Was it about as much as the Chancellor provided for the civil servants he summarily dismissed in his Budget address?
    The Secretary of State has rightly expressed her opposition to employees being sacked by text message, but what about a Government desperate to stay on-message on tackling public sector waste, which the Chancellor has now admitted amounts to £20 billion of

    1383
    taxpayers' money? I invite the Secretary of State to have a quiet word with her right hon. Friend the Chancellor about the importance of leading by example in a "no surprises" culture in the workplace. Does she not feel even a tiny pang of conscience, given her Under-Secretary's edict? On 2 December, in a DTI press release, he said:
    I want to see an end to the climate where people only hear out of the blue about job losses from the media, or by text message. I want to see a "no surprises" culture at work where employers and employees discuss common ground and find solutions to mutual problems."
    Only yesterday, however, we learned in The Sunday Telegraph that the Government are to slash or relocate at least 1,500 jobs in an overhaul of the Department of Trade and Industry. It reported:
    "The headcount at the DTI's headquarters will be reduced by a third, with about 650 jobs cut and around 850 relocated to the regions."
    Ms Hewitt: I hope that the hon. Gentleman will accept that we have been talking to our trade unions for several months about our plans to make our work force more efficient and to relocate some of our jobs.
    Mr. O'Brien: It may be of some comfort to know that a fairly Chancellor-led surprise announcement was actually in train and that there were discussions with what the Secretary of State calls "our trade unions" rather than "the trade unions", which would be a more proper way of putting it. That is important.
    Despite the Secretary of State's attempt to reassure us, it is equally important that, when the Government issue announcements about job cuts in the public sector, including the way that they slip out news about sackings from her own Department, they should be judged by their deeds. At the very least, they should adopt for their Departments the standards that she seeks to impose through the Bill on other employers, especially those in the private sector who are risk takers as opposed to the non-wealth-creating public sector—[Interruption.] Labour Members hate hearing that. They do not like to be rumbled, because the Bill is an effort to dress up something to do with their electoral advantage, as they define it, rather than a true concern for good business, good employment and good, safe jobs.
    The other highly flawed provision in the Bill is the incorporation of the information and consultation directive in UK law. In that regard, I refer again to the regulatory impact assessment published in conjunction with the Bill. Incidentally, I make no apologies for my repeated references to the impact of regulation. On the Opposition Benches, we take that very seriously indeed, although I confess that I would have more faith in the reliability of RIAs if even one burdensome regulation had been aborted as a result of that procedure. I asked the Secretary of State about that in a written question, but she relied on her Cabinet Office colleague, who declined to give even one such example. The Minister for the Cabinet Office stated:
    "There are no cross-government figures on the number of RIAs that resulted in decisions not to proceed with new regulations."—[Official Report, 2 February 2004; Vol. 417, c. 715W.]
    Even the tentative quantification of the RIA cannot disguise the fact that the one-off costs to business of implementing the measure will be £45 million and that
    1384
    the recurring annual costs will be £46 million. This single measure alone accounts for more than 75 per cent. of the recurring regulatory costs of the entire Employment Relations Act 1999, which was itself a costly piece of legislation for British business. I hope that the Secretary of State will reconsider the belief, which she expressed on Second Reading, that the costs of the Bill to employers are broadly "insignificant". In her speech this evening, she said that the amendments subsequently proposed would not add a significant cost to businesses.
    Ms Hewitt: I am puzzled. I understand that the hon. Gentleman is against the union modernisation fund; that is a clear dividing line. But is he also telling the House that he is against the information and consultation provisions?
    Mr. O'Brien: Perhaps the Secretary of State should hold her breath. I am just about to develop why the Government have chosen to implement the information and consultation directive in a form much broader than was sought in respect of its imposition on this country. As the director general of the CBI has noted, the directive is
    "a poor piece of EU legislation".
    The fact that the Government lack the will and the influence in Brussels to refine an evidently crude directive at its inception is therefore regrettable, as is their lack of a requirement for a full regulatory impact assessment of that or any other EU regulation while it is being drawn up—despite the fact that it is at that stage that the Government can do most to influence a directive's nature and outcome. Theirs is an oddly relaxed attitude, given that about 40 per cent. of UK regulations that originate in Brussels are more costly to British business than those that originate in this place.
    Even more galling is the way in which the Government manage to make the worst of a bad situation by transcribing burdensome directives into UK law with disproportionate zeal. There is no reason why the information and consultation directive should not have been introduced via a statutory instrument—indeed, it is unusual to introduce such a directive by primary legislation and to give the Secretary of State significant powers to
    "make any provision which appears &#x2026;to be necessary or expedient".
    Why have the Government taken such wide-ranging powers when they did not want the directive in the first place? Lord Sainsbury of Turville—a DTI Minister—is on the record as saying that
    "a general framework for informing and consulting employees in the European Community…is difficult to reconcile with subsidiarity and would cut across member state traditions to no benefit."—[Official Report, House of Lords, 5 March 2001; Vol. 623, c. WA 14.]
    If the Government are capable of so vigorously—to the tune of £45 million a year—gold-plating legislation of which they do not even approve, it is terrifying to consider how they implement regulation that they endorse. That goes some way to explaining the BCC figure I mentioned earlier that the cost of regulation on British business has rocketed by £9 billion in the past 12 months alone.
    What began as a non-Bill has ended up as a stealth Bill, which will serve to strengthen the unions' power and the Labour party's purported links to them, and

    1385
    to weaken both British business and Parliament. It is an abuse of taxpayers' money and of the scrutiny procedures of this House. One of the few positive notes that can be struck is that it represents a powerful and definitive argument for the two excellent ten-minute Bills recently presented by Back-Bench Members of the official Opposition, my hon. Friends the Members for Huntingdon and for Tunbridge Wells (Mr. Norman).
    The Bill presented by my hon. Friend the Member for Huntingdon was designed to eradicate precisely the thoughtless bureaucratic gold-plating of EU directives that the Bill embodies in relation to the information and consultation directive. The European Communities (Deregulation) Bill declares that provisions of regulations will not have to be enforced if it can be proved that they will impose higher compliance costs or a heavier sanction for failure to comply than in other EU member states. That is a constructive and commendable approach to over-burdensome EU regulation, and any Government interested in our British national interest should take my hon. Friend's Bill seriously.
    Mr. John Bercow: My hon. Friend is delivering a racy and intoxicating speech to which I hope I can add. Does he agree that it is most regrettable that the pioneering stance on sunset regulation adopted by the right hon. Member for Tyneside, North (Mr. Byers) when he was Secretary of State for Trade and Industry, as reflected in the Electronic Communications Act 2000, has since been abandoned and the Government are now adopting a tepid and reactionary attitude that fails to give the proper opportunity to minimise regulation in the way that the example of the United States teaches us is beneficial to industry and commerce?
    Mr. O'Brien: I am grateful to my hon. Friend. It is nice to know that a speech can be intoxicating, although I assure the House that, at this stage of the day, I have not had the benefit of anything intoxicating to help me along. More important, he can be reassured that a presumption in favour of sunset clauses is a plank in the official Opposition's proposals to aid the British economy and British business, and that presumption will not be ditched for the sake of expediency.
    The Government ignored the Bill presented by my hon. Friend the Member for Huntingdon. Yet again, they displayed their indifference to the needs of British business. With reference to the disgraceful way in which the union modernisation fund was announced, it is clear that the suggestion made by my hon. Friend the Member for Tunbridge Wells of a system of post-implementation audits for RIAs, as set out in his Regulatory Impact Assessments (Audits) Bill, would prevent Ministers from getting away with the shameful practice of signing off RIAs, only to table amendments later that impose potentially vast additional costs on the taxpayer. Indeed, my hon. Friend also provided for the fact that those who promote a Bill and who argue in
    1386
    favour of its benefits cannot be expected to be trusted to be impartial about the costs. Again, there was no squeak of interest from the Secretary of State or her Government colleagues. I know that my colleagues in the other place will be interested in pursuing all these points.
    As presented on Second Reading, the Bill was unnecessary. Now, as predicted by the Opposition and feared by British business, it has become costly, nannying, preachy and burdensome. It is highly unlikely that it will influence a few bad employers. It will increase burdens on already good employers and give comfort to the few bad unions. The Bill is a product of the distorted priorities of those who sponsored it—a Government who are desperate to curry favour with their paymaster unions and a Department that is structurally indifferent to the flexible and fair needs of British business and wealth-creating small businesses, especially those employing fewer than 50 people. Above all, it is not even-handed between employer and employee. Had we been able to debate amendment No. 7, I know that that issue would have been taken seriously in another place. It is appropriately known as the Miller amendment.
    It is no accident that the resource budget for employment relations of the Department of Trade and Industry has more than tripled since 1998, while the allocation for innovation has fallen by 7 per cent. over the same period. It is a matter of fact that the Secretary of State, like her Department, is on the side of the regulators and against enterprising British entrepreneurs and innovators. Unless and until there is a re-evaluation of the purpose and priorities of the Department, I believe that businesses will continue to suffer. The Bill is the latest in a litany of measures that the Government have introduced to burden British business. Unless it is defeated this evening—I urge my colleagues and all other Members to join me in the No Lobby—it will sit as another glaring indictment on the charge sheet against this Labour Government and this Secretary of State.
    10.26 pm
    Jim Sheridan: It is unfortunate that, once again, those who spoke from the Front Benches took most of the time that was allocated to an important debate.
    As a long-standing member of the Transport and General Workers Union, I am proud of the Government for introducing legislation that protects and enhances the role of trade unions. I would argue that another term of Conservative government would have sounded the death knell for trade unions. In that event, we would have been talking today about the reinvigoration of trade unions instead of helping them to expand.

    The T and G was much involved in my education and assisted me in getting to this place, for which I am extremely grateful. Many Labour Members have experience of working through the trade union movement and in so doing getting their education. There is an argument that we need more people of the same background and experience in the House if it is to be representative of the work force.

    1387
    The most chilling comment that I heard during the debate came from the hon. Member for North-West Norfolk (Mr. Bellingham), the Opposition Front-Bench spokesman. He said that employees' performance could be affected if they had to attend trade union meetings.
    Mr. Bellingham: I was making the point that when more than one member of staff went consistently to meetings—perhaps three, four, five or six meetings—that could affect performance, particularly in relation to health and safety.
    Jim Sheridan: I thank the hon. Gentleman, but it was chilling to hear him say that the performance of employees could be affected if they had to attend a trade union meeting. Many members of the Labour party have experience of attending trade union meetings and of being discriminated against because they did so. Many of them are still on the dole as a result of being blacklisted. They are still looking for a job. In some instances, that is the result of the legislation that the Tory Government brought in.
    Not much mention has been made of the foot soldiers in the trade union movement—shop stewards. There are young shop stewards, and I have in mind particularly the young females in the trade union movement, which is trying to encourage more women to become representatives. That is something that the Labour party would welcome.
    I would put employers into three categories. There is the progressive employer who has nothing to fear from the Bill. The company that I have recently left is already engaged in consulting and helping trade unions, especially with training. It offers resources to help shop stewards to be trained. It recognises that that adds value to the company and helps to increase productivity. There is no problem with that.
    Secondly, there are negative employers who wish to take advantage of inexperienced young shop stewards. They keep them waiting in corridors. They misinform them and treat them as idiots. Finally, there is the altruistic employer, whose attitude is, "If you do what you're told, if you're a good boy or a good girl, you'll be here for ever. Just do what I tell you." In my experience of working with the trade unions, I have never yet met a bad employer. I look forward to the day when I do.
    On the modernisation fund, it is only right that trade unions should be given money to enable employees to negotiate on a level playing field with employers.
    Anne Picking: On the money going to modernise trade unions, I am sure that my hon. Friend will agree that it is no surprise to us that the Tories were against that. They are always anti-union and always will be. Is he as surprised as I am that the Liberal Democrats and the Scottish nationalists, who claim to be friends of the trade union movement, abstained or voted against it?
    Jim Sheridan: My hon. Friend makes a good point. As a former president of Unison, the public services union, she knows what she is talking about. She is right. In my area, Renfrewshire, the Liberals claim to be the
    1388
    allies of the trade unions, but when it comes to giving the trade unions the resources to do the job, what do the Liberals do? They vote against it. The SNP say they stand up for Scotland. Where were they when it came to resources for the trade unions? They were not here. They could not be bothered to turn up. That explains why the people of Scotland should reject the nationalists, and why people throughout Britain should reject the Liberals.
    Negotiations on pensions are complex, as are negotiations on health and safety. It is important that we have proper health and safety legislation that shop stewards and health and safety representatives are aware of and can deal with. We need people to know what employment law is about and how to relate that to the members. The same applies to company law. I know that many on the Opposition Benches do not understand why shop stewards should be involved with company law. They would rather keep that for the lawyers and the courtrooms. On redundancy packages and productivity pay, why should people not receive the best advice?
    It would be remiss of me not to mention gangmasters. In that connection I pay tribute to the hon. Member for North-West Norfolk for his assistance and for recognising that legislation is needed to stop people being exploited by unscrupulous gangmasters, especially in agriculture. A private Member's Bill is going through the House and I hope that, with the support of hon. Members of all parties, it will become law.
    We have tried voluntary codes and we have tried free markets, but they have not worked, so we need to try something else. Legislation is not a panacea for all the inequalities in the workplace, but it will go a long way towards stopping them. Effective employment legislation is needed particularly in agriculture, where current practice is nothing more than modern slavery and should be outlawed at every level. In addition to effective legislation, we need ministerial responsibility and financial resources to deal with unscrupulous employers.
    Mr. Djanogly: Will the hon. Gentleman give way?
    Jim Sheridan: My nipples are about to explode in anticipation of what the hon. Gentleman has to say.
    Mr. Djanogly: Does not the hon. Gentleman recognise that the Bill is about squashing individual rights? We have the bosses getting together with the unions, and it is back to the 1950s. The people who suffer are individuals who want to have their own say.
    Jim Sheridan: The Bill is about affording people the right to decent work and to dignity at work. When I spent time with the hon. Gentleman in Committee, it was nostalgic to hear him talk about trade unions, particularly when he talked about the 70s, 80s and 90s. Perhaps he was not around at that time, and he was basing his comments on what his parents or somebody else has told him. It was definitely nostalgic to listen to him talk about trade unions, his knowledge of which is somewhat limited.

    1389

    It being four hours after the commencement of proceedings on consideration of the Bill, MR. DEPUTY SPEAKER,pursuant to Order [25 March], put forthwith the Question already proposed from the Chair:—
    The House divided: Ayes 331, Noes 134.

    Division No.115]

    [10:35 pm

    AYES

    Ainsworth, Bob(Cov'try NE)

    Clark, Paul(Gillingham)

    Alexander, Douglas

    Clarke, rh Charles(Norwich S)

    Allen, Graham

    Clarke, rh Tom(Coatbridge &

    Anderson, Janet(Rossendale &

    Chryston)

    Darwen)

    Clelland, David

    Armstrong, rh Ms Hilary

    Clwyd, Ann(Cynon V)

    Atherton, Ms Candy

    Coaker, Vernon

    Atkins, Charlotte

    Cohen, Harry

    Austin, John

    Coleman, lain

    Baird, Vera

    Colman, Tony

    Banks, Tony

    Cook, Frank(Stockton N)

    Barnes, Harry

    Cook, rh Robin(Livingston)

    Barrett, John

    Corbyn, Jeremy

    Barron, rh Kevin

    Cotter, Brian

    Battle, John

    Cousins, Jim

    Bayley, Hugh

    Crausby, David

    Beard, Nigel

    Cruddas, Jon

    Begg, Miss Anne

    Cryer, Ann(Keighley)

    Beith, rh A. J.

    Cryer, John(Hornchurch)

    Bell, Sir Stuart

    Cunningham, Jim(Coventry S)

    Benn, rh Hilary

    Cunningham, Tony(Workington)

    Bennett, Andrew

    Dalyell, Tam

    Benton, Joe(Bootle)

    Davey, Valerie(Bristol W)

    Berry, Roger

    David, Wayne

    Best, Harold

    Davidson, lan

    Betts, Clive

    Davies, Geraint(Croydon C)

    Blackman, Liz

    Dawson, Hilton

    Blears, Ms Hazel

    Dhanda, Parmjit

    Blizzard, Bob

    Dismore, Andrew

    Borrow, David

    Dobbin, Jim(Heywood)

    Bradley, rh Keith(Withington)

    Dobson, rh Frank

    Bradley, Peter(The Wrekin)

    Donohoe, Brian H.

    Bradshaw, Ben

    Doran, Frank

    Brennan, Kevin

    Doughty, Sue

    Brooke, Mrs Annette L.

    Dowd, Jim(Lewisham W)

    Brown, rh Nicholas(Newcastle E

    Drew, David(Stroud)

    Wallsend)

    Eagle, Angela(Wallasey)

    Brown, Russell(Dumfries)

    Eagle, Maria(L'pool Garston)

    Browne, Desmond

    Ellman, Mrs Louise

    Bruce, Malcolm

    Ennis, Jeff(Barnsley E)

    Bryant, Chris

    Farrelly, Paul

    Buck, Ms Karen

    Field, rh Frank(Birkenhead)

    Burden, Richard

    Fisher, Mark

    Burgon, Colin

    Fitzpatrick, Jim

    Burnham, Andy

    Flynn, Paul(Newport W)

    Cable, Dr. Vincent

    Follett, Barbara

    Caborn, rh Richard

    Foster, rh Derek

    Calton, Mrs Patsy

    Foster, Michael(Worcester)

    Campbell, Alan(Tynemouth)

    Foster, Michael Jabez(Hastings

    Campbell, Mrs Anne(C'bridge)

    & Rye)

    Campbell, rh Sir Menzies(NE

    Gapes, Mike(llford S)

    Fife)

    Gardiner, Barry

    Caplin, lvor

    George, Andrew(St. lves)

    Carmichael, Alistair

    Gerrard, Neil

    Casale, Roger

    Gibson, Dr. lan

    Cawsey, lan(Brigg)

    Gilroy, Linda

    Challen, Colin

    Godsiff, Roger

    Chapman, Ben(Wirral S)

    Goggins, Paul

    Chaytor, David

    Griffiths, Jane(Reading E)

    Clapham, Michael

    Griffiths, Nigel(Edinburgh S)

    Clark, Mrs Helen(Peterborough)

    Griffiths, Win(Bridgend)

    Clark, Dr. Lynda(Edinburgh

    Hain, rh Peter

    Pentlands)

    Hall, Mike(Weaver Vale)

    1390

    Hall, Patrick(Bedford)

    McDonnell, John

    Hamilton, David(Midlothian)

    MacDougall, John

    Hanson, David

    McFall, John

    Harman, rh Ms Harriet

    Mclsaac, Shona

    Havard, Dai(Merthyr Tydfil &

    Mackinlay, Andrew

    Rhymney)

    McNamara, Kevin

    Healey, John

    McNulty, Tony

    Henderson, Doug(Newcastle N)

    MacShane, Denis

    Henderson, lvan(Harwich)

    Mactaggart, Fiona

    Hendrick, Mark

    McWalter, Tony

    Hermon, Lady

    McWilliam, John

    Hesford, Stephen

    Mahmood, Khalid

    Hewitt, rh Ms Patricia

    Mahon, Mrs Alice

    Heyes, David

    Mallaber, Judy

    Hinchliffe, David

    Mendelson, rh Peter

    Hodge, Margaret

    Mann, John(Bassetlaw)

    Hoey, Kate(Vauxhall)

    Marris, Rob(Wolverh'ton SW)

    Holmes, Paul

    Marsden, Gordon(Blackpool S)

    Hood, Jimmy(Clydesdale)

    Marshall, David(Glasgow

    Hope, Phil(Corby)

    Shettleston)

    Hopkins, Kelvin

    Marshall, Jim(Leicester S)

    Howarth, rh Alan(Newport E)

    Marshall-Andrews, Robert

    Howells, Dr. Kim

    Martlew, Eric

    Hoyle, Lindsay

    Meacher, rh Michael

    Hughes, Beverley(Stretford &

    Meale, Alan(Mansfield)

    Urmston)

    Merron, Gillian

    Hughes, Kevin(Doncaster N)

    Michael, rh Alun

    Hughes, Simon(Southwark N)

    Miliband, David

    Humble, Mrs Joan

    Miller, Andrew

    Hurst, Alan(Braintree)

    Moffatt, Laura

    Hutton, rh John

    Mole, Chris

    Iddon, Dr. Brian

    Moore, Michael

    Illsley, Eric

    Moran, Margaret

    Ingram, rh Adam

    Mountford, Kali

    Irranca-Davies, Huw

    Mudie, George

    Jackson, Glenda(Hampstead &

    Mullin, Chris

    Highgate)

    Murphy, Denis(Wansbeck)

    Jackson, Helen(Hillsborough)

    Murphy, Jim(Eastwood)

    Jamieson, David

    Naysmith, Dr. Doug

    Jenkins, Brian

    O'Brien, Bill(Normanton)

    Johnson, Alan(Hull W)

    O'Brien, Mike(N Warks)

    Jones, Helen(Warrington N)

    O'Hara, Edward

    Jones, Jon Owen(Cardiff C)

    Olner, Bill

    Jones, Kevan(N Durham)

    O'Neill, Martin

    Jones, Nigel(Cheltenham)

    Organ, Diana

    Joyce, Eric(Falkirk W)

    Palmer, Dr. Nick

    Keeble, Ms Sally

    Perham, Linda

    Keen, Alan(Feltham)

    Picking, Anne

    Keen, Ann(Brenfford)

    Pickthall, Colin

    Kemp, Fraser

    Pike, Peter(Burnley)

    Khabra, Piara S.

    Plaskitt, James

    Kidney, David

    Pollard, Kerry

    Kilfoyle, Peter

    Pond, Chris(Gravesham)

    King, Andy(Rugby)

    Pope, Greg(Hyndburn)

    Knight Jim(S Dorset)

    Prentice, Ms Bridget(Lewisham

    Kumar, Dr. Ashok

    E)

    Ladyman, Dr. Stephen

    Prentice, Gordon(Pendle)

    Lamb, Norman

    Price, Adam(E Carmarthen &

    Lammy, David

    Dinefwr)

    Laxton, Bob(Derby N)

    Primarolo, rh Dawn

    Lazarowicz, Mark

    Pugh, Dr. John

    Lepper, David

    Purchase, Ken

    Leslie, Christopher

    Purnell, James

    Levitt, Tom(High Peak)

    Quin, rh Joyce

    Lewis, lvan(Bury S)

    Rapson, Syd(Portsmouth N)

    Lewis, Terry(Worsley)

    Raynsford, rh Nick

    Linton, Martin

    Reed, Andy(Loughborough)

    Lloyd, Tony(Manchester C)

    Reid, rh Dr. John(Hamilton N &

    Love, Andrew

    Bellshill)

    Lucas, lan(Wrexham)

    Rendel, David

    McAvoy, Thomas

    Robertson, Angus(Moray)

    McCabe, Stephen

    Robertson, John(Glasgow

    McCafferty, Chris

    Anniesland)

    McCartney, rh lan

    Robinson, Geoffrey(Coventry

    McDonagh, Siobhain

    NW)

    MacDonald, Calum

    Rooney, Terry

    1391

    Ross, Ernie(Dundee W)

    Thomas, Gareth(Harrow W)

    Roy, Frank(Motherwell)

    Thurso, John

    Ruane, Chris

    Timms, Stephen

    Ruddock, Joan

    Tipping, Paddy

    Russell, Bob(Colchester)

    Trickett, Jon

    Russell, Ms Christine(City of

    Truswell, Paul

    Chester)

    Turner, Dennis(Wolverh'ton SE)

    Ryan, Joan(Enfield N)

    Turner, Dr. Desmond(Brighton

    Sanders, Adrian

    Kemptown)

    Sarwar, Mohammad

    Twigg, Derek(Halton)

    Savidge, Malcolm

    Tyler, Paul(N Cornwall)

    Sawford, Phil

    Tynan, Bill(Hamilton S)

    Sedgemore, Brian

    Vis, Dr. Rudi

    Sheerman, Barry

    Walley, Ms Joan

    Sheridan, Jim

    Ward, Claire

    Simpson, Alan(Nottingham S)

    Wareing, Robert N.

    Skinner, Dennis

    Watson, Tom(W Bromwich E)

    Smith, rh Andrew(Oxford E)

    Watts, David

    Smith, Geraldine(Morecambe &

    Webb, Steve(Northavon)

    Lunesdale)

    White, Brian

    Smith, Jacqui(Redditch)

    Whitehead, Dr. Alan

    Smith, Llew(Blaenau Gwent)

    Wicks, Malcolm

    Williams, rh Alan(Swansea W)

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

    Williams, Betty(Conwy)

    Kincardine)

    Squire Rachel

    Williams, Hywel(Caernarfon)

    Starkey, Dr. Phyllis

    Winnick, David

    Winterton, Ms Rosie(Doncaster

    Steinberg, Gerry

    C)

    Stewart, David(Inverness E &

    Wood, Mike(Batley)

    Lochaber)

    Woodward, Shaun

    Stewart, lan(Eccles)

    Woolas, Phil

    Stinchcombe, Paul

    Wright, Anthony D.(Gt

    Stoate, Dr. Howard

    Yarmouth)

    Stringer, Graham

    Wright, David(Telford)

    Stuart, Ms Gisela

    Wyatt, Derek

    Stunell, Andrew

    Younger-Ross, Richard

    Sutcliffe, Gerry

    Taylor, Dr. Richard(Wyre F)

    Tellers for the Ayes:

    Teather, Sarah

    Mr. Nick Ainger and

    Thomas, Gareth(Clwyd W)

    Mr. John Heppell

    NOES

    Ainsworth, Peter(E Surrey)

    Davis, rh David(Haltemprice &

    Amess, David

    Howden)

    Ancram, rh Michael

    Djanogly, Jonathan

    Arbuthnot, rh James

    Dorrell, rh Stephen

    Atkinson, David(Bour'mth E)

    Duncan, Alan(Rutland)

    Atkinson, Peter(Hexham)

    Duncan, Peter(Galloway)

    Bacon, Richard

    Evans, Nigel

    Baldry, Tony

    Fabricant, Michael

    Barker, Gregory

    Fallon, Michael

    Baron, John(Billericay)

    Flight, Howard

    Bellingham, Henry

    Flook, Adrian

    Bercow , John

    Gale, Roger(N Thanet)

    Beresford, Sir Paul

    Gamier, Edward

    Blunt Crispin

    Gibb, Nick(Bognor Regis)

    Boswell, Tim

    Gillan, Mrs Cheryl

    Bottomley, Peter(Worthing W)

    Goodman, Paul

    Brady, Graham

    Gray, James(N Wilts)

    Grayling, Chris

    Browning, Mrs Angela

    Greenway, John

    Burns, Simon

    Grieve, Dominic

    Burnside, David

    Gurnmer, rh John

    Butterfill, Sir John

    Hague, rh William

    Cameron, David

    Hammond, Philip

    Chapman, Sir Sydney(Chipping

    Hawkins, Nick

    Barnet)

    Hayes, John(S Holland)

    Chope, Christopher

    Heald, Oliver

    Clappison, James

    Heathcoat-Amory, rh David

    Clarke, rh Kenneth(Rushcliffe)

    Hendry, Charles

    Clifton-Brown, Geoffrey

    Hoban, Mark(Fareham)

    Collins, Tim

    Horam, John(Orpington)

    Conway, Derek

    Howard, rh Michael

    Cormack, Sir Patrick

    Howarth, Gerald(Aldershot)

    Davies, Quentin(Grantham &

    Jack, rh Michael

    Stamford)

    Jenkin, Bernard

    1392

    Johnson, Boris(Henley)

    Rosindell, Andrew

    Key, Robert(Salisbury)

    Ruffley, David

    Kirkbride, Miss Julie

    Sayeed, Jonathan

    Knight, rh Greg(E Yorkshire)

    Selous, Andrew

    Laing, Mrs Eleanor

    Shepherd, rh Mrs Gillian

    Lait, Mrs Jacqui

    Shepherd, Richard

    Lansley, Andrew

    Simmonds, Mark

    Leigh, Edward

    Simpson, Keith(M-Norfolk)

    Letwin, rh Oliver

    Spelman, Mrs Caroline

    Liddell-Grainger, lan

    Spink, Bob(Castle Point)

    Loughton, Tim

    Stanley, rh Sir John

    Luff, Peter(M-Worcs)

    Steen, Anthony

    McIntosh, Miss Anne

    Streeter, Gary

    Mackay, rh Andrew

    Swayne, Desmond

    Maclean, rh David

    Swire, Hugo(E Devon)

    McLoughlin, Patrick

    Syms, Robert

    Malins, Humfrey

    Tapsell, Sir Peter

    Maples, John

    Taylor, Ian(Esher)

    Mawhinney, rh Sir Brian

    Taylor, John(Solihull)

    May, Mrs Theresa

    Taylor, Sir Teddy

    Mercer, Patrick

    Tredinnick, David

    Mitchell Andrew(Sutton

    Turner, Andrew(Isle of Wight)

    Coldfield)

    Tyrie, Andrew

    Moss, Malcolm

    Walter, Robert

    Murrison, Dr. Andrew

    Watkinson, Angela

    Norman, Archie

    Whittingdale, John

    O'Brien, Stephen(Eddisbury)

    Wiggin, Bill

    Osborne, George(Tatton)

    Willetts, David

    Wilshire, David

    Ottaway, Richard

    Winterton, Ann(Congleton)

    Page, Richard

    Wintenon, Sir Nicholas

    Paterson, Owen

    (Macclesfield)

    Pickles, Eric

    Yeo, Tim(S Suffolk)

    Portillo, rh Michael

    Young, rh Sir George

    Prisk, Mark(Hertford)

    Randall, John

    Tellers for the Noes:

    Redwood, rh John

    Mr. Mark Francois and

    Robathan, Andrew

    Hugh Robertson

    Robertson, Laurence(Tewk'b'ry)

    Question accordingly agreed to.
    Bill read the Third time, and passed, with amendments.
    Malcolm Bruce: On a point of order, Mr. Deputy Speaker. As you know, the time constraints meant that you were not able to call me in the debate on Third Reading. I make no complaint about that—I appreciate the rules of the House. However, that means that, in relation to a programmed debate, our reasons for supporting a Bill and our qualifications are not on the record. Secondly, I wonder whether you and/or Mr. Speaker could review the speaking rules for programmed and timetabled Bills to ensure that all major opinions in the House are properly heard.
    Mr. Deputy Speaker: I sympathise with the circumstances in which the hon. Gentleman found himself. The Chair always nurses the hope on occasions when time is limited that hon. Members will somehow share out the time in a way that satisfies all points of view. Sometimes the Chair's hopes are not fulfilled.
    Mr. Patrick McLoughlin: Further to that point of order, Mr. Deputy Speaker. Would it not be useful on such occasions if the party that complained did not support the programme motion?
    Mr. Deputy Speaker: The hon. Gentleman should not try to draw the Chair into a matter of debate.

  DELEGATED LEGISLATION
  Mr. Deputy Speaker: With the leave of the House, I shall put together motions 3 and 4.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

  NORTHERN IRELAND
  That the draft Northern Ireland Act 2000 (Modification) Order 2004, which was laid before this House on 4th March, be approved.—[Paul Clark.]

  TERMS AND CONDITIONS OF EMPLOYMENT
  That the draft National Minimum Wage Regulations 1999 (Amendment) Regulations 2004, which were laid before this House on 18th March, be approved.—(Paul Clark.]
  Question agreed to.

  EUROPEAN UNION DOCUMENTS
  Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

  REVIEW OF THE WORKING TIME DIRECTIVE
  That this House takes note of the European Union Document No.5188/04, Commission Communication on the re-examination of Directive 93/104/EC concerning certain aspects of the organisation of working time; welcomes the review; supports the retention of the opt-out to the working time limit; and urges that a solution to the problems caused by the European Court of Justice cases of SiMAP and Jaeger is found.—(Paul Clark.]
  Question agreed to.

  DELEGATED LEGISLATION
  Ordered,
  That the Pet Travel Scheme (Pilot Arrangements) (England) (Amendment) Order 2004 (S.I., 2004, No.828) be referred to a Standing Committee on Delegated Legislation.—[Paul Clark.]

  Census 1911
  Motion made, and Question proposed, That this House do now adjourn.—[Paul Clark.]
  10.51 pm
  Mr. Alistair Carmichael: I fully appreciate that the subject of tonight's Adjournment debate might not feature in the editorial columns of tomorrow's newspapers, notwithstanding the fact that 1911 was a vintage year, when Lloyd George introduced old age pensions in his "people's Budget". However, I have received representations on the matter from several constituents. They are generally people who are interested in tracing their family histories and keen for the records to be brought into the public domain to assist that. I know that other hon. Members will have been contacted by constituents in similar circumstances. Indeed, only last week, I tabled early-day motion 871 on the release of the 1911 census data and it has already received 28 signatures from hon. Members of all parties.
  I pay tribute to the hon. Member for Solihull (Mr. Taylor) who has been very supportive and I am pleased that several hon. Friends, including my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith), who chairs the Select Committee on Constitutional Affairs, are present.
  The Minister will know about the phenomenal interest that was generated by the release of the 1901 census records in January 2002. He will also know that demand for the information was so great that 1.2 million people were trying to access the internet site that contained the records every hour. That somewhat outstripped the initial forecasts of 1.2 million users a day. That unforeseen demand resulted in the site's withdrawal on 7 January 2002, some five days after its launch. A full service was resumed 11 months later on 21 November. Whatever the Minister thinks about the release date for the records, I hope he will accept that when the 1911 census data are released, it must be done much more effectively.
  First, I want to consider the period of closure—the time that must pass before the data are released. The Lord Chancellor recently advised an hon. Member that the period of census closure in Britain is normally 100 years. Only six out of the 15 pre-1910 United Kingdom censuses have been closed for 100 years. The details of nine out of 15 have been released after less than 90 years. The average closure period for censuses in Britain is 80 years and, according to the national archives in Dublin, records of the 1911 census in Northern Ireland were released in 1960, some 49 years after closure.
  Of course, I accept that the situation north of the border is now devolved, but it has become apparent to me through my correspondence with the General Register Office for Scotland that, in these matters, the General Registrar for Scotland will take the same line on the release of personal information as his colleagues in England.
  I do not wish to second-guess what the Minister will say tonight, but he will be aware that I have already tabled a number of parliamentary questions on this subject and I think that I can glean a fair idea from the answer that I received from the Under-Secretary of

  1395
  State for Constitutional Affairs, the hon. Member for Shipley (Mr. Leslie) on 10 December 2003, in which he stated:
  "The 1911 census returns, now in the custody of the National Archives, are currently closed for 100 years by the Lord Chancellor's Instrument no. 12 of 1966, on the grounds that the information was supplied in strict confidence."—[Official Report, 10 December 2003; Vol. 415, c. 457W.]
  Before the Minister restates that position tonight, it might be useful to examine the legal basis for that view, to have a brief look at some of the financial benefits that could result from an alternative approach, and to consider the situation that pertains in the Republic of Ireland.
  I shall turn first to the question of the legal basis. The principal point is that the original guarantee given to those who completed the 1911 census gave no time guarantee for the duration before which the records would be made public. The confidentiality assurances that were given to people in 1911 were outlined in a written answer that I received on 18 December. Those assurances stated:
  "'The contents of the Schedule will be treated as confidential. Strict care will be taken that no information is disclosed with regard to individual persons. The returns are not to be used for proof of age, as in connection with Old Age Pensions, or for any other purpose than the preparation of Statistical Tables."'—[Official Report, 18 December 2003; Vol. 415, c. 1112W.]

  On a strict construction of that, one might say that no census would ever be released. The Government are clearly of the view, however, that that guarantee does not prevent the release of documents after a significant period has elapsed. That period is at the Lord Chancellor's discretion, and to hide behind the idea that we are keeping to a time guarantee given to those who completed census returns is slightly less than accurate. The 2001 census, for example, stated explicitly that records would be held confidentially for 100 years, but the situation in 1911 was very different.
  The Lord Chancellor's Instrument No. 12 of 1966 established the 100-year embargo rule. Prior to that, the delay in making records public had been much shorter. For example, the 1841 and 1851 records for England and Wales were both released in 1912. Scottish records were also held for less than 100 years. The 1891 Scottish returns, for instance, were made public after a delay of only 64 years. Given that the release of returns after 50 to 80 years was the practice in the first half of the last century, that no confidentiality time period was given on the 1911 census and that the Lord Chancellor's Instrument No. 12 of 1966 was 55 years away at that point, I would be very surprised if anyone who participated in that census really believed that their return would be held for exactly 100 years and not a day less. What is more, section 5(1) of the Public Records Act 1958 provides for the general release of records after 50 years, and that was reduced to 30 years in 1967. The Lord Chancellor has the power to release the records early. The only question is whether he wants to.
  Mr. John Taylor: I have a constituent who would like me to ask a question about the release of census records in Scotland, but how can I do that as an English MP?
  Mr. Carmichael: If the hon. Gentleman wants to enter into correspondence with the Registrar General for
  1396
  Scotland, my experience is that the Registrar General will be more than happy to help. indeed, when the hon. Gentleman reads the earlier part of my speech in Hansard tomorrow—I know he was unable to be here for the start of it, when I referred to him—he will see that 1 have already explored with the Registrar General the question of release in Scotland. The approach that he takes is that it will be largely the same as that in the rest of the United Kingdom.
  As a Member from a fiscally responsible party, I always endeavour to ensure that any call I make for Government action is fully costed. The good news for the Government in relation to this call is that such action would increase revenue flows to the Treasury. According to the National Audit Office report on the release of the 1901 census, "Unlocking the Past: the 1901 Census Online", the internet site allowing access to the England and Wales records generated revenues of £4.5 million by 31 October 2003. Of course, the fear is that the longer the 1911 census is not available to the public, the more revenue-raising potential will decline.
  The release of the 1901 census was more successful in Scotland than in England and Wales. There were not the same problems of over-demand for information leading to website failure. The NAO report suggests that that was the case for two reasons: an up-front charge for access to the Scottish website and the progressive release of data on microfilm before its release online. I hesitate to call on the Government to increase charges for access to records, especially given the revenues made without such charges for the England and Wales records, but I ask the Minister seriously to consider the release of the data on microfilm ahead of online release. If the Government are to stick rigidly to the 2012 date, that would be welcomed by many genealogists and would assist with an effective release of the records so that additional delays, as happened in 2002, would not occur again.
  In 1901 and 1911, the whole of Ireland was part of the United Kingdom. Censuses were carried out there along similar lines to those in England, Scotland and Wales. The 1901 Irish census returns have been available in the Republic on film since 1971, and the 1911 census returns since 2000. Does the Minister not think it strange that the 1901 Irish records were available on film in Dublin some 30 years before the Public Record Office in Northern Ireland released microfilms and that while there is already access to the 1911 records in the south, the north of Ireland will have to wait another eight years?
  I am keen that the Minister should have adequate time to reply to the points that I have raised, so I shall make one final substantive comment. The more I have looked into the matter, the more I have realised that it comes down to a question of freedom of information and the public interest on the one hand and the right of privacy given to individual citizens on the other. In this case, the right of the people who are researching their family histories—genealogists—has to be balanced against the right of people who participated in the 1911 census to have their responses kept confidential. On this matter, I gently suggest to the Minister that the Government have so far got the balance wrong.

  1397
  In a recent letter to me, the Registrar General for Scotland stated:
  "Ideally…we would want to wait until the death of the last person who had appeared in the census"
  before making the details public. He continued:
  "While that would be impractical, the 100 year milestone ensures that few will still be alive. With today's greater longevity, a shorter milestone (say, 90 years) would substantially increase the number of survivors who might object to their data being released."
  Today, millions of genealogists are keen to see the 1911 census. It carried no guarantee of confidentiality for a set period and it was taken when records were normally released after 60 to 80 years. What is more, the Lord Chancellor has the power to determine that it can be released before 2012, and the Irish equivalent, which was taken by the UK Government, is already available.
  Early release would generate money for the poor, cash-strapped Chancellor, so what is the reason for having to wait? Is there a vast lobby of 93-year-old people out there who are desperate for us not to know the contents of their census return—their date of birth and their parents' names, addresses and occupations? I think not. I hope that the Minister has a much better explanation for us than that.
  11.4 pm
  The Parliamentary Under-Secretary of State for Constitutional Affairs (Mr. David Lammy): I thank the hon. Member for Orkney and Shetland (Mr. Carmichael) for raising the 1911 census for England and Wales. The Government welcome the opportunity to have a constructive debate on a complicated issue, which is to my mind essentially a question of balancing the access interests of family and other historians who wish to consult census returns to further their research against the privacy rights accorded to citizens when they provided personal information in their census returns. I am glad that he acknowledged that balance towards the end of his comments. I stress that tonight's debate is about England and Wales, since the Scottish census is the responsibility of the Scottish Parliament.
  In recent years, many people have taken up family history for the first time and with a passion, as many key documentary sources have become available over the internet. The Government recognise that the pursuit of family history is very far from being a marginal leisure interest, as it has sometimes rather unfairly been regarded in the past. It fulfils two profound needs: the development of a sense of family, community and personal identity to provide a secure anchor for people in a sometimes rather anonymous modern world; and the satisfaction of a growing curiosity about the past. In the case of the United Kingdom, there is the additional desire on the part of family historians scattered across the globe to keep alive the link with the country from which their ancestors came.
  The Government have positively encouraged family historians by providing much easier access via the internet to the many records created by Government bodies that can assist family history research. That fits in well with the wider "Modernising Government"
  1398
  agenda to make major public services available online, so that citizens can use those services in ways and at times that are convenient to them.
  In the archival world, the national archive has made digital images of its major collection of wills available over the internet, and they are a crucial source for family historians stretching over 500 years. The archive runs an online family history consortium of Departments and other public bodies, which provides detailed guidance and signposts for those new to the subject. It also provides more than 200,000 original images about the experience of immigration into the UK since the mid-19th century, to attract new users to archives, as part of the Government's social inclusion agenda.
  We are well aware that not everyone wishes to, or can afford to, install a personal computer in their homes. That is why we revived this country's libraries by providing free access to computer terminals as part of a national information network, in addition to making them more animated places offering a focus for a wide range of community activities. By the end of this year, all the UK's more than 4,000 libraries will be linked to the internet as learning and access centres. All Members will be pleased to see their libraries revived around the country.
  In the last few years, there has been an explosion of interest in history, as the popularity of television programmes presented by Simon Schama, David Starkey and others indicates. Gone for ever are the days when history was the preserve of academic scholars in a few ivory-tower universities. The Government have played a full part in that transformation by increasing funding for museums, especially in the regions, and by abolishing entry charges, which has led to an increase in the number of people visiting museums. In the first year of the free access policy, which was introduced in late 2001, there were 5.3 million extra visits to museums, and last year there were an additional 5.6 million. The record is clear. There is support for libraries, museums and online services, and for those who want to understand not just the country's history but their own family histories.
  When decisions are made about the provision of access to personally sensitive information, either in original documents or in digital copies of them, the interests of researchers are not the only factor to be taken into account. There is sometimes a danger of our being swept along in our enthusiasm to make more material available, without acknowledging that the individuals who supplied personal information also have important rights. Far from favouring a nanny state in which all decisions are made by a Government who know best, we wish to build a mature relationship between state and citizen that is based on trust. In building that trust, the Government need to adopt a careful and discriminating approach to the collection of personal information, and to demonstrate that they will use that information responsibly. In short, the Government believe that the right to privacy, and to the confidentiality of sensitive personal information, is every bit as important in a flourishing democratic society as the right of access to that information. The

  1399
  release of the 1911 census provides one example of the need to strike a reasonable balance between the access rights of some citizens and the privacy rights of others.
  Mr. Carmichael: I have a straightforward question. It is clear from the figures that I gave the Minister that the balance has been struck differently in the past. What has changed?
  Mr. Lammy: I shall explain that shortly, if the hon. Gentleman will allow me. I can say, however, that on the last five or six occasions in the last century, the Government maintained the 100-year rule. For the 19th century, they reduced the period, but that was because there was a problem relating to pension entitlement. Individuals needed access to the census, and the Government took an interest in what was a national issue.
  It is also important to note what was on the census form at that time. As the hon. Gentleman will know, census forms have become more complex and ask more searching questions than they used to. The 1911 census form asked sensitive questions for the first time. We appreciate the importance to many people of gaining access to census records as a way of starting, or continuing to pursue, their family history research. However, in the case of the 1911 census that must be weighed against the undertaking given to householders at the time in the following emphatic terms:
  "The contents of the Schedule will be treated as confidential. Strict care will be taken that no information is disclosed with regard to individual persons".
  The hon. Gentleman says that no 100-year rule was mentioned, but another interpretation of that confidentiality was that it should be in perpetuity. Some countries destroy their censuses after a reasonable period to ensure confidentiality; we have used the 100-year rule as an alternative. We were giving a remarkably categorical assurance in 1911. The Government believe that it must be taken very seriously indeed, especially because at the time it was generally interpreted as having no expiry date.
  The hon. Gentleman has noted that the average time that elapsed between the taking of censuses in England, Wales and Scotland before 1911 and their public release was only 80 years, but there was a marked tendency for census forms in the 20th century to ask detailed questions. For example, the 1911 census introduced a question on fertility for the first time. If the average is to constitute any guide, we must be careful to compare like with like. Closer examination reveals that the hon. Gentleman's average of 80 years is heavily weighted towards 19th century censuses, which asked individuals for fewer details than later censuses. Censuses up to 1851 were made publicly available in the earlier 20th century because they often constituted the only proof of age, and therefore the only proof of entitlement to pensions, which were first provided by the state in 1908. Compared with later censuses, the 1841 and 1851 censuses asked for only basic personal information. Today, the state has a vast array of documentation relating to each citizen, and no one would seriously argue that access to the census returns is still necessary to establish proof of age.
  The legislative and social context in which censuses are conducted has changed enormously since the early 20th century. Another consideration is that average life
  1400
  expectancy has increased considerably during the past 150 years, so the closure period needed to ensure that sensitive personal information is not released within the lifetime of most individuals has correspondingly lengthened. For those reasons, the argument based on past averages of censuses more than 100 years old is not, in the end, persuasive.
  Mr. Carmichael: I am grateful to the Minister for giving way; he has been very generous with his time. is he, then, critical of the Government of the Republic of Ireland for releasing information from the 1911 census relating to people in Northern Ireland? As I said, that information is already in the public domain. Have the Government received any complaints from people in Northern Ireland about the release of the information relating to them?
  Mr. Lammy: In Northern Ireland, again, certain pension issues arose, which made that action necessary.
  It is sometimes suggested that the confidentiality undertaking given in 1911 can now be set aside because most, although by no means all, the people mentioned in those returns are now dead. However, if that view prevailed, the damaging effects on future nationwide censuses could be considerable. In 1966, the then Lord Chancellor signed an instrument, under section 5(1) of the Public Records Act 1958, closing all decennial census records for 100 years on the grounds that the information was supplied in confidence, and that its disclosure would constitute a breach of good faith. In 1981, the confidentiality assurance on the census forms was made even more explicit, and mentioned the 100-year closure period. The form for the most recent census, in 2001, included the following unequivocal statement:
  "The information you provide is protected by law and is treated in strict confidence. The information is only used for statistical purposes, and anyone using or disclosing Census information improperly will be liable to prosecution. Census forms will be held securely. Under the current terms of the Public Records Act 1958, the data will be treated as confidential for a period of 100 years."
  The primary purpose of the census is to compile statistics about the population so that the Government can, for example, take full account of rapidly changing demographics in order to make necessary provision for public services. Filling in the census is compulsory, and those who refuse to fill the forms in may be prosecuted. However, the plain fact of the matter is that the census will not be a successful information-gathering exercise if it is not generally acceptable to the public at large. We know from experience that many members of the public are concerned about the confidentiality of a census and the uses to which the information is put. The hon. Gentleman will know that there is debate in the House about certain aspects of the 2001 census, and it is important that we encourage Members to have such debates. It is right that we protect confidentiality in striking the necessary balance.
  If the Government were suddenly to reduce the closure period of 100 years for the 1911 census, seeds of doubt would inevitably be sown in the public's mind about the strength of the explicit assurance that later census returns will be closed for 100 years. No Government can afford to deprive themselves of the wealth of socio-economic data that contemporary

  1401
  censuses provide. The Government therefore believe that maintaining the security and confidentiality of the information that citizens supply about themselves in their census returns is of paramount importance. It is strongly in the national interest that public confidence in these confidentiality assurances be maintained.
  That is the fundamental reason why the Lord Chancellor does not intend to reconsider the 100-year closure period established in 1966. Since then, successive
  1402
  Governments have reaffirmed the position in the undertakings printed on census forms since 1981, in the 1993 White Paper on open government and in the White Paper on the 2001 census. It is for that reason that I am unable, I am afraid, to accept the case that the hon. Gentleman has made, although I am grateful to him for bringing this issue to the House's attention this evening.
  Question put and agreed to.
  Adjourned accordingly at twenty-one minutes past Eleven o'clock.

LEADER OF THE HOUSE
  Departmental Buildings
  Departmental Buildings
  Temporary Staff
  Temporary Staff
TRADE AND INDUSTRY
  Broadband
  Broadband
  Computer Misuse
  Computer Misuse
  House Sharers
  House Sharers
  Regional Funding
  Regional Funding
DEFENCE
  Sea Cadet Corps
  Sea Cadet Corps
  Secondments
  Secondments
  Defence Industrial Policy
  Defence Industrial Policy
  Aircraft Carriers
  Aircraft Carriers
  Territorial Army
  Territorial Army
  Departmental Officials
  Departmental Officials
  Deployments (Germany)
  Deployments (Germany)
  Iraq
  Iraq
  Kilve Bend Range
  Kilve Bend Range
  Kuwait
  Kuwait
  Osama Bin Laden
  Osama Bin Laden
  RAF Stafford
  RAF Stafford
  Sanctuary Magazine
  Sanctuary Magazine
  War Disablement Pensioners
  War Disablement Pensioners
PRIME MINISTER
  Cabinet Committee on Relocation
  Cabinet Committee on Relocation
  Employment Agencies
  Employment Agencies
  Liberation of Rome (1944)
  Liberation of Rome (1944)
  Libya
  Libya
  Party Use of Government Buildings
  Party Use of Government Buildings
  Register of Interests
  Register of Interests
SOLICITOR-GENERAL
  Iraq
  Iraq
  Overseas Bribery
  Overseas Bribery
  Parliamentary Questions
  Parliamentary Questions
  Youth Matters
  Youth Matters
FOREIGN AND COMMONWEALTH AFFAIRS
  China
  China
  Correspondence
  Correspondence
  Elections (International Observers)
  Elections (International Observers)
  Embassy and High Commission Land
  Embassy and High Commission Land
  Iran
  Iran
  Iraq
  Iraq
  Israel
  Israel
  Press Releases
  Press Releases
  Canada
  Canada
  Sri Lanka
  Sri Lanka
  Sudan
  Sudan
  Travel Guidance
  Travel Guidance
  Australia
  Australia
CABINET OFFICE
  Departmental Officials
  Departmental Officials
  DirectGov
  DirectGov
  Official Data
  Official Data
  Secondments
  Secondments
CULTURE, MEDIA AND SPORT
  Double Decker Buses (Tourism)
  Double Decker Buses (Tourism)
  Employment Agencies
  Employment Agencies
  Green Spaces Funding
  Green Spaces Funding
  Public Libraries
  Public Libraries
  National Lottery
  National Lottery
INTERNATIONAL DEVELOPMENT
  EU Development Assistance
  EU Development Assistance
  Iraq
  Iraq
  Palestine
  Palestine
  British Overseas Territories
  British Overseas Territories
TRANSPORT
  Bicycle Helmets
  Bicycle Helmets
  East London Line
  East London Line
  Employment Agencies
  Employment Agencies
  EU Freight Facilities Grants
  EU Freight Facilities Grants
  Hazardous Substances (Carriage at Sea)
  Hazardous Substances (Carriage at Sea)
  Heavy Goods/Public Service Vehicles
  Heavy Goods/Public Service Vehicles
  Level Crossings (Pollution)
  Level Crossings (Pollution)
  Maritime Security
  Maritime Security
  Merchant Fleet
  Merchant Fleet
  Piracy
  Piracy
  Queen Elizabeth Bridge, Dartford
  Queen Elizabeth Bridge, Dartford
  Rail Services
  Rail Services
  Ships and Containers (Scanning)
  Ships and Containers (Scanning)
  Speed Cameras
  Speed Cameras
  Road Accidents
  Road Accidents
  Telecommunications Masts
  Telecommunications Masts
  Tachograph Offences
  Tachograph Offences
  Vehicle Inspectorate
  Vehicle Inspectorate
CONSTITUTIONAL AFFAIRS
  Community Legal Service
  Community Legal Service
  Computer Misuse
  Computer Misuse
  Departmental Officials
  Departmental Officials
  Emergency Protection Orders
  Emergency Protection Orders
  Legal Services Review
  Legal Services Review
  Lord Chancellor
  Lord Chancellor
  Munby Judgment, November 2001
  Munby Judgment, November 2001
  Secondments
  Secondments
  Wrongful Convictions
  Wrongful Convictions
NORTHERN IRELAND
  Cancer
  Cancer
  Census 2001
  Census 2001
  Computer Misuse
  Computer Misuse
  Invest Northern Ireland
  Invest Northern Ireland
  Police Recruitment
  Police Recruitment
EDUCATION AND SKILLS
  Asylum-seeking Children
  Asylum-seeking Children
  Careers Service
  Careers Service
  Child Care
  Child Care
  Child Poverty
  Child Poverty
  Connexions
  Connexions
  Contact Centres
  Contact Centres
  E-universities
  E-universities
  Early Years Development
  Early Years Development
  Further Education Colleges
  Further Education Colleges
  Education Funding
  Education Funding
  Kids Club Network (Funding)
  Kids Club Network (Funding)
  Local Government Finance
  Local Government Finance
  Mature Students
  Mature Students
  National Childcare Strategy (Burton)
  National Childcare Strategy (Burton)
  Pre-school Education (Crosby)
  Pre-school Education (Crosby)
  School Playing Fields
  School Playing Fields
  Science Strategy
  Science Strategy
  Special Educational Needs
  Special Educational Needs
  Student Loans
  Student Loans
  Sure Start
  Sure Start
  Telephone Tapping
  Telephone Tapping
  Universities (Work Experience)
  Universities (Work Experience)
  University Science Departments
  University Science Departments
ENVIRONMENT, FOOD AND RURAL AFFAIRS
  Coastal Defence
  Coastal Defence
  Conferences/Seminars
  Conferences/Seminars
  Disposable Nappies
  Disposable Nappies
  Drinking Water Quality
  Drinking Water Quality
  Emissions Trading
  Emissions Trading
  Home Energy Efficiency Scheme
  Home Energy Efficiency Scheme
  Ivory
  Ivory
  Fly-tipping
  Fly-tipping
  Gamma interferon Test
  Gamma interferon Test
  Large Combustion Plants Directive
  Large Combustion Plants Directive
  Marine Conservation
  Marine Conservation
  Parish/Town Councils
  Parish/Town Councils
  Public Carriage Roads
  Public Carriage Roads
  Radioactive Waste
  Radioactive Waste
  Recycling
  Recycling
  Science Strategy
  Science Strategy
  Sugar Regime
  Sugar Regime
  Trophy Hunting
  Trophy Hunting
  Warm Front (Cleethorpes)
  Warm Front (Cleethorpes)
  Waste Management
  Waste Management
HEALTH
  "Delivering Race Equality"
  "Delivering Race Equality"
  Biomedicine
  Biomedicine
  Breast Screening
  Breast Screening
  Chronic Obstructive Pulmonary Disease
  Chronic Obstructive Pulmonary Disease
  Cluster Headaches
  Cluster Headaches
  Computer Misuse
  Computer Misuse
  Correspondence
  Correspondence
  Dentistry
  Dentistry
  Diabetes
  Diabetes
  Health Spending (West Derbyshire)
  Health Spending (West Derbyshire)
  Integrated Community Equipment Service Team
  Integrated Community Equipment Service Team
  Maternity Services (Asylum Seekers)
  Maternity Services (Asylum Seekers)
  Medicines and Healthcare Products Regulatory Agency
  Medicines and Healthcare Products Regulatory Agency
  Mental Health Services
  Mental Health Services
  Nappies
  Nappies
  NHS (South Tyneside)
  NHS (South Tyneside)
  NHS Staff
  NHS Staff
  NHS Beds (Crosby)
  NHS Beds (Crosby)
  North Bristol NHS Trust
  North Bristol NHS Trust
  Ophthalmology
  Ophthalmology
  PET Scanners
  PET Scanners
  Prescription Drugs
  Prescription Drugs
  Respiratory Conditions
  Respiratory Conditions
  Seroxat
  Seroxat
  St. Jude Silzone Heart Valve
  St. Jude Silzone Heart Valve
  Substance Misuse
  Substance Misuse
TREASURY
  National Statistics
  National Statistics
  United States Container Security Initiative
  United States Container Security Initiative
  Aggregates Tax
  Aggregates Tax
  Bureaux de Change
  Bureaux de Change
  Carbon Monoxide Poisoning
  Carbon Monoxide Poisoning
  Champagne Imports
  Champagne Imports
  Child Tax Credits
  Child Tax Credits
  Customs and Excise
  Customs and Excise
  Demographics
  Demographics
  Departmental Buildings/Officials
  Departmental Buildings/Officials
  Economic Statistics (Burton)
  Economic Statistics (Burton)
  Employment Agency Staff
  Employment Agency Staff
  Focus Groups and Opinion Polls
  Focus Groups and Opinion Polls
  Individual Savings Accounts
  Individual Savings Accounts
  Insurance Premium Tax
  Insurance Premium Tax
  National Trust
  National Trust
  Pensions (Equitable Life)
  Pensions (Equitable Life)
  Stamp Duty
  Stamp Duty
  Tax Collection
  Tax Collection
  Unclaimed Assets
  Unclaimed Assets
WORK AND PENSIONS
  Benefit Payments (Scotland)
  Benefit Payments (Scotland)
  Benefits
  Benefits
  Benefits Reforms (Scotland)
  Benefits Reforms (Scotland)
  Child Support Agency
  Child Support Agency
  Child Tax Credit
  Child Tax Credit
  Company Cars (Child Support)
  Company Cars (Child Support)
  Departmental Communications
  Departmental Communications
  Departmental Ethnic Minority Employment
  Departmental Ethnic Minority Employment
  EU Accession States
  EU Accession States
  Local Government Finance
  Local Government Finance
  Habitual Residence Test
  Habitual Residence Test
  Health and Safety at Work
  Health and Safety at Work
  Incapacity Benefit
  Incapacity Benefit
  Jobcentre Plus
  Jobcentre Plus
  Jobcentre Plus
  Jobcentre Plus
  Partnerships Against Poverty
  Partnerships Against Poverty
  Pension Credit
  Pension Credit
  Poverty Threshold
  Poverty Threshold
  Sure Start Maternity Grant
  Sure Start Maternity Grant
  Underoccupation
  Underoccupation
  Websites
  Websites
  Winter Fuel Payment
  Winter Fuel Payment
  Working at Height Regulations
  Working at Height Regulations
DEPUTY PRIME MINISTER
  Mortgages
  Mortgages
  Balance of Funding Review
  Balance of Funding Review
  Car Parking
  Car Parking
  Correspondence
  Correspondence
  Council Houses
  Council Houses
  Department-Sponsored Bodies
  Department-Sponsored Bodies
  Hereford and Worcester Fire Authority
  Hereford and Worcester Fire Authority
  Homeless People
  Homeless People
  House Buyers (Protection)
  House Buyers (Protection)
  Housing
  Housing
  Local Government Finance
  Local Government Finance
  Local Government Grants
  Local Government Grants
  Local Government Pension Scheme
  Local Government Pension Scheme
  Mobile Phone Masts
  Mobile Phone Masts
  New Deal for Communities
  New Deal for Communities
  Regional Assemblies
  Regional Assemblies
  Public Bodies (Expenditure)
  Public Bodies (Expenditure)
  Shell Haven Port
  Shell Haven Port
HOME DEPARTMENT
  Coroners' Inquiries
  Coroners' Inquiries
  Drugs
  Drugs
  Escort Contractors
  Escort Contractors
  Firearms
  Firearms
  Forensic Science
  Forensic Science
  Information Technology
  Information Technology
  Intensive Supervision and Surveillance Programme
  Intensive Supervision and Surveillance Programme
  Juvenile Crime
  Juvenile Crime
  Prisons
  Prisons
  Probation
  Probation
  Rape
  Rape
  Sentencing Statistics
  Sentencing Statistics
  Truancy Parental Imprisonment
  Truancy Parental Imprisonment
  Wormwood Scrubs
  Wormwood Scrubs
  Young Offenders
  Young Offenders
DEPUTY PRIME MINISTER

  Green Belt Statistics
  The Minister for Housing and Planning (Keith Hill)
  In 2000, the Government published figures on the area of land designated as green belt in England, based on figures in plans that had been adopted by 1997. I am pleased to announce today the publication of statistics that show changes to the amount of green belt since then. In future, such figures will be published on an annual basis, and will be used to monitor the Government's target to maintain or increase the amount of green belt in each region.

  The statistics show that since 11997 there has been an increase of around 25,000 hectares in the amount of green belt identified in adopted local and unitary development plans in England. In addition, there are proposals for an additional 12,000 hectares of green belt that are currently being taken forward in plans that have not yet reached adoption. This figure does not include changes to the green belt proposed in the New Forest, where land will be re-designated from green belt to national park once the national park has been formally designated. This comprises some 46,000 hectares of land in the area covered by New Forest district council. In view of this re-designation, the Government does not intend that these figures should be included in monitoring progress towards its target of maintaining or increasing the amount of green belt in each region.

  Copies of the statistical release are available in the Libraries of both Houses.

  High Hedges
  The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Yvette Cooper)
  We have today launched a public consultation on implementing Part 8 of the Antisocial Behaviour Act 2003 in England. This gives local authorities the powers to deal with complaints about high hedges that are having an adverse affect on a neighbour's amenity.

  We are seeking views on draft regulations covering certain procedural details such as the fees that authorities should charge for this service and how appeals against their decisions should be dealt with. We are also seeking views on the draft guidance on how local authorities should administer the complaints system. This offers advice on how authorities should assess whether a hedge is having an adverse affect on a neighbour's amenity. Copies of the consultation paper and the draft guidance have been placed in the Libraries of both Houses.

  74WS
  The consultation papers have been sent to local authorities in England, specialist and other interested organisations. They have also been published on the Office of the Deputy Prime Minister's web site www.odpm.gov.uk. The closing date for responses is 30 June 2004.

  This is another step towards tackling the misery that can be caused by high hedges and we are on course to have the system fully operational towards the end of this year.

TREASURY

  Civil Registration Review
  The Financial Secretary to the Treasury (Ruth Kelly)
  The House will wish to be aware of developments on the Government's plans for modernising civil registration.

  On 10 July 2003 the Government published the consultation paper "Civil Registration: Delivering Vital Change". This set out our proposals to reform civil registration in England and Wales using powers in the Regulatory Reform Act 2001. The proposed changes will make it easier both for citizens to deal with Government at key points in their lives and in the lives of their families and for the Government to modernise this public service by exploiting improved information and communication technology. I am pleased to be able to tell the House that there were almost 3,400 responses to the consultation document. This indicates the very real interest amongst a wide range of stakeholders—registration practitioners and managers, the public and other interested organisations—in this area of reform.

  Our intention was to introduce a regulatory reform order in this Session of Parliament. This remains the case in respect of provisions relating to registration of births and deaths and access to birth and death records. I have however decided to postpone the presentation of provisions relating to marriage till early in the next Session. The splitting of the proposals in this way will ensure that the momentum for reform is sustained whilst, at the same time, providing an opportunity for the second regulatory reform order to take account of Parliament's wishes on the civil partnership legislation.

  This strategy will not hinder the Government's plans for implementation that will begin in 2005 with improved information technology to forward registration information to the Registrar General and the structural reform of the local
  registration service.

HOME DEPARTMENT

  Government Co-operation Faith Communities
  The Parliamentary Under-Secretary of State for the Home Department (Fiona Mactaggart)
  Today my right hon. Friend the Home Secretary and I launched"Working Together—Co-operation between Government and Faith Communities". The report is aimed at Government Departments and faith communities and includes recommendations on what each can do to engage more effectively in partnership working together.

  75WS
  The report is the result of a wide-ranging cross-Government review, led by the Home Office, involving Ministers, officials and senior faith community representatives working in partnership together. To ensure the report's recommendations are being acted on and progressed, review members will reconvene in a year to evaluate the impact of the review.

  The report is entitled "Working Together: Co-operation between Government and Faith Communities". Copies have been placed in the Libraries of both Houses, and may be obtained from the Faith Communities Unit in my Department or through the Home Office website.

  Special Branch
  The Secretary of State for the Home Department (Mr. David Blunkett)
  Following a recommendation made by Her Majesty's Inspector of Constabulary in his report on special branch and ports policing in January 2003, I am today publishing redrafted guidelines for special branch work in the United Kingdom.

  They have been redrafted in partnership with the Scottish Executive and the Northern Ireland Office. We have consulted fully with all interested parties, including the Association of Chief Police Officers, the National Co-ordinator of Special Branch, the National Co-ordinator of Ports Policing and the Security Service.

  The new guidelines reflect that the current operational priority for special branch is counter terrorism work. They also detail the role roles and responsibilities of officers and the local, regional and national structure of special branch. They provide clarity on the work of special branch and make special branch duties more understandable and transparent.

  Passport Service
  The Minister for Citizenship and Immigration (Beverley Hughes)
  The United Kingdom Passport Service Corporate and Business plan for 2004–09 will be published tomorrow. Copies of the plan will be placed in the Library of the House.

DEFENCE

  Bowman
  The Minister of State, Ministry of Defence (Mr. Adam Ingram)
  On 19 July 2001, I informed the House that, after years of delay and forecast cost growth, we had selected a preferred supplier to take forward the BOWMAN programme. Although our approved in service date was December 2004, we set a demanding target to deliver by 30 March 2004. This target is just 30 months from the September 2001 contract awarded to General Dynamics United Kingdom Ltd, a challenge unprecedented on such a major and complex acquisition project. Our priority was to deliver a secure, reliable voice communications replacement for Clansman and I am pleased to report to the House that BOWMAN has achieved its in service date on this basis, ahead of the target. This achievement and the capability it provides will enable the programme to progress to its next key milestone, the delivery of war fighting capability in 2005.

  76WS
  Once fully implemented, BOWMAN will provide a secure tactical + voice and data communications system for our land forces and selected elements of the Royal Navy and Royal Air Force, until at least 2025. As well as being man-portable, it will be an integral part of the communications fit of major equipments such as warships, main battle tanks and helicopters. The provision of secure voice communications down to section level represents a step-change in capability for the armed forces as they migrate from Clansman to BOWMAN. Other functions which BOWMAN is designed to deliver, such as automatic position reporting and an ability to pass digital data around the battlefield have been demonstrated in principle on field trials and their development is on course.

  At the end of 2002, nearly a year and a half into the BOWMAN contract, we extended it to further develop the battle management system and to enhance integration with systems and sensors on board our key armoured platforms—a programme known as CIP. A key advantage of aligning both programmes is that time and cost are saved through converting vehicles only once. There has been positive progress on CIP but the performance of the battle management system in recent field trials leads us to conclude that a few more months of work will be required to develop and fully demonstrate its effectiveness.

  BOWMAN will provide a marked increase in operational tempo, firepower lethality and survivability across all our armed services and will be a key enabler for the UK's network-enabled capability. There is a widespread commitment to BOWMAN across the services and industry stakeholder community and it has already demonstrated greater military capability overall than Clansman. The first brigade converted to BOWMAN will undertake a further 15 months of unit and collective performance training, and as with the programme hitherto, the brigade will be closely involved in the development and proving of BOWMAN.

  Achieving the BOWMAN in service date is an important step on the road to the ultimate goal, delivering a robust war fighting capability that fully meets the requirements of the user in service. It is a key milestone on the path to achieving war fighting operational readiness in 2005 and represents a huge success for smart acquisition as well as a big step forward for the British armed forces.

  Nuclear Weapons (Safety Arrangements)
  The Minister of State, Ministry of Defence (Mr. Adam Ingram)
  In 1992, the then Chief Scientific Adviser to the Ministry of Defence, Sir Ronald Oxburgh, conducted a review of the safety of nuclear weapons. It was reported to Parliament House of Commons, 13 July 1992,Official Report, column 520. that he had recommended the inauguration of a safety "champion". A position entitled Nuclear Weapon Safety Adviser was subsequently created, and this has had two incumbents. More recently, further work has been done on safety management arrangements in the Department in general, and in the nuclear programmes in particular, to reflect policy and organisational developments. As a result, we have appointed a Nuclear Weapon Regulator to provide assurance about safety in the nuclear weapons programme. In so doing, it was recognised that the tasks of this official would be very similar to those of

  77WS
  the Nuclear Weapon Safety Adviser, and it was decided that, when the regulator was ready to conduct business, the safety adviser post should close. This has recently occurred.

  Regional Prime Contract (South-West)
  The Parliamentary Under-Secretary of State for Defence (Mr.Ivor Caplin)
  Debut Services (South-West) Limited, a joint venture between Babcock International Group and Bovis Lend Lease, has been awarded the regional prime contract for the Ministry of Defence's estate in the south-west. This follows successful completion of the clarification phase.

  The seven-year contract, worth in the order of £480 million, is the second in a series of five such arrangements covering the estate and will provide for capital works, property maintenance and facilities management services, throughout the south-west of England.

  The MOD has undertaken to make significant improvements in the overall condition of its estate by changing its organisational structures and introducing prime contracting methods. Encouraging innovation and efficiency, Regional Prime Contracting is a key initiative that aims to provide a better quality of service and greater value for money through suitably incentivised contracts conforming to the principles of "Smart Acquisition".

WORK AND PENSIONS

  Debt Management
  The Parliamentary Under-Secretary of State for Work and Pensions (Mr.Chris Pond)
  I am today announcing that contracts have been signed with four private sector companies to provide debt collection services to the Department for Work and Pensions (DWP). The contractors are Commercial Collections Services, Eversheds, Legal and Trade Collections and the Lewis Group.

  The contractors will provide support with two categories of debt: benefit debt and commercial debt. They will act as recovery agents, earning commission on amounts recovered and passed to DWP. The ownership of the debt will remain with DWP at all times.

  The contracts will offer support to our existing debt management operations rather than replacing or outsourcing them. There will be no job reductions in DWP as a result of this announcement. So DWP will continue to handle negotiation and civil enforcement of debts in-house. The cases transferred will be those where DWP has been unsuccessful.

  The contractors will adhere to strict contractual controls on their behaviour and DWP will put robust contract management processes in place to ensure compliance. Contractors will also have to adhere to the codes of conduct of their own supervising bodies (e.g. the Credit Services Association or the Law Society) and also the Office of Fair Trading (OFT).

  Benefit debt includes overpaid benefits, where the overpayment is caused by customer error, and outstanding social fund loans. The debts transferred will be those where the debtor is not currently in receipt of a
  78WS
  DWP benefit, they have refused to repay voluntarily and DWP has been unable to obtain full recovery. Each debtor will be given the opportunity to make an arrangement to repay their debt before their case is transferred to one of the contractors.

  DWP has a number of categories of debts owed by commercial organisations including:
  money owed by insurance companies by way of compensation for NHS costs following Road Traffic Accidents and repayment of Social Security benefits following compensation awards;
  recoupment from employment tribunal awards—where employers are required to repay social security benefits paid to employees following, for example, unfair dismissal;
  amount owed through contracts such as European social fund, training and general supplies.

  As with benefit debt, the organisations owing money will be given the opportunity to make an arrangement to repay DWP before the case is transferred to the private sector for collection.

  There are three main purposes to this exercise:
  to reduce the debts outstanding to the Department;
  to reinforce the message that debts have to be repaid, especially those that arose as a result of fraud;
  to learn from the private sector and increase the efficiency and effectiveness of DWP's Debt Management organisation.

  The contract will be for an initial two-year period to March 2006, with the possibility of extension. First cases will be transferred towards the end of April 2004 with each Contractor receiving an initial tranche of 50,000 cases. After this initial allocation there is no guarantee of additional cases being referred.

  Business Plans
  The Secretary of State for Work and Pensions (Mr. Andrew Smith)
  I am today able to announce the 2004–05 annual performance targets for three of the executive agencies of the Department for Work and Pensions: Jobcentre Plus, Child Support Agency and Appeals Service. The targets I have agreed are set out below.

  Further information on the plans of each of the businesses in 2004–05 is contained in their individual business plans which have been published today. Copies have been placed in the Library.

  Performance targets for The Pension Service, Disability and Carers Service and The Rent Service, responsibility for which transfers to my Department from 1 April 2004, will be announced in due course.

  In line with the Department's Public Service Agreement, I will also be publishing unit cost targets that will be set to ensure that Jobcentre Plus, Child Support Agency and The Pension Service continue to deliver business efficiently.

  Jobcentre Plus:
  Helping people into work1: to achieve a total points score of 7,295,100 based on job entry outcomes.
  Tackling fraud and error: by March 2005 to reduce losses from fraud and error in working age Income Support and Jobseeker's Allowance to no more than 6.0 per cent. of the monetary value of these benefits paid during the year.
  Helping employers fill their vacancies: to ensure that at least 84 per cent. of employers placing their vacancies with Jobcentre Plus will have a positive outcome.

  79WS
  Business Delivery2: to ensure processes are delivered efficiently, accurately and to specified standards in 89.6 per cent. of cases checked.
  Serving our customers well: to achieve an 81 per cent. customer service level in the delivery of the standards set out in the Jobcentre Plus Customer and Employer Charters.

  Child Support Agency:

  All targets refer to new scheme cases.
  Case compliance: by 31 March 2005 to be collecting child maintenance and/or arrears from 78 per cent. of all cases with a maintenance liability using the collection service.
  Cash compliance: by 31 March 2005 to be collecting 75 per cent. of child maintenance and/or arrears due to be paid through the collection service.
  Cash and case collection: to develop for introduction from 1 April 2005 individual targets for case and cash compliance to measure the collection of current maintenance separately from the collection of arrears.
  Accuracy: by 31 March 2005 accuracy on the last decision made for all maintenance calculations checked in the year to be correct to the nearest penny in at least 90 per cent. of cases.
  Customer perception: to develop and introduce a client perception target by October 2004.
  Debt: to develop and introduce a debt reduction target by October 2004.

  Appeals Service:
  The average waiting time for an appeal to be heard will be no more than 11 weeks from the time of receipt by the Appeals Service3
  The number of cases over 20 weeks old as at 1 April 2004 will be reduced by at least 15 per cent. by 31 March 2005.
  For cases returned by the Commissioner, the average waiting time for an appeal to be re-heard will be no more than eight weeks from the date of return to the Appeals Service4.

  Notes

  1. This target is measured by a points score system which focuses efforts and resources on helping into work people in priority groups such as lone parents, disabled people and those in the most disadvantaged areas. For each person that Jobcentre Plus places in work it will earn a point score ranging from 12 points for, for example, a lone parent, to one point for someone who is already employed.

  2. This target measures standards of delivery of five key Jobcentre Plus business processes: Income Support accuracy, Jobseeker's Allowance accuracy, Incapacity Benefit accuracy, Labour Market Interventions, and attendance at an independent assessment to identify basic skills needs.

  3. Excludes stayed cases awaiting decision in lead cases in a higher court (the effective date will commence from withdrawal of stay being notified).

  4. Excludes cases requiring further evidence.

  Social Fund
  The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond)
  I am pleased to announce that the gross discretionary social fund budget for 2004–05 will be £689 million. This includes a further increase in net treasury funding of £10 million, which is additional to last year's extra £20 million. This means that net funding is now £30 million higher than in 2002–03, and is the second of three annual increases from a £90 million boost for the discretionary social fund announced in the autumn 2002 pre-budget report.

  80WS
  After careful consideration, we have decided to allocate all the extra net funding to community care grant needs. We have therefore increased the community care grant (CCG) budget by £10 million. This is a further significant increase that will help the most vulnerable. It has been distributed so that every district benefits by an increase in their CCG budget and districts move closer to meeting the same proportion of demand nationally.

  The gross loans budget for 2004–05 will be £560 million, which represents an increase of £2 million over the April 2003 allocation. The increase is owing to higher loan recoveries and setting a lower contingency reserve than 2003–04. To maintain fairness within the scheme, the loans budget will continue to be allocated to districts to support consistency of outcome for applicants wherever they live.

  The sum of £1 million will be retained centrally as a contingency reserve, which, for example will provide additional help to districts facing unexpected and unplanned expenditure.

  Details of individual district budget allocations have been placed in the Library.

  The discretionary social fund budget is cash limited. Budgets are allocated to districts on 1 April each year.

  The gross discretionary SF budget allocated for 2004–05 is £689 million made up of:

  New money (AME)

  £168.2 million

  Forecast loan recovery

  £520.8 million

  This was allocated as follows:

  Loans

  £560 million

  Grants

  £128 million

  Contingency reserve

  £1 million

  If the forecast for loan recoveries proves to be an underestimate, any additional recoveries can be allocated to districts during the year.

  The contingency reserve is held centrally and allocations made from it reimburse districts for expenditure resulting from a local accident or disaster (eg, flooding).

  Since April 1997, the gross discretionary social fund budget has increased by £221.5 million from £467.5 million to £689 million, an increase of more than 47 per cent.

  Since April 1997, the community care grant budget has increased by £31 million from £97 million to £128 million, an increase of nearly 32 per cent.

  My right hon. Friend the Secretary of State will be making a number of minor changes to the discretionary social fund, with effect from 5 April 2004. The changes to the fund are minor clarifications of guidance and directions, and, in the main, are consequential to legislative changes being made in respect of other social security benefits.

  Details of the changes have been placed in the Library.

FOREIGN AND COMMONWEALTH AFFAIRS

  Falklands Islands
  The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Bill Rammell)
  On 15 and 16 March 2004 the Argentine naval Icebreaker, Almirante Irizar sailed through the Falklands outer conservation zone and the Falklands interim conservation zone. These are areas for which the Falkland Islands Government issues fishing licences. During the time that it was inside these zones, the Argentine vessel was challenging other vessels to identify themselves. While transit of the conservation 82WS
  zones is permissible, the policing of the zones by a foreign vessel contravenes the Falkland Islands exclusive jurisdiction.

  We asked the Argentine Government for an explanation of the vessel's actions. Their response was not satisfactory. We have therefore made a formal protest to the Argentine Government concerning the actions of the Almirante Irizar, underlining the need to ensure that this type of incident does not happen again. This note also reiterated that HMG has no doubts about UK sovereignty over the Falkland Islands.

  I have spoken to Falkland Island councillors about this incident. I share their concerns and I have briefed them on our response. I assured them of our continued firm support.

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

National Service Framework for Children
Baroness Massey of Darwen Baroness Massey of Darwen asked Her Majesty's Government:
What progress is being made on the National Service Framework for Children.
The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): My Lords, this is the most complex of the national service frameworks to date, but good progress is being made. The first part of the National Service Framework for Children—Standards for Hospital Services—was published in April 2003. Work is now in hand to implement that standard. The Government will publish the full National Service Framework for Children before the end of the year.
On 4 March, we published Every Child Matters: Next Steps, which sets out the first phase for implementing the Government's Green Paper on children with an important role for the national service framework in raising standards of care.
Baroness Massey of Darwen: My Lords, I thank the Minister for that very encouraging reply. How will the National Service Framework for Children impact on the White Paper on public health? Does he agree that issues of public health for children are very important, for example, in matters of diet, nutrition and obesity?
Lord Warner: My Lords, I agree with my noble friend about the importance of the links between the National Service Framework for Children and the White Paper on public health that my right honourable friend the Secretary of State launched in March as a major consultation exercise. The responses to that consultation exercise will feed into the White Paper and will inform the national service framework, a key part of which is to promote children's health and well-being.
Lord Clement-Jones: My Lords, the Mental Health Foundation recently highlighted the fact that some 50,000 children are on antidepressants and that the rates of suicide and self-harm among children have increased dramatically in the past 20 years. What focus will there be in the NSF on mental health services for children?
Lord Warner: My Lords, there are likely to be eight strands in the National Service Framework for Children, one of which will be child and adolescent mental health services. Perhaps I may remind the
1016
noble Lord that the Government are committed to improving child and adolescent mental health services, which will be backed up by significant additional funding of about £300 million in the three years to 2005–06, payable to local authorities and primary care trusts.
Lord Chan: My Lords, does the Minister agree that it is important for the National Service Framework for Children to get a good start? Could the Minister tell us what progress has been made in tackling health inequalities, particularly as regards reducing infant mortality and expectancy of life at time of birth?
Lord Warner: My Lords, the noble Lord is right. The Government have made a huge investment in improving neonatal care and £72 million is being invested in neonatal intensive care facilities. Perhaps I may remind the House and the noble Lord that it was this Government who started the Sure Start programme. There are now more than 500 of those programmes doing a great deal to help children and young people in very disadvantaged areas, which are covered by about 1,700 child centres.
Baroness Gardner of Parkes: My Lords, can the Minister assure us that children with disabilities, including physical disabilities—the Minister referred to mental health problems earlier—will be fully considered in the framework?
Lord Warner: My Lords, I am happy to reassure the noble Baroness that disabled children is one of the eight strands to be covered in the National Service Framework for Children.
Baroness David: My Lords, will the needs of children in special circumstances, such as refugees, looked-after children and children in secure provision, whose health outcomes are often the worst, be looked after in the national service framework?
Lord Warner: My Lords, I have a feeling that we shall work through the whole of the eight strands in the National Service Framework for Children. I am happy to reassure my noble friend that children in special circumstances of the kinds that she mentioned will be covered in the NSF.
Baroness Howe of Idlicote: My Lords, can the Minister tell us if the National Service Framework for Children will also have an impact on schools? Is that another strand? As the Government are seeking to join up services and locate many health and social care services in schools, surely it is crucial that the National Service Framework for Children should bite on education providers.
Lord Warner: My Lords, the Government have done a great deal to join together services that affect children and have appointed a Minister for Children. If the noble Baroness looks at Every Child Matters: Next Steps, she will see the way in which we are

1017]
weaving together the strands of services for children. The National Service Framework for Children will do exactly that. There will be arrangements for integrated inspection of children's services.
Lord Elton: My Lords, the NSF will be a statement of intentions. What will be the mechanism for seeing that the intentions are completed?
Lord Warner: My Lords, the National Service Framework for Children is a 10-year strategy for delivering better health and social care for children. If the noble Lord looks at the other national service frameworks, he will see that there has been a strong emphasis on delivery. That is shown in the Government's record on improving death rates in relation to cancer and the reduction in coronary heart disease, both of which have a national service framework.
Baroness Howarth of Breckland: My Lords, the Minister mentioned the links with Every Child Matters: Next Steps. How are these links made with the five outcomes for children and young people?
Lord Warner: My Lords, the noble Baroness will have to wait for the detail in the national service framework, but the Government are integrating these different strands of work, and they will be covered in the national service framework when it is published.
Lord Harrison: My Lords, given the importance of joined-up questions, and joined-up government, what will the impact of the NSF be on the Children Bill?
Lord Warner: My Lords, the Government's position on the Children Bill will be explained fully by my noble friend at Second Reading tomorrow. The national service framework will be totally integrated and co-ordinated with the Children Bill when it is published.
Earl Howe: My Lords, the Minister will be aware that one in 10 young people are infected with chlamydia, and that in the past year alone there has been a 20 per cent increase in the number of people infected with HIV, which has prompted the Health Select Committee in another place to speak of a crisis in sexual health. Does he think that there should not only be a section in the children's NSF devoted to young people's sexual health, but that there is also a strong case for a separate national service framework on sexually transmitted diseases?
Lord Warner: My Lords, the National Service Framework for Children will be comprehensive in what it proposes in relation to improving integrated services for children. It will pull together information and expertise from a wide range of fields. In relation to the specific question asked by the noble Earl, a national strategy for sexual health and HIV was published by the Government in 2001, and large sums of extra money have been put in to modernise services
1018
and to tackle chlamydia, as well as a £4 million campaign on sex lottery, which is pitched at younger people.

Regulatory Impact Assessments
2.45 p.m.
Viscount Goschen Viscount Goschen asked Her Majesty's Government:
Whether they believe that the regulatory impact assessment procedure is effective in ensuring that the benefits of regulation justify the costs.
Lord Bassam of Brighton: My Lords, Ministers sign off regulatory impact assessments to confirm that they are satisfied that the benefits of regulation, where it is necessary, justify the costs.
Viscount Goschen: My Lords, if the system is to be taken to be working well, could the Minister quantify the benefits that justify the more than £30 billion of regulatory costs that the British Chambers of Commerce calculates to have been imposed in the United Kingdom since 1997? If the Minister disputes the latter costing, could he give us his own?
Lord Bassam of Brighton: My Lords, welcome though the report British Chambers of Commerce Burdens Barometer was, some of the claims that it made were misleading. Some of the costs that were seen as red tape were actually the value of the policy to recipients, for example, the enhanced maternity rights for women, the minimum wage for 1.5 million workers, and better working conditions. Regulation is valuable. When the noble Lord was in government, no doubt he was the begetter of regulations. I could read out a long list of highly desirable regulations. We must look at the benefits of regulations as well as the costs. I am not able to provide a cost estimate, but the BCC cost assessment is somewhat wide of the mark.
Lord McNally: My Lords, would a greater deterrent to over-regulation be if Parliament had better scrutiny of regulation, not least in secondary legislation? So much of the over-regulation comes from Ministers using powers long after Parliament has passed the original Act. For example, the Licensing Bill that we passed for 24-hour licensing, has just had 198 pages of guidance notes published by the Home Office. Some of that guidance should have been closely scrutinised by Parliament, and there should be a reform that allows Parliament to look at secondary legislation much more thoroughly before Ministers use their powers under it.
Lord Bassam of Brighton: My Lords, I agree that Parliament is the place where regulations should be closely examined. Your Lordships' House does a fine job in that, through the Select Committee on Delegated Powers and Regulatory Reform. The Commons already has a regulatory reform committee. Your Lordships' House debates and considers in great detail those statutory instruments and orders that

1019
come before it. We do a good job in that respect, and I am intrigued by the noble Lord's example. I am sure that Members of your Lordships' House can think of many positive examples of regulations that they consider each and every day of the year.
Lord Peyton of Yeovil: My Lords, if the noble Lord was really satisfied with his Answer to my noble friend, I suggest that he has no grounds for it at all. It was about the most casual brush-off to an important Question that I have heard for a long time. My noble friend seeks to know whether the Government have any idea at all about the cost to themselves of their regulatory exercises, and, even more difficult, but more important, the cost to those who are obliged to obey and observe some of these absurd rules.
Lord Bassam of Brighton: My Lords, the whole purpose of the regulatory impact assessment process is to measure costs and benefits. It is not an easy task to quantify in the way in which the noble Lord suggests. In some ways, the British Chambers of Commerce report tells us that. Things that report sees as costs are actually, in some senses, savings, for example, the working time regulations, which the BCC report claims cost £11.1 billion. In fact, the assessment is that those regulations probably saved businesses somewhere in the region of £13 million. This business of costs and benefits is perhaps much more complex than the noble Lord would like to think.
Lord Glenarthur: My Lords, if, as the Minister said, these regulations are regularly scrutinised, can he say how many regulations have not been taken forward as a result of an adverse regulatory impact assessment?
Lord Bassam of Brighton: My Lords, I can give some examples of regulations that have not been taken forward as a consequence of an impact assessment. The United Kingdom was successful in convincing the European Commission to drop the proposal on emissions limits for vehicles following an RIA; after a consultation, the Government's powers to take control of financial markets following a terrorist attack were considered unworkable and would have undermined London's competitive advantage, and that regulation was dropped; and the recent changes to transfer pricing rules were heavily influenced by the regulatory impact assessment. Following a consultation on analysis and costs, it was considered that they would be disproportionate for small businesses and, as a result, small and medium-sized businesses were exempted. Those are three examples I can cite to the noble Lord.
Lord Haskel: My Lords, does my noble friend agree that many regulations today lay down not what people should or should not do, but the standards which a society such as ours should try to live up to?
Lord Bassam of Brighton: My Lords, my noble friend speaks a great deal of sense. That is exactly one of the purposes of regulation. It is also there to ensure
1020
fairness at work, better health and safety, the promotion of equality of opportunity, to tackle fraud and to improve maternity leave arrangements. Those are the kinds of matters that the vast majority of sensible regulations cover. I cannot believe that noble Lords opposite would want to argue with them.
Lord Cope of Berkeley: My Lords, given that some of the individual regulations may be desirable, does the Minister acknowledge that it is the cumulative weight of all the costs—the cost of taxation as well as the cost of regulation—that crushes small businesses? It is that cumulative weight that the Minister has refused to try even to evaluate in response to my noble friend's original Question.
Lord Bassam of Brighton: My Lords, it is perhaps worth taking a longer view on these matters. If you look at some of the independent evaluations of the regulatory regime in the United Kingdom you will discover that they believe Britain is the place in which to invest. The World Bank's Doing Business in 2004 publication named the United Kingdom among the top 10 countries, out of 130 countries, with the least regulation. That is a powerful endorsement from a major institution. While understandably concerned about regulation, I believe that noble Lords opposite too often forget its benefits.

Bovine Tuberculosis
2.53 p.m.
Lord Livsey of Talgarth Lord Livsey of Talgarth asked Her Majesty's Government:
What action they will take to eradicate bovine tuberculosis in the United Kingdom, in place of the present policy of containment of the disease.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, complete eradication of bovine TB is not likely to be achieved within the next 10 years using current control methods. The current public consultation on a revised TB strategy for Great Britain looks at what might be achieved in this timescale, potential control methods and the role of government and key stakeholders. Our priority in the shorter term is to prevent further spread of the disease.
Lord Livsey of Talgarth: My Lords, does the Minister agree that bovine TB has reached the stage where it has now become virtually impossible to contain? Is he aware that the estimated cost of compensation for infected animals is in excess of £50 million per year and that the disease is increasing by 19 per cent per annum? Does he agree with his right honourable friend Mr Nick Brown, the former Minister of Agriculture, who now believes that the disease must be eradicated'? I speak as a sponsor of the original badger protection Bill. Does the Minister agree that badgers and cattle should now be treated equally and that

1021
diseased cattle and badgers should be eradicated, on an area by area basis, so that we have healthy badgers and healthy cattle and human health is not threatened?
Lord Whitty: My Lords, the noble Lord is correct to say that this is a very difficult animal disease—it is the largest threat facing us at the moment. In fact, help in containment of the disease and compensation for it cost £74 million last year. It is possible to slow down and, it is to be hoped, reverse the spread of the disease. There were severe setbacks during the foot and mouth epidemic but the backlog has since been overcome and the measures are at least containing the spread somewhat. Nevertheless, it is a very difficult situation.
There are clearly a number of viewpoints in regard to badgers and we are currently still conducting scientific experiments to assess the effects of various forms of culling badgers in particular areas. We are about to receive the results of a review of that process which will inform future strategy.
Baroness Hayman: My Lords, has there been any progress in the search for an effective vaccine against bovine TB? Has there been any improvement in the situation that, I fear, existed when I was responsible for these matters, where every new incoming Minister was told that a vaccine was a decade away?
Lord Whitty: My Lords, we have expended some considerable effort on research into a vaccine, both for cattle and for badgers. The position is that there are various vaccines which would be appropriate for cattle but which would have side effects. However, even though there are more promising possibilities within that area, it will be a number of years—probably less than 10, but nevertheless a number of years—before we will have a general cattle vaccine. However, even though we may have an effective badger vaccine, the means of distributing it are a little hit and miss at the moment.
Baroness Byford: My Lords, is not the Minister slightly concerned about the vast increase in numbers? For example, the incidence of bovine TB in herds in the south-west of England has risen from more than 11,000 in 1994 to more than 19,000. The number of new herds infected has multiplied by three times and the total number of new incidents has multiplied by four times. I urge the Minister to push ahead because nothing is happening. What has been the response to the Central Science Laboratory's collection of badger carcasses? The project has been running since 1 June 2002: how many carcasses have been collected and how many were found to be infective?
Lord Whitty: My Lords, the noble Baroness is wrong to say that nothing is proving effective because the spread has slowed down; the backlog has been eliminated in terms of testing; and, at any given time over the past year, only 5.7 per cent of herds within the UK were affected by TB restrictions. Although there has been some spread of the disease, that indicates that
1022
one can exaggerate the problem. Nevertheless, although we wish to achieve the objective of eradicating the disease in the long term, it looks increasingly difficult to achieve within any given timescale. We are therefore concentrating on reducing the spread, restricting the amount of disease in the country and developing vaccines. To elaborate on my previous answer, we are spending £15 million a year at the moment in order to deliver an effective vaccine. As to the CSL trials, I do not have the exact numbers. I shall let the noble Baroness know. Clearly this is part of the scientific information that we are receiving in relation to our future strategy for badger culling.
Lord Hughes of Woodside: My Lords, as an innocent in these matters, and in a spirit of honest inquiry, how do we know the numbers of infected badgers? Are badgers collected and tested for the disease every three months, every six months or what? If, as suggested by the noble Lord, the disease is to be eradicated, is he suggesting that the only way to get rid of it is to eliminate every badger in the country?
Lord Whitty: My Lords, although badgers are one means of transmitting the disease, cattle movements and, to some extent, human movements may also contribute to its spread. Indeed, the spread from the south-west up the country tended to coincide with restocking following foot and mouth. So badgers are by no means the only method of transmission and there are biosecurity measures which can limit the access of badgers to herds. As far as concerns testing, the noble Baroness has already referred to one type, which is on carcasses found at the roadside and elsewhere. Within the areas where the scientific cull is taking place, the culled badgers are being continuously tested. The effects on the herds in those areas are part of the so-called Krebs trials assessment in which we are engaged. We hope that it will inform how we will deal with this process once we have the full results from the trials.

Draft European Constitution
3 p.m.
Lord Howell of Guildford Lord Howell of Guildford asked Her Majesty's Government:
What are the implications for the draft European constitution of the recent election result in Spain.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, the Government congratulate Mr Zapatero on his success in the Spanish elections and welcome his commitment to taking forward work on the constitutional treaty for the EU. The European Council agreed last week that negotiations on the new treaty should resume with a view to concluding no later than the next European Council in June. The noble Baroness, Lady Amos, will make a full Statement on this to the House later today.
Lord Howell of Guildford: My Lords, I thank the Minister for that reply. I realise that these matters will,

1023
to some degree, be covered in the Statement later. However, did the Minister note the Prime Minister's statement on Friday that, after the events in Spain, he is in favour of a quick agreement on the constitution and that the constitution is a good thing? Has she also noticed the excellent report about the European Court of Justice from this House's European Union Committee that confirmed that powers will be transferred to the Union by the draft constitution? That is contrary to what Ministers have claimed and asserted in recent months. How can the Prime Minister go on saying that that is a myth? How can he go on saying that it will be good to have this constitution when it means transferring powers to unaccountable central institutions? Can the Minister shed any light on the complete contradiction that confronts us now, quite apart from what will be said in the Statement later this afternoon?
Baroness Symons of Vernham Dean: My Lords, on the noble Lord's final point, I refer noble Lords to the 41st report of the European Union Committee, which states:
"The draft Treaty makes plain the intention that the European Union remains a union of sovereign member states … It is clear that the balance of power is going to shift from the Commission to the Member States".
That is what our own Peers have said. That is what we have discussed on a number of occasions. We have been over this issue. There may be differences of opinion but your Lordships' own peer group said something quite different.
On the other point mentioned by the noble Lord, we look forward to a swift conclusion to the negotiations. The treaty is an important step forward. It spells out that the EU is a union of nation states. We believe that it reinforces the role of your Lordships' House and another place in ensuring that the EU legislates only where it can provide added value.
Lord Tomlinson: My Lords, does my noble friend agree that conferred competences are the basis of the draft treaty? It is very clear from the draft constitutional treaty that competences not explicitly transferred to the European Union remain with member states. Therefore, there is no transfer of sovereignty to be feared in this draft treaty that is comparable to the Single European Act passed by the previous administration.
Baroness Symons of Vernham Dean: My Lords, I emphatically agree. My noble friend Lord Tomlinson has spoken with his usual admirable common sense and I remind noble Lords that my noble friend is not alone in taking that view. I do not know many noble Lords are avid listeners to the "Today" programme. I listened to it on Saturday and was very pleased to hear the noble Lord, Lord Heseltine, say:
"Why did Mrs Thatcher not have a referenda on the Single European Act?"
He went on to say that it was:
"far and away more significant in the surrender of British sovereignty than anything involved in the present constitution".
1024
It was not a noble Lord on my side of the House who said that but one of the cardinal figures on the other side of the House.
Lord Wallace of Saltaire: My Lords, we saw the eurosceptic press winding itself up to its usual hysteria at the weekend, as soon as it seemed likely that there will be an agreement by June. We have not yet heard any positive speeches by Ministers arguing the advantage to Britain of this further change in the treaty. May we anticipate that Ministers will be making the case loudly and clearly in weeks to come?
Baroness Symons of Vernham Dean: My Lords, I do not know many times I have stood at this Dispatch Box arguing the case over the draft treaty. We have said on a number of occasions that nothing in this draft treaty is agreed until everything is agreed. Noble Lords know that there is still a great deal of work to do. I shall not mislead noble Lords for a single instant about the importance and difficulty of the work that still faces the European Union on this point. The Irish Presidency's report to last week's European Council identified a number of issues that are unresolved. As noble Lords know, there are a number of issues that are enormously important to the United Kingdom Government.
Lord Willoughby de Broke: My Lords, what powers of scrutiny of the treaty will Parliament have? Will Parliament be able to change a single word of it, or will it have to be accepted or rejected whole?
Baroness Symons of Vernham Dean: My Lords, the noble Lord has been in this House long enough to know the answer to that question. Once the treaty is presented to your Lordships' House and to another place, that is the treaty on which your Lordships will decide. We cannot tinker with a treaty that has been agreed elsewhere. I think that the noble Lord really knew that when he rose to ask his question.
Lord Harrison: My Lords, is it not—
Lord Stoddart of Swindon: My Lords—
The Lord President of the Council (Baroness Amos): My Lords, I think that the House would like to hear from the noble Lord, Lord Harrison.
Lord Harrison: My Lords, is it not a fact that the proposed new constitution will enhance the powers of scrutiny of national parliaments?
Baroness Symons of Vernham Dean: My Lords, taken with my right honourable friend the Foreign Secretary's proposals on scrutiny, which I had the honour of repeating to your Lordships' House recently, there will be considerably enhanced powers of scrutiny by this House and by another place. I am sure that all noble Lords will take full advantage of that. At least, I hope that they will because in recent

1025
months when opportunities for discussion have been offered I have sometimes found noble Lords sadly absent from the meeting rooms.
Lord Renton: My Lords—

Business
3.8 p.m.
Lord Grocott: My Lords, I am sorry to spoil the fun but we are back to Business. With permission, two Statements will be repeated this afternoon. The first will be on the European Council and update us on Libyan relations and will be repeated by my noble friend the Leader of the House. The second will be on serious and organised crime and will be repeated by my noble friend Lady Scotland.

Horserace Betting and Olympic Lottery Bill
Lord Grocott: My Lords, on behalf of my noble friend Lord McIntosh of Haringey, I beg to move the Motion standing in his name on the Order Paper.
Moved, That it be an instruction to the Grand Committee to which the Horserace Betting and Olympic Lottery Bill has been committed that they consider the Bill in the following order:

Clauses 1 to 10

Schedule 1,

Clauses 11 to 13,

Schedule 2,

Clauses 14 to 16,

Schedule 3,

Clause 17 Schedule 4,

Clauses 18 to 29,

Schedule 5,

Clauses 30 to 38,

Schedule 6,

Clauses 39 to 42.—(Lord Grocott.)

On Question, Motion agreed to.

Air Traffic Emissions Reduction Bill [H.L.]
Read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

Energy Bill [H.L.]
3.10 p.m.
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 96 [Interpretation of Chapter 1 of Part 2]:
[Amendments Nos. 189 and 190 not moved.]
Clause 97 [Requirement to prepare decommissioning programmes]:
Baroness Byford Baroness Byford moved Amendment No. 190A:
Page 79, line 28, at end insert—
"( ) Where a consent is given under section 36 of the 1989 Act for the construction of a renewable energy installation in—

(a) tidal waters and parts of the sea in or adjacent to Great Britain up to the seaward limits of the territorial sea; and

(b) waters in a Renewable Energy Zone,

the Secretary of State shall, before that consent is implemented, publish a program for the decommissioning of that installation."
The noble Baroness said: My Lords, engineers, I am sure, are very capable and competent people. Considering the breadth and depth of their influence and the range of artefacts, buildings and huge constructions they have designed, it is amazing that there have been so few disasters. Unfortunately, when those disasters have occurred, they have tended to be memorable. One is aware of the Tay Bridge, the "Titanic" and the R101: all examples of cleverly engineered developments that worked perfectly well, until they came up against something unusual, not to say abnormal.
Sea-based wind turbines are comparatively new. They stand up to their turbine tips in some of the most hostile water in Europe, and they have not yet been fully tested. Bearing in mind the predictions of rising seawater levels, stronger winds, and even more frequent storms, that testing may not be long delayed. Can the Minister say if there is to be a test to determine whether the pattern of installation affects how each turbine reacts to stress? What will happen if something large and solid strikes a turbine, particularly in a storm? Will the unexpected result in environmental damage, which will need to be swiftly removed or reversed?
There is then the situation to be faced at the end of the turbine's life. This may occur at the expected time; it may occur sooner than that; it may be precipitated by new developments which render the wind turbines uneconomic. Whenever it occurs—by accident, by design, by competitive advantage—the ending of a turbine's life should be accompanied by a swift, uncluttered and complete removal of its constituent parts. These should then be recycled in whatever way is possible. None of them should be left in the sea or on the sea-bed.
We are told that the DTI is proud of the decommissioning programme which works for other sea-bound structures. This may well be so, but it apparently has not been translated into law and, if a company were to move to the other side of the world or to go into liquidation, it might be difficult to pursue the matter. In Committee the Government stressed Article 60 of the UN Convention on the Law of the Sea. This article demands the removal of defunct structures to protect navigation, and further demands that the removal process honours the rights of other states and takes care of the marine environment.
This will not content us, particularly as it may be that some of these structures will be put in areas where navigation is inadvisable, if not downright impossible. We believe that, before anyone constructs a wind turbine or a group of wind turbines—and we heard in Report last week that there may be up to 200 in one particular area—the Secretary of State should have a copy of the decommissioning plan. It may be that such a provision is already written into the Bill and that I have not seen it. If so, I apologise to the Minister. However, we believe that it should be as much a part of the construction process as the End of Life Vehicles Directive aims to be for car manufacture.
Any installations or structures which are abandoned or disused should be removed to ensure the safety of navigation, taking into account any generally accepted international standards established in this regard by the competent international organisation. I understand that it is the view of the DTI that there is already a decommissioning programme for such installations, which it says is working well. As I have suggested, however, this is not set down in statute. We believe that putting it on the face of the Bill would ensure consistent application of these duties in the future. I beg to move.
Baroness Miller of Chilthorne Domer: My Lords, we moved this amendment in Committee. While supporting the spirit of what the noble Baroness, Lady Byford, says, in this rare instance we were satisfied with the Government's answer on the particular issue.
Lord Whitty: My Lords, I thank the noble Baroness, Lady Miller, for that. The first part of what the noble Baroness, Lady Byford, said related to the construction standards and the built-in standards as against any outside shock, which would be part of the original consent.
As far as decommissioning is concerned, in serving a notice on a person to submit a decommissioning programme—which is covered by Clause 97(7)—the Secretary of State will have the power to direct a developer to consult interested parties. That involves everybody: shipping interests, conservation interests, the Environment Agency, and so forth.
The Secretary of State will also have the discretion under those powers to require a developer to make such proposals public—on a website, for example—as part of a formal consultation process. On receipt of a draft decommissioning programme, the Secretary of State will need to have regard to the general requirements for decommissioning which will be set out in those regulations, but should also have the discretion to consult further, if she so decides. Once the programme has been approved, it would be the intention that developers would provide that information on their website for public inspection. There does not appear to be a problem in relation to this, as it is already common practice for the decommissioning of oil and gas installations.
The Bill therefore already provides the powers for the Secretary of State to do what lies behind this amendment. As regards specifying more of the details—for example, if the noble Baroness suggests that the entire structure should always be taken
1028
away—it would depend on environmental factors and the science at that time. Clearly there is a decommissioning requirement at the beginning, which will be subject to consultation and, if necessary, the Secretary of State already has powers to extend that consultation to the decommissioning programme as such. I hope that the noble Baroness will, therefore, not feel it necessary to press this amendment.
Lord Jenkin of Roding: My Lords, I have listened carefully to what the noble Lord has said, but what happens if a developer, by the time you reach that point, is no longer solvent? What powers do the Government have to ensure that the provisions which the noble Lord has been describing will be written into the licence?
Lord Whitty: My Lords, they will have the powers to ensure that there is some security in place in relation to that; for example, if the company moved abroad. In the case of bankruptcy there may be a more complicated situation, particularly as we are talking of what would be a considerable time-scale. However, some security is provided.
We will not be able to deal with all such risks, but neither can we do that in relation to oil and gas installations. By and large, we have found that the present regulations and the security provided in relation to those do work, have covered the cost of decommissioning and, where necessary, destruction.
Lord Peyton of Yeovil: My Lords, to what degree does the noble Lord find his own answer satisfactory, in terms of satisfying the point raised by my noble friends?
Lord Whitty: My Lords, it is as satisfying as it can be in the circumstances. We are talking about a long time-scale. Where a decommissioning programme is approved, its technology of decommissioning will of course change over the period of time; but the costs of decommissioning are, as far as is possible, built into the security provided at that time and into the contract and consent that are set up at that time. In a normal situation, I would have considered that to be pretty substantial security.
Baroness Byford: My Lords, I am not at all happy about that response. I am very grateful to my noble friends Lord Jenkin of Roding and Lord Peyton of Yeovil, because I find the Minister's answer somewhat disappointing. He said that in the Bill there is the power to consult everybody, and that they can use their discretion and have regard to such issues. There is, however, no laid-down imperative that these things should be concluded. I am very grateful to my noble friend Lord Jenkin of Roding for asking the question that I tried to pose: what happens if somebody is insolvent?
I urge the Government to give this more thought. Before Third Reading, perhaps the Minister could write to me and place a copy of his letter in the Library, outlining the type of security that people will have to

1029
provide before receiving permission to develop these wind farms. That would be helpful. I am not at all happy with the response, and I shall return to the matter at Third Reading, but, at this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Whitty Lord Whitty moved Amendment No. 190B:
Before Clause 107, insert the following new clause—
"DISCHARGE OF RENEWABLES OBLIGATION IN GREAT BRITAIN BY PAYMENT

(1) In section 32(3) of the 1989 Act (renewables obligation), for the words from "must" to "produce" substitute "must, by each specified day, have produced".

(2) In section 32C of that Act (payment as an alternative to complying with a renewables obligation), in subsection (1) for the words from "that" onwards substitute—

"(a) that an electricity supplier may (in whole or in part) discharge its renewables obligation by making a payment to the Authority before the day specified as the day by which evidence must be produced for the purposes of section 32(3); and

(b) that an electricity supplier's renewables obligation that was not discharged in whole or in part before the day so specified is to be treated as having been discharged to the extent specified in the order where the payment for which the order provides is made to the Authority before the end of such period beginning with that day as may be specified in the order."

(3) In subsection (2) of that section (supplementary provisions of order providing for payments)—

(a) after paragraph (a) insert—

"(aa) for the sums that must be paid in order for an obligation to be treated as having been discharged to increase at a rate specified in the order for each day after the time by which evidence had to be produced for the purposes of section 32(3);"

(b) in paragraph (b), for "such sums" substitute "sums or rates falling within paragraph (a) or (aa)";

(c) in paragraph (c), after "sums" insert "or rates"; and

(d) in paragraph (d), after "sum" insert "or rate".

(4) After subsection (3) of that section insert—

"(3A) An order under section 32 may, in the case of an electricity supplier's renewables obligation in relation to which provision is made by virtue of subsection (1)(b), provide that during the period—

(a) beginning with the day specified for the production of evidence for the purposes of section 32(3), and

(b) of such duration, or ending with such day, as may be specified in the order,

no step under section 27A that is specified in the order shall be taken in respect of a contravention of that obligation (and section 27A shall have effect subject to provision made by virtue of this subsection)."

(5) After subsection (5) of that section insert—

"(6) References in this section to an electricity supplier's renewables obligation include references to its renewables obligation in relation to a particular period."

(6) The requirements of section 32(7) of the 1989 Act (consultation before making an order) may be satisfied in the case of an order containing provision made by virtue of this section by consultation that took place wholly or partly before the commencement of this section."

The noble Lord said: My Lords, Amendment No. 190B seeks to take steps towards meeting the aim of reducing the likelihood of the impact of a future shortfall in the renewables obligation. In Grand Committee the Government agreed to consider a number of amendments that sought to deal with this problem. As I said at the time, I am grateful to noble Lords for the work they have done in preparing those amendments. I hope they will recognise that some of the concerns are addressed by this government amendment. We are under no illusion, however, that this would entirely remove the risk. With a market mechanism such as the renewables obligation, there is inevitably an element of risk as companies can and do fail. We need to achieve the right balance between reducing risk of a shortfall without placing undue additional burdens on consumers.
Our amendment is very different from those which we discussed in Grand Committee, and it is somewhat complex. The amendment to Section 32(3) of the Electricity Act provides the power to reduce the length of the obligation period under the renewables obligation. As noble Lords will be aware, obligations are currently of a year's duration. Reducing the length of the obligation period reduces the size of the buy-out fund and, consequently, the effect of any shortfall.
There are a number of complex issues to be addressed when considering shorter obligation periods. These include the length of the periods; the length of time after the end of the period before suppliers had to meet their obligations; and how suppliers' obligations could be assessed for shorter periods. These are detailed issues and there will be a statutory consultation exercise before amendment to the order can be made. We intend to do that this year. The amendment would therefore provide the necessary powers to introduce shorter obligation periods, but we would be informed by the outcome of that consultation.
Before turning to the major thrust of the amendment, perhaps I should say a few words about netting off shortfalls in the buy-out fund against entitlements for recycled payments from that fund. The amendment does not address the issue of netting off in any direct sense. We have agreed to look at that, but we have been advised that we already have the necessary powers under existing legislation to enable us to make this change. I can assure your Lordships that we will be consulting later this year on amendments to the renewables obligation order to allow for netting off. However, we do not need a legislative change to do that, if indeed that is what emerges from the consultation. Indeed, it clearly will be a significant part of that consultation.
Where our suppliers aim to meet their share of the obligations for a combination of ROCs and payment to the buy-out fund, and where their payments fall short for any reason—or where they aim to meet their obligation entirely through ROCs but for any reason should not have available sufficient ROCs—the first remedy will be netting off the shortfall against their entitlement for recycled payments. That is a sensible housekeeping measure that allows a more flexible approach to small shortfalls in provision.
On late payments, the amendments to Section 32C of the Electricity Act would introduce a regime whereby suppliers who did not meet their share of the obligation in full would still be in breach of the obligation, but the breach could be remediable by making a late payment on which surcharges would be added. That builds on the order which was approved last week and which, among other things, enables Ofgem specifically to accept and disburse late payments into the new late payments fund.
The amendment allows for the surcharges to increase for every day in which the payment is late. As noble Lords will recall, in Grand Committee I expressed some concern about the possibility of suppliers suffering double jeopardy. The amendment addresses this by specifying that the renewables obligation order may provide that no penalty under Section 27A of the Act can be imposed while the late payments regime applies. That should minimise the double jeopardy problem.
The main aim of the amendment is to provide an incentive for suppliers to make any required payments into the buy-out fund on time. As noble Lords said in Grand Committee, it should be more expensive for electricity suppliers to make late payments to the buyout fund than it should be for them to borrow from their banks.
The amendment's second aim is to compensate suppliers who have provided ROCs and therefore demonstrated their commitment to increasing the contribution of renewables. It is these suppliers who suffer when there are shortfalls. It is therefore only right that these suppliers should receive compensation in the form of recycled surcharge payments from those who have paid their obligations late.
As with all measures to address the issue of supply and shortfall there will be problems in specific cases. Applying surcharges to late payments will be effective only where the defaulting company has sufficient assets to pay both its obligation commitment and the surcharges which will be imposed.
The amendment also provides for a period when late payments can be expected to come to an end. The reason for an end date is that, having specified that no enforcement action under Section 27A can be taken while the late regime is in operation, it is also important that there is a date when the late payment regime ends and the existing enforcement regime is resumed which would allow Ofgem to impose penalties for breaches of the obligation in the normal way.
As with other issues concerning the securing of the buy-out fund, there are undoubtedly a number of detailed issues that will have to be resolved by secondary legislation. That includes, for example, the level of the surcharge and the duration of the period when surcharges are payable. Those issues will be addressed in the consultation, with the aim of these obligations coming into force on 1 April 2005.
I am aware that the amendment does not address the issue of transferring liabilities with the obligation—or of keeping the obligation with the customers, to put it more simply. We agreed in Grand Committee to consider an amendment put forward by the noble Baroness, Lady Miller. We have done so. However, on further consideration, it has become clear that to take forward such an amendment would breach one of the fundamental principles of insolvency law; namely, that, generally speaking, if a company is insolvent, no unsecured creditor should be preferred at the expense of others. The amendment that the noble Baroness brought forward in Grand Committee would indeed have had the effect of taking a power to require the transfer of the failed supplier's renewable obligation commitment to the supplier who had taken on the customers.
Not only does that conflict with the general approach to insolvency, if the power were exercised; it would also mean the buy-out fund would be paid in full and therefore other creditors would have lost out. The assets of the failed company would be worth less, as the assets would now come with the ROCs commitment, and the purchasers would therefore pay commensurately less for them. Hence there would be both a direct and an indirect effect on other unsecured creditors. So while the amendment may have appeared attractive at the time, it does conflict with these other principles of insolvency. We have concluded that it cannot be right for the buy-out fund to be treated more favourably than other unsecured creditors—for example, small businesses, those who supply to the company concerned, and so on.
We have attempted to see if the same objective can be achieved by other means, but we have concluded that, again, it would have the effect of placing the fund in a preferential position compared with other creditors. We do not think that we could do that without disadvantaging those other creditors and breaching the principles of insolvency.
Although I recognise that, particularly on the last point, this does not satisfactorily address all the concerns, I do not think there is a way of so doing without running into these other problems of organisations that may be in a contractual relationship or a non-contractual relationship with the supplier. However, I think the main point of the amendment addresses some of the problems arising from the possibility of shortfall on the renewables obligation. I beg to move.
3.30 p.m.
Baroness Miller of Hendon: My Lords, I am grateful to the Minister for the points that he made in moving his amendment. He is right to say that he was aware that it would not go far enough to satisfy us, but we are always grateful for small mercies. With regard to the other matters that he brought up, we will leave those until the debate on Amendment No. 209ZA, which would be appropriate.
Lord Jenkin of Roding: My Lords, I am giving way to my noble friend who is leaving the Chamber. It has been clear from the start that the insolvency of a significant contributor to the buy-out fund will lead to a shortfall in the fund and therefore a reduction in the sum that will be available to those who wish to cash in their renewables obligation certificates. Although the measures that the noble Lord, Lord Whitty, has described to the House are aimed at trying to mitigate the implications of that, the fact remains that there will be, from time to time, as a result of an insolvency such as we faced with the company TXU, a reduction in the amount available to those entitled to benefit from payouts of the fund.
In these circumstances the answer has to be that that has to be spread among consumers generally. It is far from clear that that will be the effect of what is happening. The effect will be to the disadvantage of those who invest in renewables and buy power from renewable generators—they will get less than they would otherwise have done. So the burden of an insolvency of, for instance, an ordinary generator from coal or gas will impact not on consumers as a whole but on those who invest in renewables.
The Government have now faced one case, TXU, which had an immediate impact on the tradable value of the certificates, reducing them quite significantly and thereby disadvantaging the purpose of the renewables regime. Can the Minister give a figure for how much that deprived the renewable generators of what they would otherwise have received if TXU and the other small company had made the required payments? I am not sure that the Government have this right yet, because it impinges directly on their renewables objectives.
Lord Whitty: My Lords, the noble Lord rightly refers to the TXU situation. The full effect of that on the shortfall of the fund, which would in one sense therefore be spread across the other suppliers in the first instance, was £23.1 million and another £500,000 for the other maverick—the other small supplier. In that instance it applies to almost 20 per cent of the total fund. Clearly, in any such situation the initial effect of that will be to hit the other suppliers and adjustments will subsequently be made to their prices. It may well mean that the consumers make a contribution to it, but the noble Lord is undoubtedly right that that is inevitably the effect of the system and that the other suppliers will bear the initial brunt of such a bankruptcy and shortfall. We have to balance the requirement to secure the fund with the interests of the suppliers and their delivery of the renewables obligation and the interests of consumers.
However, these amendments will make the situation of a shortfall less likely to arise or to arise at an earlier stage when the actual substantive effect would be less. But I am not pretending that it would not be there at all and that it would not have some of the consequences to which the noble Lord referred.
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendment No. 190C:
Before Clause 107, insert the following new clause—
"ISSUE OF GREEN CERTIFICATES IN GREAT BRITAIN

(1) Section 32B of the 1989 Act (green certificates) is amended as follows.

(2) In subsection (1), for "or to an electricity supplier" substitute ", to an electricity supplier or to a Northern Ireland supplier".

(3) After that subsection insert—

"(1A) A certificate is to certify either the matters within subsection (2) or the matters within subsection (2A)."

(4) In subsection (2)—

(a) for "A certificate is to certify" substitute "The matters within this subsection are";

(b) in paragraph (a), after "an electricity supplier" insert "or to a Northern Ireland supplier".

(5) After that subsection insert—

"(2A) The matters within this subsection are—

(a) that the generating station or, in the case of a certificate issued to an electricity supplier or to a Northern Ireland supplier, a generating station specified in the certificate, has generated from renewable sources the amount of electricity stated in the certificate;

(b) that the generating station in question is not a generating station mentioned in Article 54(1) of the Energy (Northern Ireland) Order 2003; and

(c) that the electricity has been supplied to customers in Northern Ireland.

(2B) An order under section 32 must—

(a) prohibit the issue of a certificate certifying matters within subsection (2A) where the Northern Ireland authority has notified the Authority that it is not satisfied that the electricity in question has been supplied to customers in Northern Ireland; and

(b) require the revocation of such a certificate if the Northern Ireland authority so notifies the Authority at a time between the issue of the certificate and its production for the purposes of provision made by virtue of subsection (4)."

(6) In subsection (3), after "Authority" insert "that certifies matters within subsection (2)".

(7) After that subsection insert—

"(4) An order under section 32 may provide that—

(a) in such cases as may be specified in the order, and

(b) subject to such conditions as may be so specified,

an electricity supplier may (to the extent provided for in accordance with the order) discharge its renewables obligation (or its obligation in relation to a particular period) by the production to the Authority of a certificate that certifies matters within subsection (2A).

(5) References in this section to the supply of electricity to customers in Northern Ireland shall be construed in accordance with the definition of 'supply' in Article 3 of the Electricity (Northern Ireland) Order 1992."

(8) The requirements of section 32(7) of that Act (consultation before making an order) may be satisfied in the case of an order containing provision made by virtue of this section by consultation that took place wholly or partly before the commencement of this section."

The noble Lord said: My Lords, during the passage of the renewables obligation order through Parliament in 2002, the Government gave a commitment to consider the mutual recognition of renewables obligation certificates in Great Britain and Northern Ireland. There are now firm plans to implement a

1035
Northern Ireland renewables obligation on 1 April 2005. We have been working closely with Northern Ireland to set up the arrangements for the full tradability of certificates issued in Northern Ireland with those issued in Great Britain. That is important, as the relatively small size of the Northern Ireland electricity industry could not sustain a stand-alone market for ROCs.
I now turn to the detail of the clauses on this issue. Existing clauses allow the supplier to count Northern Ireland renewables obligation certificates, NIROCs—another set of letters in this alphabet soup, pronounced "nirox"—towards its Great Britain obligation. They would permit Northern Ireland electricity suppliers who have discharged their obligation in Great Britain to be eligible for recycled buyout funds, and would allow GEMA to act on behalf of the Northern Ireland authority for electricity regulation in administering the Northern Ireland obligation.
However, it has become apparent that these clauses are insufficient to deliver our policy intent of mutual recognition in full and the creation of a UK-wide market in ROCs, whether issued in Great Britain or Northern Ireland. Therefore we have tabled amendments designed to allow the completion of this policy intent.
The amendments allow GEMA to issue ROCs to suppliers in Northern Ireland for some renewables electricity supplied in Northern Ireland and for those suppliers to discharge their obligation by presentation of these ROCs. It includes the issue of ROCs relating to the generation of GB electricity supplied in Northern Ireland.
Amendment No. 191 A is a minor drafting change and does not change the substance of Clause 107. Amendment No. 191B deletes subsection (2) of Clause 107. It is no longer required in the light of the other amendments. Amendment No. 191C allows the DETI's powers to amend Part 7 of the energy order to be extended to take account of the addition of Section 32BA. Amendment No. 191D amends Clause 108 to replace a reference to persons who are electricity suppliers within the meaning of Part 7 of the energy order with the defined term "Northern Ireland suppliers".
We are keen to allow the full tradability of Great Britain ROCs and NIROCs from the outset of the introduction of the Northern Ireland obligation. These clauses will play an important part in that process and I commend them to the House. I beg to move.
On Question, amendment agreed to.
Baroness Miller of Hendon Baroness Miller of Hendon moved Amendment No. 191:
Before Clause 107, insert the following new clause—
"ELECTRICITY TO BE EXEMPTED WHEN DETERMINING ELECTRICITY SUPPLIED
In Section 32A of the 1989 Act, after subsection (1)(h), insert—
"(i) that electricity generated by a generating station producing a heating or cooling effect in association with electricity shall not count towards the amount of electricity supplied by an electricity supplier that is subject to the obligation.""
The noble Baroness said: My Lords, in Grand Committee I introduced an amendment, together with my noble friends Lady Byford and Lord Jenkin of Roding, which was supported by the noble Lord, Lord Ezra. The amendment was intended to exempt combined heat and power from the renewables obligation. A further amendment tabled by noble friend Lady Byford, the noble Lord, Lord Ezra, and me required the Secretary of State to draw up a strategy for the encouragement of the development of CHP, and another amendment tabled by the noble Baroness, Lady Miller of Chilthorne Domer, further added to our proposal.
Although these amendments—and especially the one requiring the Government to produce a timetable—were probing amendments, the response from the Government was disappointing to say the least. I will deal with that response in a few moments. However, in conjunction with my noble friend Lady Byford, the noble Lord, Lord Ezra, and the noble Baroness, Lady Miller of Chilthorne Domer, and—I stress this point—in consultation with the Combined Heat and Power Association, the present amendment has been tabled. It considerably modifies our original proposal and goes a substantial way towards meeting the Government's objections. We did not accept those objections as valid, but nevertheless this amendment goes some way to meeting them.
I stress at once that the amendment does not classify CHP as renewable energy. However, CHP is a highly efficient means of reducing the United Kingdom's carbon emissions, strengthening our security of supply and improving the competitiveness of important sections of the British economy. CHP plants have much higher efficiencies—around 70 to 80 per cent—than conventional power stations, which operate at efficiencies of a little more than 40 per cent. It is CHP's efficiency gains that significantly lower the United Kingdom's carbon emissions, as I shall mention again later.
The industry created a target to secure the much wider use of CHP when Michael Howard led the United Kingdom negotiations at the 1992 Earth Summit. The industry increased the target to achieve 5 gigawatts of CHP by 2000. When in opposition, the present Government committed themselves to double that target to 10 gigawatts by 2010. Last year's White Paper confirmed that target. The Government are woefully off course on achieving the targets set by the former government, let alone the more ambitious target that they set for themselves for CHP. Cambridge Econometrics recently reported to the Government that only between 7 and 8 gigawatts of capacity would be in place by 2010. That is 20 per cent less than what the Government say we shall need.
The noble Lord, Lord Whitty, is the chief Minister responsible for CHP, and is fully aware of three indisputable facts. First, the new electricity trading arrangements—NETA—caused some CHP plant output to drop by 60 per cent almost overnight. Secondly, CHP capacity actually fell last year, for the first time since 1991. Thirdly, many existing CHP plants ran at only 50 per cent of their capacity.
CHP is the primary carbon-reducing technology that supports British industry. It reduces energy costs and has a lower environmental impact. It thus makes our industry more competitive, and large-process plants such as refineries and chemical plants require more heat than power. That means that a CHP project could sell its excess power and, apart from the financial benefits, would add to the solution of our problem with security of supply. However, the Government's only support so far for CHP has been to exempt large industrial CHP plant from the climate change levy, but that took four years—from the Chancellor's announcement in 2000 until this January—to come fully into operation. That exemption's continued existence is not guaranteed beyond 2010, so there is no incentive for a new CHP project to be started today. It would take four years to come on stream, so it is possible to project only a minimal commercial value.
A consequence of the Utilities Act—I hope that it was one of the unintended consequences—was to burden CHP plant with the cost of helping to meet the Government's overall renewable energy target. The Government's target for CHP of 10 gigawatts of electricity will cost the industry more than £60 million per annum by 2010. The extension of the renewables obligation to 2015 will further increase that burden. As I have said, what the Government have done, in effect by imposing a tax on CHP, is to make it cross-subsidise other low-carbon technology.
In Committee on the Sustainable Energy Act 2003 in the other place, the Energy Minister said that the Government would,
"consider proposals for an appropriate means of promoting CHP in line with our commitments in the energy White Paper".—[Official Report, Commons Standing Committee C, 24/6/03; col. 69.]
We all know that the Government laboured long and hard in creating their White Paper, but they produced a veritable mouse that contains much more aspiration than inspiration. That is why, even as recently as Grand Committee, the noble Lord, Lord Whitty, said:
"I readily accept that CHP can make a significant contribution towards energy management and reducing carbons".
He said that, at present, the Government were not on target to meet their objectives for CHP, and that,
"one could argue that CHP requires additional support to meet even the 2010 target".—[Official Report, 10/2/04; col. GC 528.]
From the words of the well respected Minister, one could argue that CHP needs additional support. We on these Benches agree totally with him.
What are the Government doing, however? They are refusing to treat CHP as carbon-efficient, and are taxing it as though it were as bad as the worst fossil-fuel power source operating. As I have pointed out, that has had disastrous effects on the whole industry and the potential of developing and exporting the new technology. It is also costing jobs, in an area where we should be thriving.
We have had a White Paper and extensive consultation on the whole subject of energy. We have passed the Sustainable Energy Act, of which CHP could have been an element. We have this massive Bill before Parliament, but what did the Minister tell us in Committee? He said that,
"we shall need to introduce a further CHP strategy very shortly".
In the Government's annual report of 2003, they promised a CHP strategy to be published by the end of the financial year. The end of the financial year is 5 April, less than two weeks away. I am certain therefore that the Government have now made up their mind. I hope that the Minister would not disclose some vital state secret if he were to give us today a hint of what the decision might be. Why are even this Government vacillating over such an exceptionally important plank of their own energy policy? The answer may be found by reading between the lines of the fine print—I hope that noble Lords will forgive the mixed metaphor—of the Minister's speech in Grand Committee, when he said:
"We need to ensure that the renewables target is met and not undermined by anything we do for CHP, which should not be considered in isolation".—[Official Report, 10/2/04; col. GC 528.]
There we have it—a typical piece of creative bookkeeping.
I said at the beginning of my remarks that it is CHP's efficiency gains that significantly lower United Kingdom emissions. By treating CHP in the same way as the dirtiest coal-fired station, and then by lumping the two together in the same equation, the efficiency of one immediately reduces the liability of the other. What were the Minister's other arguments against—I use the word advisedly—the promotion of CHP, despite the lip service that he paid to it? He argued that including CHP in the renewables obligation was contrary to government policy, that measures to support CHP would weaken the commitment to renewables, and that CHP was largely based on fossil fuels and so merited less support anyway.
It will not surprise noble Lords that the CHP industry did not take that attack on it lying down. It commissioned the leading energy consultancy, ILEX, whose credentials are that it was recently commissioned by the DTI itself on work concerning the renewables obligation. It found that: there will be a greater reduction in UK carbon emissions by excluding CHP from the base cost of the renewables obligation; the cost to the Government is negligible, and the proposal is easy to administer; the cost of reducing carbon in such a way is relatively cheap; the proposal will result in significant increases in output from existing CHP plant and in new development; and, contrary to what the Minister implied, there would be no adverse impact on renewable investment or ROC prices.
Those findings have been duly presented to the DTI and Defra, the two departments that have the conduct of the Bill. Now that they have had the opportunity to consider them prior to today's sitting, I hope that they will agree that removing the cost burden from CHP is a relatively simple matter. No additional agencies or

1039
instruments would need to be created, because an effective audit trail for CHP already exists. There will be no additional cost to taxpayers, consumers or the Government.
To be fair, as I hope that I always am, I have to inform your Lordships that this modest amendment does not enjoy unequivocal support from all parts of the generating industry. In an early brief, I was originally given to understand that the major companies driving forward the development of the United Kingdom renewables market, in collaboration with the Government, supported the amendment. However, in a brief that I and other noble Lords, as well as the Government—presumably—received after the amendment was tabled, I learned that although the Renewable Power Association agrees that CHP needs help—and that concession should be noted—it argues, nevertheless, that the amendment would damage the prospects of renewables.
I shall not take up your Lordships' time by repeating the RPA's arguments in detail because your Lordships probably received them directly. However, it is my duty to respond as briefly as I can to its points. Its main argument is that the renewables obligation would instantly be reduced by the amount of electricity generated by CHP. In other words, it is argued—as I previously wrote before I received the RPA brief—that the other generators would have to work much harder to reach their targets. However, it is open to the Government to reduce any disadvantage that other renewables might incur by a few strokes of their pen, either by increasing the RO percentage or by increasing the base to which the percentage would be applied. Similarly, the Government could cap the amount of good quality CHP exports eligible to receive the exemption, although—it is to be hoped—that would still be at a realistic level that would maintain the economics of CHP.
I believe that all parties in both Houses of Parliament, whatever their differences may be on the detail, are united in support of the Bill's general objectives. That includes support on these Benches for the means to reduce the United Kingdom's dependence on a high percentage of foreign fuel. It is not right that one trade association should be attacking another, when their common objective should be to protect Britain from the consequences of looming power shortages. I stress that noble Lords on these Benches do not support CHP at the expense of renewables. We unequivocally support both in all their forms, as long as they are viable, and I sincerely trust that the Government do, too. I beg to move.
3.45 p.m.
Lord Ezra: My Lords, I support the amendment, which was moved so ably by the noble Baroness, Lady Miller of Hendon. This issue emerged in Grand Committee, much was said about it and the noble Baroness has fully answered the critique that has been made that it could be costly to the renewables sector.
1040
In fact, as the ILEX report showed in great detail, that would not be the case if the proposals in the amendment were adopted. What is worrying is that although the Government and, indeed, everyone else fully accept the contribution that combined heat and power could make to the reduction in carbon emissions, so far those objectives have not been achieved. They are not yet at the target level that was set for the year 2000 and the prospect, on the basis of present policies, of achieving the 2010 target of 10 gigawatts remain remote.
CHP capacity for the past three years has remained unchanged while generation from that capacity has fallen. So urgent action is required if the Government are to do what they set out in the energy White Paper regarding CHP. We realise that the Government will publish a further report on CHP before long, but we do not know when that will be and we do not know what positive steps will be proposed.
We propose one measure that will immediately offer some alleviation and change the current feeling within the CHP sector. We strongly recommend that the Government adopt our amendment. I was involved in the lengthy debate on the Utilities Bill and it was certainly not our opinion that, arising out of that Bill, CHP would be discriminated against in the way proposed by the Government and treated on the same level—as the noble Baroness argued—as other sectors that emit far more CO2. There is not the slightest doubt on these Benches that this is a desirable amendment which goes some way to start a move towards more CHP operations by, at least, making fuller use of existing capacity and introducing additional capacity that would be required if the Government's objectives are to be achieved.
Lord Jenkin of Roding: My Lords, I, too, support the amendment. I do so following the noble Lord, Lord Ezra, who for some years was one of the few voices in this Chamber who consistently argued for the expansion of combined heat and power. My noble friend Lady Miller of Hendon has made a compelling case, to which I hope the Minister will listen.
I shall make one central point. When the White Paper was published last year it was widely interpreted as having set out a new approach to a low carbon energy policy. Indeed, in paragraph 1.18 of that White Paper, under the heading:
"The goals of our new energy policy",
the first goal, printed in bold, was,
"to put ourselves on a path to cut the UK's carbon dioxide emissions—the main contributor to global warming—by some 60 per cent by about 2050".
When the Royal Commission published that figure there was much scepticism, but that target has become a central plank of the Government's aspirations—I use that word because we recognise that they cannot be more than that at this stage. There it is—the first goal is to reduce CO2 emissions.

1041
The next page contains the proposals for how that will be achieved. Under the heading,
"How we will achieve our goals"—
that is, the goal of reducing carbon emissions—paragraph 1.29 states:
"We believe it is possible to achieve this goal by reducing the amount of energy we consume, together with"—
these are the key words—
"a substantial increase in renewable energy".
So, there is the goal—the end, as it were—of reducing carbon dioxide, and the means: the increase in renewables.
As my noble friend Lady Miller said, sight has been lost of the ends and the means have now become the primary target. They have become the goal. CHP is a technology that can achieve a marked increase in energy efficiency, by either reducing emissions for the same amount of output or increasing output with no increase in emissions; but receives no support. I shall weary the House by quoting, yet again, the words of the noble Lord, Lord Whitty, in Grand Committee:
"We need to ensure that the renewables target is met and not undermined by anything that we do to CHP".—[Official Report, 10/2/04; col. GC 528.]
That position stands the policy on its head. The means have become the ends—and there are other such examples that will be considered later—where a perfectly satisfactory and proven way of reducing carbon dioxide and the CO2 equivalent is being denied the help that it deserves in order to save the Government's face as they head towards their targets for wind power.
What has happened? The CHPA made an interesting statement that capacity in CHP fell last year for the first time since 1991. That sits alongside an announcement from Defra, the noble Lord's own department, last week on 25 March, which said:
"Statistics published today by Defra show that carbon dioxide emissions increased by 1.5 per cent during 2003".
What could be madder than that? My noble friend called it "creative book keeping", but, with great respect to her, it is much worse than that: it is standing the policy on its head, confusing the ends with the means and ensuring that the Government will not achieve their first goal, which I quoted from the White Paper; namely, the reduction of CO2.
It is nonsense to refuse to support CHP in order not to blunt the incentive for windmills, but that is what the Government are doing and why I support my noble friend's amendment. I hope that she will press it to a Division.
4 p.m.
Lord Peyton of Yeovil: My Lords, I too support my noble friend's amendment. I admire her persistence, eloquence and vigour and the way that she has sustained those qualities having gone through the anaesthetic experience of proceedings in Grand Committee in the Moses Room. I do not know how your Lordships can summon the patience to go
1042
through that dreary business when the Committee's teeth are removed and you are told at the beginning that you have no power to amend the Bill but that you must go through it and discuss it and take what pleasure, enjoyment or satisfaction you can from government explanations.
I have some sympathy with the noble Lord, Lord Whitty. I cannot understand why he instead of the Department of Trade and Industry has been saddled with this Bill. I thought that energy was subject to the DTI. I regarded the White Paper as a product of the DTI and I cannot for the life of me understand why the DTI is not here to answer for it. The explanation that occurs to me is the natural inborn coyness of the Secretary of State, who probably knows awfully little about electricity and does not care much about security of supply; perhaps she will be out of office when the penalties arrive.
The Government, particularly the DTI, have a sort of yearning. In case the Minister is under any misapprehension, I must tell him that my admiration, respect and regard for the DTI is extremely limited. It seems to suffer from the ambition of wishing to tell people what to do while at the same time taking little responsibility.
The Government and Ofgem have materially and substantially reorganised or been responsible for the reorganisation of the electricity market in our country. In the course of doing so they have reshaped it. The investment target of 10 gigawatts by 2010, which they accepted in their White Paper, has been rendered impossible to achieve. In the past two years, my understanding is that 2.7 million gigawatts have been put on hold, with the result that that target has become virtually unattainable, so the future security of supply has been jeopardised.
I do not understand how the Government have allowed such an important subject to be buried in the DTI, which is responsible for many other matters. As a result, they have put this vital matter into jeopardy. I hope that the Government will accept the powerful arguments of my noble friends Lady Miller and Lord Jenkin and the noble Lord, Lord Ezra, so that they show at least a gleam of sense in wishing to go in the direction which they stated in the White Paper.
Baroness Miller of Chilthorne Domer: My Lords, I am pleased to have my name to the amendment. Nothing is more important than cutting our carbon dioxide emissions. The Government's chief scientist says how important that is in counteracting climate change, which he views as the greatest threat.
We have heard that not only have the Government failed in their target but carbon emissions have increased by 1.5 per cent. In response, the Environment Minister Mr Elliot Morley said on Thursday that the Government would be reviewing UK climate change programme measures and policies to try to introduce new measures

1043
and policies so that climate change might be tackled more effectively. By writing this amendment into the Bill we will help the Government to do just that.
Lord Whitty: My Lords, I am grateful for some important speeches, not least from the noble Baroness, Lady Miller of Hendon, and the noble Lord, Lord Ezra, who has long been an advocate on the matter. I turn first to the intervention of the noble Lord, Lord Peyton, which was also enlightening but shows us that there is a misapprehension on the part of the Opposition Benches—he is not the only one to suggest it.
The energy White Paper, the Bill and our energy policies as a whole are a product of the whole Government. Nothing is buried, as he put it, in one department. We are all party to these policies and that is why we present them across government as a whole: the DTI, Defra, the Treasury and everyone else is engaged in their delivery.
CHP is an area that can clearly make major contributions towards a lower carbon economy. That is why the Government have set a target for it and supported it in a number of ways set out in the energy White Paper and since, fiscally in terms of support and the Government's commitment for their own estate and so forth.
The achievement of the Government's strategy on energy requires us to deliver on CHP and renewables. We cannot trade one against the other. The noble Lord, Lord Jenkin, argues that we should not maintain the renewables target at the expense of CHP and accuses us of doing the opposite. But both are necessary.
Lord Jenkin of Roding: My Lords, I do not know whether the noble Lord was asleep at that point, because I never said anything of the sort. I was quoting him as saying that he could not give help to CHP because he saw it as a threat to renewables.
Lord Whitty: My Lords, exactly. The logical conclusion is that the noble Lord would prefer us to adopt a policy in relation to CHP that undermined the target on renewables. I am saying to the House that we should do both. We have a target to meet our objectives for renewables and a target to meet our objectives in relation to CHP. I agree to a large extent with the noble Baroness, Lady Miller, that we need to redouble our efforts in support of CHP and that we need to ensure that we deliver the target of 10 gigawatts of CHP by 2010—not to the extent that she implied, but we are short of meeting that target at the moment. She is undoubtedly right that there has been some serious setback to the momentum on CHP, but the latest estimates suggest that even on current policies and current price matters we would be delivering about 8.5 gigawatts of CHP by 2010 and therefore the gap is achievable. Provided that we can focus support for CHP, we intend to deliver 10GW of CHP in line with our target.
1044
CHP is not, as a result of the renewables obligation, discriminated against. Every form of power generation must meet the renewables obligation, whether it is coal, oil, gas nuclear or CHP. It is not discriminated against.
The noble Baroness has half an argument on the initial stages of the NETA proceedings, which probably disadvantaged CHP to some extent in terms of the supplier to the National Grid. However, that has been rectified by Ofgem so, that apparent discrimination has been removed.
The noble Baroness is wrong to say that the ILEX report says that it would have no effect on the ROCs' structure. In fact, it says that the effect on ROCs prices, and therefore the proper operation of the market in that area, will be about 5 per cent. We consider that it might be somewhat larger, but 5 per cent is a significant effect on the ROCs market. Indeed, it is almost the equivalent effect created by the TXU shortfall, to which the noble Lord, Lord Jenkin, rightly drew our attention on the previous amendment. If it has an effect of that magnitude, surely we should take it seriously. The fact of the matter is that CHP, although a hugely more efficient form of fossil fuel, is a fossil fuel. It is therefore odd to take it in a way that undermines the achievement of the renewables obligation.
In closing, the noble Baroness referred to the views of another trade association. The only way in which the amendment could stack up would be to increase the size of the renewables obligation to compensate for the effect which the removal of the CHP from that obligation would cause. That is not in the amendment before us. It is more logical, but it would impose an effect on the rest of consumers and industry. The noble Baroness also referred to the cost of achieving the renewables obligation more generally.
The noble Baroness, Lady Miller, the noble Lord, Lord Ezra, and others referred to the strategy on CHP. We will bring together into the CHP strategy all the measures in support of CHP through the fiscal process and any new measures. I can assure the noble Lord, Lord Ezra, that it will slip a little from 1 April, but will be in place immediately after Easter. Therefore, the degree of government support for CHP will be clear.
While I am deeply sympathetic with the need to support CHP, the amendment has serious problems which undermine the renewables obligation and thereby the achievement of the carbons target. We should not be favouring one means of achieving—and we are talking about means—by acting detrimentally towards another. We need CHP and renewables in order to meet what we have set out in the energy White Paper. This amendment would distort that achievement and does not of itself contain rectifying measures to offset that negative effect. I therefore consider that we should not go down this road.
Baroness Miller of Hendon: My Lords, I listened carefully to what the Minister said. He said that in part he agreed with me but he clearly did not agree with me enough. I therefore intend to test the opinion of the House.
4.13 p.m.
On Question, Whether the said amendment (No. 191) shall be agreed to?
Their Lordships divided: Contents, 138; Not-Contents, 118.

Division No. 1

CONTENTS

Addington, L.

Kimball, L.

Allenby of Megiddo, V.

Kingsland, L.

Ampthill, L.

Laird, L.

Anelay of St Johns, B.

Lester of Herne Hill, L.

Astor of Hever, L.

Livsey of Talgarth, L.

Attlee, E.

Lucas, L.

Avebury, L.

Luke, L.

Baker of Dorking, L.

Lyell, L.

Barker, B.

McColl of Dulwich, L.

Bell, L.

Maclennan of Rogart, L.

Biffen, L.

McNally, L.

Blackwell, L.

Maddock, B.

Blaker, L.

Mar and Kellie, E.

Blatch, B.

Marlesford, L.

Bradshaw, L.

Masham of Ilton, B.

Bridgeman, V.

Mayhew of Twysden, L.

Brightman, L.

Miller of Chilthorne Domer, B.

Brooke of Sutton Mandeville, L.

Miller of Hendon, B.

Brougham and Vaux, L.

Molyneaux of Killead, L.

Byford, B.

Monro of Langholm, L.

Campbell of Alloway, L.

Mowbray and Stourton, L.

Carnegy of Lour, B.

Murton of Lindisfarne, L.

Chalfont, L.

Naseby, L.

Chalker of Wallasey, B.

Noakes, B.

Chorley, L.

Northover, B.

Cope of Berkeley, L. [Teller]

Norton of Louth, L.

Craigavon, V.

Oakeshott of Seagrove Bay, L.

Crickhowell, L.

Palmer, L.

Deedes, L.

Palumbo, L.

Dholakia, L.

Pearson of Rannoch, L.

Dixon-Smith, L.

Peyton of Yeovil, L.

Eccles of Moulton, B.

Phillips of Sudbury, L.

Eden of Winton, L.

Pilkington of Oxenford, L.

Elles, B.

Prior, L.

Erroll, E.

Razzall, L.

Ezra, L.

Redesdale, L.

Falkland, V.

Rennard, L.

Fearn, L.

Renton, L.

Fookes, B.

Rodgers of Quarry Bank, L.

Fowler, L.

Roper, L.

Freeman, L.

Rotherwick, L.

Geddes, L.

Russell, E.

Gilmour of Craigmillar, L.

Russell-Johnston, L.

Glenarthur, L.

St John of Fawsley, L.

Glentoran, L.

Saltoun of Abernethy, Ly.

Goodhart, L.

Sandberg, L.

Gray of Contin, L.

Scott of Needham Market, B.

Greenway, L.

Seccombe, B. [Teller]

Hamwee, B.

Sharples, B.

Hanham, B.

Shaw of Northstead, L.

Harris of Richmond, B.

Shutt of Greetland, L.

Hayhoe, L.

Skelmersdale, L.

Higgins, L.

Smith of Clifton, L.

Hodgson of Astley Abbotts, L.

Stevens of Ludgate, L.

Home, E.

Stoddart of Swindon, L.

Howe, E.

Strathclyde, L.

Howe of Aberavon, L.

Swinfen, L.

Howell of Guildford, L.

Taverne, L.

Howie of Troon, L.

Thatcher, B.

Hunt of Wirral, L.

Thomas of Gresford, L.

Jenkin of Roding, L.

Thomas of Walliswood, B.

Jopling, L.

Thomson of Monifieth, L.

1046

Tombs, L.

Wallace of Saltaire, L.

Tope, L.

Walmsley, B.

Trefgarne, L.

Walpole, L.

Trumpington, B.

Weatherill, L.

Waddington, L.

Williams of Crosby, B.

Wade of Chorlton, L.

Willoughby de Broke, L.

Wakeham, L.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Jones, L.

Ahmed, L.

Kilclooney, L.

Alli, L.

King of West Bromwich, L.

Amos, B. (The Lord President of the Council.)

Layard, L.

Lea of Crondall, L.

Andrews, B.

Levy, L.

Archer of Sandwell, L.

Lipsey, L.

Ashton of Upholland, B.

Lockwood, B.

Barnett, L.

Lofthouse of Pontefract, L.

Bassam of Brighton, L.

Macdonald of Tradeston, L.

Bernstein of Craigweil, L.

McIntosh of Hudnall, B.

Billingham, B.

MacKenzie of Culkein, L.

Blackstone, B.

Mackenzie of Framwellgate, L.

Boothroyd, B.

Marsh, L.

Borrie, L.

Mason of Barnsley, L.

Brooke of Alverthorpe, L.

Massey of Darwen, B.

Brookman, L.

Burlison, L.

Merlyn-Rees, L.

Campbell-Savours, L.

Mitchell, L.

Carter, L.

Morgan, L.

Christopher, L.

Morris of Manchester, L.

Clark of Windermere, L.

Nicol, B.

Clarke of Hampstead, L.

Orme, L.

Clinton-Davis, L.

Ouseley, L.

Cohen of Pimlico, B.

Parekh, L.

Corbett of Castle Vale, L.

Patel of Blackburn, L.

David, B.

Pendry, L.

Davies of Coity, L.

Pitkeathley, B.

Davies of Oldham, L. [Teller]

Plant of Highfield, L.

Dean of Thornton-le-Fylde, B.

Ponsonby of Shulbrede, L.

Desai, L.

Prashar, B.

Dixon, L.

Prys-Davies, L.

Elder, L.

Radice, L.

Evans of Parkside, L.

Ramsay of Cartvale, B.

Evans of Temple Guiting, L.

Randall of St. Budeaux, L.

Falconer of Thoroton, L. (Lord Chancellor)

Rendell of Babergh, B.

Richard, L.

Farrington of Ribbleton, B.

Rooker, L.

Filkin, L.

Sainsbury of Turville, L.

Fitt, L.

St. John of Bletso, L.

Fyfe of Fairfield, L.

Scotland of Asthal, B.

Gale, B.

Simon, V.

Gibson of Market Rasen, B.

Slim, V.

Golding, B.

Smith of Gilmorehill, B.

Gordon of Strathblane, L.

Stern, B.

Goudie, B.

Stone of Blackheath, L.

Gould of Potternewton, B.

Gregson, L.

Strabolgi, L.

Grenfell, L.

Symons of Vernham Dean, B.

Grocott, L. [Teller]

Taylor of Blackburn, L.

Harrison, L.

Temple-Morris, L.

Haskel, L.

Thornton, B.

Hayman, B.

Tomlinson, L.

Hogg of Cumbernauld, L.

Triesman, L.

Hollis of Heigham, B.

Warner, L.

Howells of St. Davids, B.

Wedderburn of Charlton, L.

Hoyle, L.

Whitaker, B.

Hughes of Woodside, L.

Whitty, L.

Hunt of Kings Heath, L.

Williams of Elvel, L.

Irvine of Lairg, L.

Winston, L.

Jay of Paddington, B.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.

European Council and Libya
4.23 p.m.
Baroness Amos: My Lords, with permission, I shall now repeat a Statement made in another place by my right honourable friend the Prime Minister. The Statement is as follows:
"With permission, Mr Speaker, I shall make a Statement about the European Council which I attended in Brussels on 25 and 26 March. I should like to pay tribute to the excellent organisation and chairmanship of the Irish presidency and of the Taoiseach, Bertie Ahern, in particular.
"We met in the aftermath of the bomb attacks in Spain. We expressed our sympathy and solidarity with the Government and people of Spain. Co-operation in the fight against terrorism in Europe was stepped up after September 11 with the establishment of joint investigation teams, the freezing of terrorists' assets, the establishment of the European arrest warrant and a number of measures of co-operation with the United States and other countries. But we recognise that not nearly enough has been done especially on implementation of agreements, the provision of information to Europol and co-operation with third countries.
"At this European Council we have set deadlines for the implementation of EU measures. We set out further measures on counter-terrorist legislation in all member states, confiscation of crime-related proceeds, creating a comprehensive database of forensic material, strengthening border controls, better intelligence sharing, transport security and a number of other matters listed in the text that we adopted at the Council. We have appointed a single person to co-ordinate the Union's work in this area and are establishing a new counter-terrorism intelligence assessment cell, so that we will have the means of assessing intelligence, combined with effective police co-operation through Europol and co-operation among prosecuting authorities via Eurojust.
"I briefed my colleagues in the European Council on my visit earlier, on 25 March, to Libya. I made clear to Colonel Gaddafi our support for Libya's decision to abandon voluntarily its WMD programmes, and our welcome for the full and transparent co-operation which Libya had subsequently given.
"Libya's actions in the past have caused grief and pain to many individuals and families, which we cannot forget. I raised Lockerbie and WPC Fletcher with Colonel Gaddafi, stressing the importance of the forthcoming visit to Libya by the Metropolitan Police team investigating WPC Fletcher's murder. We shall stay in close touch with the families in both cases. But if change in Libya is real, we should support it. It is the beginning of a process and we should take it step by step. But I believe that a Libya free of WMD and with no links to terrorism is overwhelmingly in our interest and that it is right to pursue this dialogue, and we will.
1048
"What has happened over the last few weeks has reinforced the determination of all member Governments in Europe to equip a Union of 25 member states to be able to operate efficiently and effectively. As honourable Members will see from the conclusions, the Council took substantive decisions on growth, employment, research and development and on how to equip our citizens with the education, training and access to lifelong learning which are vital if Europe is to maintain its competitive edge.
"But it is already clear that in a Europe of 25 and then of 28, decision-making cannot remain as it is. The result would be paralysis of Europe and an inability to make progress in vital areas of co-operation that are emphatically in the British national interest. We need to be better able to set priorities, pass simpler laws, and have a completely different system for the day-to-day running of the European Union. That includes governments setting the strategic direction in the European Council with a full-time chairman of the Council, chosen by governments, to take forward their programme.
"In almost every field—job creation, sustainable development, the environment and the fight against terrorism, illegal immigration and organised crime—we need to work together as one in the European Union. That is what the constitutional treaty is about, and we shall seek to negotiate it to a successful conclusion under the Irish presidency. Britain will ensure that we keep control over our tax and social security systems, over the future of the UK abatement, over our own criminal justice system and over defence and foreign policy, as we have said we would. Provided that we do so, this treaty is right for Europe and right for Britain because, in today's world, particularly after the events of recent months, Europe needs to work more effectively to protect and enhance the lives of our people.
"The European Council gave its continued strong support to the efforts of the UN Secretary-General to bring about a comprehensive settlement of the Cyprus problem. This is a historic opportunity to end the long division of the island and we urge all the parties to seize it.
"The European Council welcomed the recent positive political developments in Iraq and the UN Secretary-General's acceptance of the Iraqi Governing Council's invitation to help. It condemned, however, the recent terrorist attacks in Iraq, which have had as their aim maximising civilian casualties. The European Council also expressed grave concern over the situation in the Middle East.
"The European Council strongly condemned the recent ethnically motivated violence in Kosovo. All leaders locally must now take responsibility for the situation to ensure there is no repetition.
"By negotiating within the European Union we have succeeded in establishing common policies to deal with terrorism, crime and illegal immigration. We are taking forward a programme of economic reform, long

1049
overdue. We have a common European stance to deal with the challenge of climate change. Last year in the context of the WTO negotiations we achieved the biggest ever reform of the common agricultural policy; not enough but a substantial step forward. We are developing a common foreign and security policy to tackle the common global threats we face. Our security, stability and prosperity depend upon our successful membership of the European Union. Under this Government, it will not be put at risk".
My Lords, that concludes the Statement.
4.31 p.m.
Lord Strathclyde: My Lords, I thank the noble Baroness the Leader of the House for repeating this important Statement. I join her in again expressing the sense of outrage that the whole House feels about the barbaric atrocity in Madrid and in associating this House with the sentiments voiced by all European leaders.
It is good to voice abhorrence of terrorism. Words help. But it is also necessary to act. The noble Baroness knows that we on these Benches strongly support the stand taken by the Prime Minister against terrorism. He was right to associate himself so closely with President Bush after 11 September; right to support international action in Afghanistan; and right to take a lead in the removal of Saddam Hussein. So long as he holds firm, he can expect our support.
But when will we see similar firmness on these issues in every European capital? The Prime Minister has forged a strong alliance with Mr Berlusconi—they are clearly of a like mind on these issues. But did President Chirac and Herr Schroeder give any new commitments to join actively in the war on terrorism? And, while understanding the agony of Spain, are the Government worried over what many saw as a signal of weakness to Al'Qaeda from the new Spanish Government? Spain is now talking about removing troops from Iraq: did any other EU countries offer to send troops in their place?
We note the undertaking over closer European cooperation on security. But, given frankly varying standards of security in different member states, will the noble Baroness assure the House that no information will be shared with any other country that might jeopardise our security or that of our Armed Forces, or which might imperil the crucial security co-operation between this country and the United States?
What was the reaction in Brussels to the Prime Minster's report on his summit with Mr Gaddafi? Did the Prime Minister in his meeting with Mr Gaddafi persuade Libya to break ties with Mr Mugabe and the vicious Government of Zimbabwe? Were any concrete new steps pressed by the Prime Minister against Mugabe and his henchmen? Were any agreed? Was there a discussion of the role of Libya in the civil wars in west Africa, which are a matter of such great humanitarian concern to all in the EU?
Not long ago the House was told that the prospect of a new constitution for the EU had receded. Now it seems Paris and Berlin are back in the driving seat.
1050
The Prime Minister himself once agreed that there was no need for a constitution. At the start of this process he said the British way for Europe was not a,
"single, legally binding document called a Constitution".
Why does he now support a constitution which would give the EU many of the attributes and trappings of statehood—a new president, a foreign minister and a new legal status—and one in which, as our EU Committee said in the conclusion of its most recent report on the future role of the European Court of Justice:
"In a number of respects the powers of the Union would be increased"?
At Question Time it appeared that the noble Baroness, Lady Symons, had not read the report. I hope that the noble Baroness the Leader of the House will have an opportunity to study its conclusions in due course.
The Prime Minister once agreed that the constitution was not essential for enlargement. In December he said:
"This is not constitutionally necessary in order for enlargement to take place".
Now he says that it is essential for enlargement. What made him change his mind?
Can the noble Baroness give any indication of when the next draft of the constitution will be published, and an indication of the timings? Assuming that the constitution is signed in June, when will the Government seek to ratify it—presumably in the form of legislation? Will they hope to publish that Bill of ratification soon after the June summit?
The events preceding this summit point to the acute dangers that stalk the international scene. For us on this side of the House they underline the crucial importance of this country's links with the United States, and make all the intrigues over a new EU constitution look insular and hopelessly short of the call of the hour.
What Europe surely needs now is a unity and common resolve against real and imminent external dangers. Should not every nation of Europe first help defeat terrorism, before courting further divisions over ill conceived new treaties? I hope that the Prime Minister will continue to hold out for that commonsense order of priorities. But if he does not succeed—or if, red lines or no, he turns into an advocate of a new EU constitution—then surely the Leader of the House must agree that the Prime Minister must carry the British people with him.
Several other governments have already given their citizens a promise of a referendum. The constitution will decide how this country is governed. This is a Government who have already held 34 referendums so far, but on this historic issue the Prime Minister refuses the British people a say.
Along with many Labour Members of Parliament such as Frank Field and Gisela Stuart, I believe that any proposal for a new constitution must be put to the British people. At least seven other member states of the EU are giving their people a say; the British people must have a say too. Why did the Prime Minister not

1051
tell his colleagues in Brussels what others of them told him: that his country could not ratify a new EU constitution without a test of the settled will of the British people in a referendum?
The Prime Minister tells us to trust him. On this side of the House we say trust the people.
4.37 p.m.
Baroness Williams of Crosby: My Lords, we on these Benches congratulate the Irish presidency on finding a very effective way of taking the position forward following a change of mind by Spain and Poland. This has again opened up the possibility of reaching a constitutional agreement by June.
Secondly, we strongly support the Prime Minister. A constitution would clarify the relationship between the member states of the Union and the Union's institutions. It would make things a great deal simpler, and go a long way in dealing with some of the murky areas of suspicion that surround the EU. It would also enable those of us who would like to see an honest and open debate to deal with the buzz of propaganda that creates an extraordinary picture in the British media of what the European Union is, and what a constitution would do. A large number of people in this country are greatly mislead by this.
We also congratulate the Prime Minister on his meeting with Colonel Gaddafi. Colonel Gaddafi may be, at best, a returned prodigal son, but the Prime Minster is surely right in saying that we need to pursue the possibility of diplomatic and peaceful methods to bring countries that are potentially very dangerous within the structure of international law.
We congratulate the Prime Minister on a courageous act, but I would like to add a word of warning. There was some discussion about possible arms deals. I hope that they will be closely limited to such brilliant deals for buying anti-mine equipment that Sir Richard Branson is now apparently developing. That is the kind of arms deal that we would like to see; as for other kinds—surely not at the present time.
I thank the Leader of the House for repeating the Statement. The most disappointing thing about it is that there is a great deal in the presidency's conclusions that the Statement does not reflect. I shall touch on two or three issues raised in the presidency conclusions, enquire whether the Leader of the House has any comment to make, and ask why they have not been touched on in the Statement, as they are of great importance.
The first issue concerns the stability pact. It is time for governments, including strongly pro-European ones, to say clearly that the rules of the EU must apply to everybody, not just some and not others depending on the size of the country concerned.
Secondly, the presidency conclusions make rather charming reference to Russia and congratulate President Putin,
"on his stated commitment to the freedom of the media".
What does that mean? Is it not right and proper that an EU profoundly committed to democratic practice and human rights should say clearly that Russia must
1052
address the issue of the increasingly narrow approach to freedom of the media, if she is to be considered a future partner of the European Union—I do not say a future member, but even a future partner?
Thirdly, I am sorry that the Statement does not reflect the reference in the presidency conclusions to the singular importance of the Kyoto agreement. There is half a sentence in the Statement; there are several paragraphs in the presidency conclusions. Again, in the interests of clarity and courage, should we not say that one reason that the Kyoto settlement is in such difficulty is the opposition, including the lobbying for further opposition, of the United States? Europeans should surely have the guts to say that to their closest ally.
Lastly, it would have been helpful if the Statement had mentioned whether there is a real chance of uniting Cyprus, with only three days left before the Secretary-General's deadline becomes real. I ask the Leader of the House to comment on that.
Let us say from these Benches loud and clear that we have been waiting for years now to campaign on the true facts of the European Union. We have campaigned for this House and this country to take rather more pride in the remarkable achievements of that Union, not least in uniting Europe for the first time in a century or more. I hope that the Government will now start campaigning firmly on the truth, the real facts about the European Union and not be endlessly put off by some of the extraordinary propaganda that passes for information in some sections of our press.
4.42 p.m.
Baroness Amos: My Lords, I thank the noble Lord, Lord Strathclyde, and the noble Baroness, Lady Williams, for their opening comments. I shall seek to address the specific issues raised.
I agree totally with the noble Lord, Lord Strathclyde, in his support for the very strong stand that my right honourable friend the Prime Minister has taken on terrorism. That is reflected in EU leaders' discussions on the counter-terrorism agenda. I am sure that the noble Lord will be pleased to know that they agreed a declaration that demonstrates a robust response by the whole EU to the Madrid attacks. The noble Lord may have read the declaration; it gives tight deadlines for the implementation of existing EU measures; identifies periods for further cooperation, for example, transport and border security; moves the European Union towards identifying and addressing those third countries failing to combat terrorism sufficiently; and agrees the appointment of a counterterrorism co-ordinator in the Council secretariat.
The noble Lord, Lord Strathclyde, mentioned, in particular, Spain and the announcement by the new Spanish Prime Minister. The noble Lord will be aware that it was made absolutely clear that that withdrawal depends on the position of the United Nations. It would therefore be wrong for us to pre-empt Spain's decision.
The noble Baroness, Lady Williams, welcomed my right honourable friend's visit to Libya. Zimbabwe was discussed. It was made clear that Libya and the

1053
UK should stay in touch on the issue. My right honourable friend was very firm about the differences that we had with Zimbabwe and the need for the Libyans and Colonel Gaddafi to understand that. There has been continuing dialogue with the Libyans on the wider issue of west Africa. For example, while I was the Minister responsible for Africa, I engaged in dialogue with the then Libyan Minister for Africa, looking specifically at Libyan involvement in the continent as a whole.
On the question of a constitution, and why now, we have made absolutely clear that the treaty is an important step forward. It spells out that the EU is a body of nation states that has only those powers that governments choose to confer on it. The noble Lord, Lord Strathclyde, is well aware that one of the reasons that it is so important is that, if we are to have an effective Union of 25, we must look at ways of streamlining the measures within the European Union so that 25 can operate effectively.
Two different House of Lords committees have reported on the issue. One committee makes absolutely clear its view that the Union's powers are not being increased, but greater powers are going to member states and their parliaments. The Government will respond to the more recent report in due course.
On the question of when another draft will be published, the noble Lord will know that the commitment made at the European Council meeting was that there should be agreement by the Council in June. The Irish have gone back to look at a timetable to achieve that.
On the question of a referendum, members of the Conservative party have voted consistently against referenda on these matters. The noble Lord, Lord Heseltine, said in a Radio 4 interview on Saturday morning,
"this is what Parliaments exist for. Why did Mrs Thatcher not have a referendum on the single European Act,"—
the noble Baroness is not in her place; she was here earlier—
"far and away more significant in the surrender of British sovereignty than anything involved in the present constitution? It never occurred to her to have a referendum".
That is because, under our constitutional arrangements, Parliament makes the law. It is interesting that suddenly the Conservative party wants that to change.
In certain circumstances, Parliament has decided that particular laws should come into operation only after a referendum has been held. In practice—I repeat, in practice—they have been held where there is a wholly new constitutional structure proposed. That is not the case in this instance, and we have made that absolutely clear time and again.
The noble Lord, Lord Strathclyde, asked me why we would not trust the British people. We have trusted them, and they have delivered two major election victories for this Government. The noble Lord may well ask himself why he does not trust Parliament, given that it has a strong role to play in the process.
1054
I shall now respond to the points raised by the noble Baroness, Lady Williams of Crosby. On Kyoto the noble Baroness is quite right: the opposition of the United States has a big role to play. We, and others, have sought to talk to our US colleagues about the importance of the Kyoto Protocol. The noble Baroness will be aware that my right honourable friend the Prime Minister has made it clear that, in our presidency of the G8 next year, climate change and Africa will be the two issues at the top of our agenda. We have a commitment to raise the awareness of the British people and to campaign on these issues. My right honourable friend has made that clear. He again made it clear in the way that he responded to questions on the Statement this afternoon.
As regards the prospects for a Cyprus settlement by 1 May, the noble Baroness is right. There is not a huge amount of time. However, as the European Council has concluded, this is an historic opportunity to bring about a comprehensive settlement to the Cyprus problem. Kofi Annan is in Switzerland leading the talks. The Prime Ministers of Greece and Turkey are closely involved. The results of these negotiations will be put to referenda in late April. So there is a chance for all the people of Cyprus to decide the future of their island and for a united Cyprus to join the European Union.
On the noble Baroness's final point on the stability pact, it was made clear in the conclusions of the European Council that the economic reform agenda remains a key plank. We need to inject a greater momentum into that process. But European leaders and countries remain committed to that economic reform agenda.
4.51 p.m.
Lord Tomlinson: My Lords, first, I thank my noble friend for repeating the Statement made in another place by my right honourable friend the Prime Minister.
Perhaps I may begin by welcoming the appointment of Mr Gijs de Vries as the counter-terrorist co-ordinator. He has done splendid jobs as the Dutch Minister for European Affairs in the European Parliament and a representative of the Dutch Government in the convention. His appointment is widely to be welcomed, as well as the role.
On a referendum, looking closely at the words that my right honourable friend the Prime Minister used, I believe that the only circumstance in which a referendum would be justified would be if any of the areas of tax and social security systems, the future of the UK rebate, our own criminal justice system or defence and foreign policy were to be subjects over which we no longer had control. They would be significant changes. However, as the Prime Minister said, provided we safeguard those the treaty is right for Europe and right for Britain. Will my noble friend accept from me that the combined forces of herself and the noble Lord, Lord Heseltine, are vastly preferable to the somewhat siren voice of the noble Lord, Lord Strathclyde?

1055
Like the noble Baroness, Lady Williams, I wish to refer to what is in the presidency conclusions but not the Statement. One matter which concerns me seriously is that this Council meeting was meant to be taking stock of the Lisbon process. The first item is the Lisbon process priorities. The language of the presidency communiqué is ambiguous. On the one hand it refers to the picture being mixed and states that,
"the pace of reform needs to be significantly stepped up if the 2010 targets are to be achieved".
However, it then states:
"The message from the European Council is one of determination and confidence".
If there is so much determination and confidence, can my noble friend tell the House why it has been necessary also to appoint Mr Wim Kok to carry out a study on progress? As we reach half time in the Lisbon process agenda, we do not seem to be anywhere near half way as regards the results.
Baroness Amos: My Lords, I share my noble friend's welcome of the appointment of the counter-terrorist co-ordinator. Because concerns have been expressed, it is important to say that at the European Council the economic reform agenda was overshadowed by the issue of terrorism and discussions on the IGC. Because of the common goals and good co-operation which already exist between member states on these issues, we had already nearly agreed final conclusions on this matter before Friday's discussions. It would be wrong for noble Lords to go away with the idea that this was not an important part of the agenda.
Heads of state and government of the 25 current and acceding member states made a commitment to take concrete steps to boost Europe's competitiveness in line with the Lisbon strategy for employment and economic reform. It was agreed to intensify measures to raise employment and growth across Europe; to deliver commitments to tackle red tape and boost enterprise and innovation; to hold a hard-hitting review of progress in meeting our strategic goal of making Europe the most competitive and dynamic knowledge-based economy in the world—on my noble friend's point about meeting the half-way point next year, that review will be critical—and to call on the next president of the Commission to make the competitiveness and economic reform agenda a top priority for action.
There is a recognition that we need to step up the pace. I think that the agreements made at the European Council will help that to happen.
Lord Maclennan of Rogart: My Lords, will the Minister recognise that the description of the proposed constitutional treaty by the noble Lord, Lord Strathclyde, as "ill conceived" could scarcely be worse chosen: that the treaty in draft has emanated from the deliberations of a convention set up by the existing and future members of the Union at a time of very great international danger; that the essential need for Europe is not only to be able to speak with one voice but also to be able to act with firm determination to curb terrorism; and that we strongly welcome the
1056
outcome of this conference which has demonstrated a willingness to reach agreement on the rules of the game and to take action in setting up Mr Gijs de Vries in his role as counter-terrorist co-ordinator?
While the views expressed about referenda differ widely, will the process not be described as more characteristic of the constitution of the Swiss confederation than of the United Kingdom's way of reaching decisions? Although there may be occasions when it is important to have referenda when considerable transfers of sovereign powers are at stake, either from Westminster to the constituent parts of the United Kingdom or from Westminster to some international organisation, this treaty in its current draft form scarcely conforms to those precedents.
Baroness Amos: My Lords, I agree strongly with the noble Lord's comments about the draft treaty, the existing and future members of the convention, and the conclusions of member states with regard to acting with firm determination on issues relating to counter-terrorism.
On his second point on referenda, the noble Lord is right. Only one UK-wide referendum has ever been held. That was in 1975 on whether the UK should stay in or withdraw from the European Union. Noble Lords are aware that the present Government are committed to holding a referendum on the euro. Referenda have never been held to approve changes to the existing institutions of which we are members. That is the situation that we confront today.
Lord Hannay of Chiswick: My Lords, does the noble Baroness accept my congratulations to the Prime Minister on his visit to Tripoli in the same terms as those offered by the noble Baroness, Lady Williams? Does she not agree that one of the most interesting and encouraging aspects of the visit was the way in which it responded to Colonel Gaddafi's surrender of his nuclear, chemical and biological capabilities? In anyone's book, surely that is a step in the right direction of reinforcing collective security. It is extraordinarily unusual.
A few years ago, we could have imagined Colonel Gaddafi surrendering the two men who were indicted to stand trial, but could we seriously have supposed that he would be shipping large quantities of weapons material out to the United States? I rather doubt it. Rather than concentrating on the trivia, such as the colour of the tent and the number of camels that were galloping around, it would be useful if we, and the press, could focus on things that really matter.
On Cyprus, I, too, should like to applaud the line taken by the European Council, its support for Kofi Annan's efforts and its determination to accommodate any settlement that Kofi Annan puts forward. That is crucially important. Does the noble Baroness not agree that if, alas, it becomes necessary to move to the third stage where Kofi Annan bridges the gaps because it has not been possible to reach agreement between the two parties and Greece and Turkey, and takes them up on their commitment to put that to a referendum, it would be incomprehensible if

1057
anyone concerned, particularly the leaders of a future member state of the European Union—that applies to Turkey and Cyprus—were to do other than to campaign for a "yes" vote in the referendum?
On the constitutional agreement, since the 1970s every British Government have questioned whether to take more decisions in Brussels and whether they should be taken by a qualified majority vote, which should be decided on the criterion of whether it was in Britain's interests to do so. Despite that, is it not strange that it appears that there is a new doctrine which says that the taking of decisions in Brussels, the taking of new decisions by a qualified majority, is ipso facto a bad thing just because that change is being made, irrespective of whether it is in this country's interest or not?
I should like to echo the plea made by the noble Baroness, Lady Williams. The Government should now step up their explanatory statements on what is in the constitutional agreement and why it is in Britain's interests to go ahead with it as long as our vital interests are protected in the negotiations. It is rather sad to see people claiming that there has not been such a change in Britain since the 17th century. I fear that that is a commentary on the teaching of history in British schools: in this case, I assume it is the private schools rather than the public sector. It is bizarre that quite a lot that happened in the 18th, 19th and 20th centuries and any understanding of the relative importance of the various treaties on which the European Union is based should be ignored.
Baroness Amos: My Lords, the noble Lord, Lord Hannay, is right in his statement about Libya and the importance of concentrating on the things that matter. The result of UK and US engagement is that Libya, within a few weeks, has dismantled its nuclear programme, begun destroying its chemical weapons and is now working in full co-operation with the international community.
We all know that we cannot make the world a less dangerous place by engaging only with friends. We have to engage with countries where there are differences. Sometimes that is difficult. But it was absolutely right for my right honourable friend the Prime Minister to visit. We still have a long way to go on certain issues, but we are moving in the right direction.
Having been the special representative, the noble Lord, Lord Hannay, knows a great deal more about Cyprus than I do. On the back of the work that is being done by Kofi Annan, it is absolutely right that both sides will need to work with their citizens to campaign for a positive outcome to these negotiations. We all hope to see that, although the timescale is somewhat short.
The noble Lord, Lord Hannay, made a plea echoing that made by the noble Baroness, Lady Williams of Crosby, for us to continue to campaign on this issue with respect to the EU constitution and stressed the
1058
importance to Britain's interests of doing so. I entirely agree with the noble Lord. We shall continue to do that.
Lord Howell of Guildford: My Lords, are we to understand from the noble Baroness's reply to my noble friend Lord Strathclyde and from a reply from the noble Baroness, Lady Symons, earlier today that Ministers have not yet read the very good and important report from our European Union Committee, entitled, The Future Role of the European Court of Justice? The report states:
"In a number of respects the powers of the Union would be increased".
That is about the draft constitution. It also pointed out that a new legal order would be created and that the ECJ would become the supreme arbiter of this country's powers.
Those are fundamental changes that totally refute what Ministers have been asserting. Indeed, they call in question what Ministers have been inaccurately quoting from a previous very good EU Committee report. If there is to be a serious debate, it is very important that accurate and not misleading statements are made by Ministers. Therefore, perhaps I may ask the Minister to read the report carefully before she or her ministerial friends repeat the utterly misleading quotations that we heard today, which were taken inaccurately from previous House of Lords European Union Committee reports. They bring into disrepute our hard work and excellent reports, which should be treated with more seriousness than appears to be the case.
Baroness Amos: My Lords, the noble Lord, Lord Howell, is wrong. I made it absolutely clear that there were two reports. In my response to the noble Lord, Lord Strathclyde, I made it clear that the Government would respond in due course to the report, which I have in front of me and which I have seen, on the ECJ. We have seen the report, which raises issues of primacy, the CFSP, the ECJ jurisdiction and access to justice. The report does not come down definitively on some of those issues.
On primacy, the report asks for more clarity on the impact of Article 10(1).
Lord Stoddart of Swindon: My Lords, is the noble Baroness aware that not only does the Conservative Party and the Liberal Democrat Party want a referendum on the very important matter of the constitution but a growing number of Labour Members of Parliament are also in favour of a referendum, as are more than 80 per cent of the people of this country, according to various opinion polls?
At Question Time today, the noble Baroness, Lady Symons, stated that ratification of the European constitution would be the same as for all previous treaties. In other words, Parliament will not be able to make any amendments to the constitution. Does the Minister not agree that in this case that would be a constitutional outrage? Parliament will not be able to amend the provisions of a new constitution that the

1059
noble Baroness has just outlined as having serious implications for this country. Parliament—the House of Commons and this House—will not be able to amend the provisions as they would any other Bill that came before this House.
I hope that the noble Baroness will be able to deny that that is the way the Government will behave over this very important constitutional change to the way in which this country will be governed.
Baroness Amos: My Lords, the noble Lord, Lord Stoddart, will not be surprised to know that I do not agree with him. This is not a constitutional outrage. We have made it clear that a treaty that increases the EU's accountability, strengthens the role of parliaments in European business, while preserving unanimity in key areas of policy, would be in this country's interests. The ratification process will be the same as for all previous treaties, as my noble friend Lady Symons set out this afternoon.
Earl Russell: My Lords, since the noble Lord, Lord Hannay, has introduced the teaching of history, I draw the noble Baroness's attention to the fact that this is the 400th anniversary of the union of England and Scotland. That, like the EU, was a union of two sovereign states under a common authority. The King believed, I quote the Lord Privy Seal, that, "this meant that decision-making could not continue as it had been".
That view did not find favour in the English House of Commons, where one particularly prominent Member said that this called for a special consultation of the people. That does not necessarily mean a referendum, but it means something remarkably like it. 'The result was that nothing was decided. If we look at the case of McCormick v Lord Advocate in 1953, a lot of the key questions were not decided in 1707 either. The relations between England and Scotland were not put on a settled legal basis until the parliamentary Session 1998–99. That caused a great deal of grief to all parties. Let us not make the same mistake twice.
Baroness Amos: My Lords, it is always a pleasure to listen to the noble Earl and to receive a lesson in history, as we have this afternoon. We are absolutely clear that if a Union of 25 is to operate effectively, we need to bring about some change. That is what this process is about. It is an important process, which will make the European Union more efficient and effective working as a Union of 25 rather than 15.

Serious and Organised Crime
5.12 p.m.
The Minister of State, Home Office (Baroness Scotland of Asthal): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Home Secretary. The Statement is as follows:
1060
"With permission Mr Speaker, I wish to make a Statement on our strategy to tackle organised crime. Although crime has fallen, there remains a very substantial challenge to turn round those aspects of criminality that threaten the very fabric of our society. The success of the police and other law enforcement agencies should not lead to complacency. We know that there is a great deal that now needs to be done to tackle specific areas of criminality, including organised crime.
"Organised crime is big business. It costs us up to £40 billion a year. Its effects are corrosive. It corrupts society and spreads fear and intimidation. Organised crime operates across frontiers and reaches into every neighbourhood, especially some of the most deprived parts of our country. Lives are destroyed by drugs, smuggling and prostitution. It is a major contributor to low-level crime, abuse and exploitation.
"Organised crime exploits every technique of modern technology, It uses identity theft, Internet and modern security communications. Such criminals employ many of the same methods as those who run terrorist networks. Indeed, the evidence is clear that many terrorists seek to finance their activities through organised crime.
"This means that now more than ever we need to make a step change in our response. So we are setting a clear objective: year on year reduction in the harm organised crime causes the United Kingdom and its citizens. We will make the UK one of the most difficult environments in the world for organised crime. We will work closely with our partners to undermine its international effects. Today's White Paper sets out our strategy to achieve these goals. We will create a powerful new agency—the Serious Organised Crime Agency. We will take new powers to disrupt activity and convict those responsible, and we will enhance our capability to stay one step ahead. Let me deal with each of these in turn.
"I announced to the House our intention to create the agency last month. Since then, we have consulted on how this should operate. The agency will bring together the responsibilities that currently fall to the National Criminal Intelligence Service, the National Crime Squad, parts of the Immigration Service dealing with organised immigration, and Customs and Excise on drug and people trafficking and related financial investigation. I wish to make clear our tribute to the professionalism and dedication of these agencies and the staff working in them.
"The new agency will build on their success. It will bring together resources into a single organisation with a clear focus on drugs, people trafficking and financial crime. It will enable us to make more effective use of intelligence and to work more closely with specialist prosecutors. The new agency will enable us to bring more criminals to justice and reduce the harm that they cause.

1061
"The White Paper sets out how the new agency will operate. It will be a non-departmental public body, with operational independence, overseen by a small, strategic board accountable to Ministers for the delivery of priorities set out by them. The agency will be chaired by a part-time non-executive. It will be led operationally by a full-time director general. We will advertise for both posts shortly.
"We will legislate to bring the new agency into being as soon as parliamentary time allows, but in the mean time, the existing agencies will work increasingly together to share objectives and a common strategy. In this way, we will begin to see the practical benefits of change during the transitional period. The creation of the agency gives us the opportunity to look at how best to improve performance and co-ordination, especially in the security of our borders.
"We will ensure, therefore, that Customs, Special Branch and the Immigration Service work together effectively. My right honourable friend the Chancellor of the Exchequer and I will be directing the heads of each of these services to develop more closely aligned objectives and priorities through their individual business plans. This will ensure co-ordinated, strategically driven operational activity. These arrangements will not interfere with any existing structures of accountability.
"Nowhere is this co-ordinated approach more important than in the battle against terrorism. At present, each of our 43 police forces maintains a separate Special Branch. Terrorists respect no such boundaries. I believe, therefore, that through greater co-ordination of their activity we can significantly enhance effectiveness. I am therefore creating a new national system to pool intelligence and co-ordinate operations. My announcement on 19 March of an extra £15 million, as well as strengthening the counter-terrorism branch of the Metropolitan Police, will enable us to achieve this goal more readily.
"Defeating organised crime is not just about structures and effective operations. The powers available to our agencies to deter, disrupt and protect, are also critical. We need to make best possible use of our existing powers, whether probation licence conditions, asset recovery, immigration, or tax powers. On the latter, it was, after all, Elliot Ness from the Revenue who was crucial in leading to the conviction of Al Capone.
"The Proceeds of Crime Act is significant in our efforts to deprive criminals of their assets. The new cash seizure powers are netting £1 million a week, and we are on track to meet this year's overall target of recovering £45 million. But there is much more we can do.
"We will ensure better use of intelligence, management of information and that prosecutors are involved at an early stage.
1062
"Recent changes to the law have provided a more effective framework. But no group of defendants is more adept at manipulating legal safeguards. They make corruption and intimidation part of their system of defence.
"As organised crime becomes more complex and organised criminals more sophisticated, so the need grows for new powers to gather evidence and for effective incentives for defendants to testify against their criminal associates. We will therefore build on the powers in the Criminal Justice and Sentencing Act.
"With my right honourable and learned friend the Attorney-General and other colleagues, I have fundamentally reviewed the powers of our law enforcement agencies. As a result we propose to create Serious Fraud Office powers to compel the production of documents and information and to put Queen's evidence on a statutory footing in order to encourage defendants to plead guilty and to testify against co-defendants. We are taking forward the idea of a national witness protection programme; we will create new licence conditions. These would ensure that the finances of serious criminals are kept under close scrutiny after release.
"Other reviews are also relevant to this work: the use of intercept material in court—we will provide a definitive proposal shortly; the law on conspiracy and secondary participation; and, of course, Sir Michael Bichard's review of data retention and information sharing between police forces.
"With my right honourable and learned friend the Secretary of State for Constitutional Affairs, I am also asking the Sentencing Guidelines Council to review the existing sentencing regime to produce sentences which match more clearly the gravity of the underlying offences and the harm they cause.
"Finally, we will need to ensure a clear focus on our protection of areas of organised crime where most damage is done. This means transforming the quality of our intelligence-driven effort. We must increase the risks and reduce the benefits of operating in this field.
"The United Kingdom has never before produced a comprehensive strategy to tackle organised crime. With a new ministerial committee under my chairmanship and a better understanding of the harm caused, we have the building blocks to adopt a more focused approach.
"The proposals I am publishing today will define a new approach for the 21st century which will match the threat and the sophistication we face. Defeating organised criminals is an objective I know we all share. I commend the White Paper to the House".
My Lords, that concludes the Statement.
5.23 p.m.
Baroness Anelay of St Johns: My Lords, I thank the Minister for repeating the Statement made a short while ago in the other place by her right honourable friend the Home Secretary.

1063
The Home Secretary said this morning during his BBC Radio 4 interview on the White Paper that he does not want any knee-jerk reactions to the proposals. I certainly undertake to reflect very carefully on the White Paper proposals in the coming months. Of course everyone wants those involved in serious organised crime to be brought to book, but the ink is barely dry on the Criminal Justice Act 2003 that took so much time in the House. That Act made substantial changes to the rules of evidence, including hearsay, bad character, prosecution appeals and re-trials for serious offences, and we do not yet know how those changes have affected our capability to do what we all want—that is, to ensure that serious organised crime feels the draught. So we will, of course, consider these proposals against the background of existing legislation.
But let me make it clear that I support entirely the principles of the announcement made by the Home Secretary today to create a serious and organised crime agency. Indeed, how could I not when my own party has advocated the creation of such an agency for quite a long time?
However, we still will need to have a rigorous scrutiny of the proposals. As noble Lords will know, I always hear in mind the Judge Bassingthwaighte principle: the more the Government and the Opposition agree on any matters, the more it is a duty for the Opposition carefully to check that they have got things right, otherwise policy may go astray and we may disproportionately damage our civil liberties.
I read with great interest this morning the March edition of Police—the Police Federation's magazine—and its remarks on the creation of the new agency. I certainly agree with it that there is nothing wrong with the thinking behind the proposed new force. But the question marks concern the extent of the resources that will be allocated for its work and whether these will be entirely additional to the current funding of the police service. Is the £15 million referred to in the Statement intended to cover the creation and running of the new agency, as well as the strengthening of the counter-terrorism branch of the Metropolitan Police? I certainly hope not.
There are also queries from the police about accountability. To what extent will the new body operate independently, regardless of the present statutory responsibilities of chief officers? For example, what impact will the new agency have on the autonomy of Chief Constables, which is so vital to the independence of our police forces? Who will decide what is a matter for the "super force" and what should be left to conventional forces?
I join with the Minister in the proper tribute she has paid to the work of our police forces across the board. They will now find some of their work transferred to the new agency.
Turning to some of the other issues within the Statement, I support the Home Secretary's announcement in regard to plea bargaining. We know that plea bargaining has worked well in countries such as Australia and America. However, I am aware that there have been problems in Northern Ireland, where it can create a situation whereby it is to the advantage of a criminal to,
1064
in the jargon, "fit somebody up". There can of course be no greater miscarriage of justice than that an innocent person should be gaoled so that a criminal can go free. How will the Home Secretary ensure that that does not happen?
Does the Minister accept that it will be imperative for the Government to ensure that the victim is given a proper explanation of why an offender may be given a much reduced sentence in recognition of his or her co-operation; or, indeed, as I understand it, may be offered full immunity, not merely a reduced sentence? If the Government fail to get the balance right between giving super-grasses a quid pro quo and putting the victims' interests at the heart of the criminal justice system, then the work that we have done in the House so far this year on the victims Bill would be as nought.
As regards intercepts, again a welcome from these Benches. But, again, an acknowledgement that there are dangers. We must ensure that we do not compromise intelligence sources. We know that intelligence information is, by its very nature, difficult to verify. It is surely imperative that we take steps to ensure that innocent people are not convicted on intelligence which turns out to be wrong. Above all, we need to protect the intelligence sources themselves and the way in which they operate so that we do not undermine their future viability.
I was interested by the reference in the Statement to the fact that a statement will be made shortly in regard to this issue. I heard the Home Secretary say this morning that a review is underway. When she responds, will the Minister confirm that it will be as a result of the ongoing review that the Home Secretary will give further thought as to how intercepts may be dealt with?
As regards sentencing, I am rather intrigued by the reference at the end of the Statement to the request being made by the Government to the Sentencing Guidelines Council to review the existing sentencing regime to produce sentences which match more clearly the gravity of the underlying offences and the harm they cause. What do the Government mean by "underlying offences"? What are those underlying offences exactly? What evidence do the Government have that they are not being properly addressed by the courts at the moment?
In summary, we support the general thrust of the Statement but we are mindful of the fact that, for all of us, the devil is in detail. We look forward to proper scrutiny of it.
5.29 p.m.
Lord McNally: My Lords, on my way here to speak to the Statement, I thought in a rather frivolous moment that I could refer to Elliot Ness. I then thought, "No, this is too serious a subject to bring that in"—but there is good old Elliot on page 3 of the Statement. That confirms my view that, in his more Walter Mitty moments, the Home Secretary does indeed see himself as a kind of Elliot Ness figure, kicking down doors and cutting corners in the battle against crime. That is why I endorse the approach of

1065
the noble Baroness, Lady Anelay. No one on these Benches disputes our determination to combat organised crime. Like the noble Baroness, we give a warm welcome to the general thrust of the Statement. But, in doing so, we will not take one step back from our duty as an opposition to scrutinise very carefully how these objectives are put into place and how they affect the rules of evidence and the balance of guilt in our criminal law practices.
I hope that it goes without saying that we share the objective of making the UK one of the most difficult environments in the world for organised crime to operate in. However, there are worries for Parliament. Throughout history, and in other countries—the FBI under Hoover comes to mind—we have seen that if there is a massive concentration of power in powerful state bodies, whether they be police or security bodies, there is a need for a counterbalancing democratic and parliamentary accountability. I wonder whether this new super-agency will have parliamentary accountability built in.
As the noble Baroness also mentioned, there is some murkiness about how it will relate to existing police authorities. I wonder whether the Home Secretary's thinking goes further. Does he see amalgamations of existing authorities, particularly some of the smaller ones, or even the concept of regional police authorities responsible to the new regional governments? Clearly, he is thinking big at one end, but one of the fundamental parts of our policing has been its local and democratic control.
As someone who sat, sometimes slightly bemused, through the passage of the Regulation of Investigatory Powers Act, I am also slightly bemused about why it has taken so long to use some of the powers under that Act. I wonder whether inter-agency disputes are holding up implementation, as reported in the press, or whether some of the concerns about security, to which the noble Baroness, Lady Anelay, referred, have not yet been settled. Ministers must push to make it clear that they will not tolerate turf wars or the squirreling away of information—I have mentioned this in the House before. They must make the system work.
We also welcome the recognition of the overlap between terrorism and organised crime. The application of the Data Protection Act and clearance for sharing information are mentioned in this document. They are clearly still obscure—if that is not too Irish. This White Paper repeats the worry, which we raised with the Minister during proceedings on the Domestic Violence, Crime and Victims Bill, that information is still not being exchanged between agencies because of fears of, or misinterpretations of, the Data Protection Act. During debates on the Domestic Violence, Crime and Victims Bill the Minister referred to an inter-ministerial committee and the Statement refers to Sir Michael Bichard's work. We should like to know when this matter will be resolved in a way that will allow exchanges to take place.
1066
I have two other brief points. There is still concern about whether our action on money laundering is biting. It is the oil that lubricates organised crime. We need the City of London, professionals, such as accountants and lawyers, and Crown dependencies, which are often seen as black holes in this matter, to co-operate fully to make a reality of cutting into money laundering.
I should like a quiet report on how the Home Secretary is doing in his battle in Cabinet on ID cards. Is he winning or losing? We read so many leaks these days.
Finally, the noble Baroness, Lady Anelay, made a point about sentencing. If there is a review that works out how the bad guys will get longer sentences, what will that do to our already over-crowded prisons? Will the Government show real determination to find alternatives to prison for less serious crimes, for young people or for women, as Cherie Booth was arguing over the weekend?
Defeating organised crime is a shared objective. That is a given. So too are the defence of civil liberties, parliamentary accountability and the rule of law.
5.36 p.m.
Baroness Scotland of Asthal: My Lords, I thank the noble Baroness, Lady Anelay, and the noble Lord, Lord McNally, for the warmth of their welcomes. We too wish these issues to be scrutinised with the greatest care. That is why we ask in the White Paper for comments and constructive criticism. I make no bones about it: the Government want to get the balance right. Noble Lords have rightly identified the need to tackle organised crime. Criminals are becoming more sophisticated and adept at using the system. They see no local or national boundaries. We must become more skilled at co-operating internally in order to meet the challenge that they pose.
The noble Baroness, Lady Anelay, asked about the additional £15 million. It was for Metropolitan Police counter-terrorism. The resources for SOCA have yet to be determined. We shall listen very carefully to what is said by the new director-general, who will be responsible for operational activities, and to the non-executive chairperson.
We want to build on the existing constitutional path. The details of the interaction between SOCA and the chief constables are to be determined. We listened very carefully to what the chief constables said and will take their views into account. I reassure noble Lords that the national policing plan makes organised crime one of the four key priorities for all forces. HMIC is already reviewing force performance in this area. SOCA will work closely in support of local forces through advice, intelligence and operational support. Local forces will have to deal with the criminals in their area. SOCA will focus on the higher level national and international players. Noble Lords will immediately notice that the interaction between those two levels is likely to be very significant. It is absolutely clear that co-ordination will be necessary to get it right.

1067
We too wish to balance the protection of the accused and society's interest in seeing the guilty convicted. We think that the powers that we are suggesting in the White Paper get it right. But we are very anxious to listen to noble Lords, and to those who reply to the White Paper, before we come to any definitive view.
I note that the noble Lord, Lord McNally, referred to Elliot Ness. I assure noble Lords that my right honourable friend the Home Secretary does not see himself in that light. Perhaps a degree of mild levity is sometimes necessary to hone people's senses. I am delighted that my honourable friend the Home Secretary and the noble Lord, Lord McNally, were, at one stage in their ruminations, thinking along the same lines. There are difficulties about the application of sharing information. This is an issue which has been given very anxious consideration and we await the outcome.
In response to the noble Baroness, Lady Anelay, we await the outcome of the review on intercept information. We made it clear in paragraph 6.2.2 of the White Paper that the Home Office-led review is expected to conclude by June this year. If the Government are satisfied that adequate safeguards can be designed to prevent the disclosure of sensitive capabilities, and if the review concludes that the benefits of this move would clearly outweigh the costs, then we will bring forward legislation to allow the evidential use of intercept material.
Your Lordships will note the caveats. We have not seen the report; we do not yet know what is in it; but we are being clear and open about what that report may contain. We do not know what is in it and we shall have to reflect on it more carefully.
We also accept that the interests of the victims are of absolutely critical importance. The noble Baroness asks about the need for explanation. That goes very much to the way in which we are seeking to deal and to engage with victims in the system: first, to gain their confidence so that they will be prepared to be witnesses; secondly, to keep them informed right the way through the process, so that they better understand the decisions we are making and have an opportunity to have input into the information before an informed decision is taken. I can certainly reassure the noble Baroness, therefore, that that is also very much in line with our thinking.
The noble Baroness will know that almost the raison d'étre of the Sentencing Guidelines Council is to give us continuity and parity of treatment across the country. We know that, historically, different approaches have been taken in different areas in relation to a number of different crimes. It will be very important that, particularly when we are dealing with serious organised crimes, the guidance given to all our sentencers reflects the proper benchmark, so that they take into consideration that which the Sentencing Guidelines Council believes to be appropriate. We are absolutely confident that, under the chairmanship of the Lord Chief Justice, together with the other very able members of that council, they will be able to give the guidance to the sentencers which is needed to achieve parity of treatment and continuity across the board.
5.45 pm
Lord Morris of Aberavon: My Lords, I very much welcome the broad thrust of the Government's proposals. The Minister is absolutely right to say that there should be a period of reflection in order to get the matter absolutely right, or as right as can be.
May I ask a specific question, however? Is the Minister aware that there has been considerable concern over some years regarding the combination of the investigating and prosecuting responsibilities of HM Customs? The matter has been judicially investigated and reported upon. Is the situation now satisfactory?
Lastly, what will be the practical effect of putting Queen's evidence on a statutory basis?
Baroness Scotland of Asthal: My Lords, I am aware that Her Majesty's Customs and Excise have in the past been subject to a certain amount of inquiry. I can assure my noble and learned friend that we are being very rigorous in the way in which we are approaching these matters, to make sure that the rules put in place are appropriate and robust enough to do that which we would wish them to do, in a way that is fair. Fairness, as my noble and learned friend will know, has to be the benchmark in relation to the content of those rules.
My noble and learned friend also asked whether we thought it satisfactory. I have nothing to indicate that it is not satisfactory. As for why we are putting the Queen's evidence on a statutory basis, your Lordships will know that, even though the Queen's evidence is allowed under case law, we lag behind in this. For example, 1 per cent of Customs defendants gave evidence in exchange for leniency last year. We hope that placing this on a statutory footing will make clearer what are the incentives for those who cooperate, and will make it available where it is appropriate.
The current proposal is that a defendant who wanted to co-operate would come to an agreement with the prosecutor. The defendant would offer full cooperation in the investigation, testify if necessary, and plead guilty of the offences he or she had committed. The prosecution would make an application to the judge, setting out the level of co-operation, and the judge would be able to impose a split sentence, setting out what the defendant would have received but for the co-operation and what he will actually receive. In the event that the testimony turned out to be false or misleading, it would be open to the prosecution to go back to court and to seek to have the original, higher sentence imposed. We aim to give clarity and transparency on how the matter will be dealt with, in a way that will be accessible, open and, we hope, clearly demonstrable as being fair and just.
Lord Goodhart: My Lords, to continue with the question of the Queen's evidence, is it not the case that courts and juries look with considerable suspicion on evidence which is given by a witness who has a clear personal incentive for giving that evidence? As is well

1069
known, there are witnesses who disclose in court that they have been paid by a newspaper, on terms which mean that they will get more money if the defendant is convicted than if he or she is not.
Is that not doubly a problem when there is somebody who, for the co-operation and for giving evidence, has been offered a reduction in sentence, particularly where—as is not now the case—either the sentence is deferred until after the evidence has been given or the prosecution has a right to appeal against the sentence if the evidence turns out to be useless or misleading? In those circumstances are the Government satisfied that the Queen's evidence provisions will be effective in the battle against serious crime?
Baroness Scotland of Asthal: My Lords, we have looked at the situation not just here, but in Australia, the United States and elsewhere where these provisions have been applied. Other national responses will not necessarily equate with us.
I can understand the noble Lord's anxiety about the way in which jurors may view this evidence. We very much take that on board, but, particularly when there is other supporting evidence confirming the evidence given on a Queen's evidence basis, this evidence can potentially be very useful and important.
In order to make what is being done clear and open, we think it better that it should be on a statutory basis. Everyone is then able to understand its precise nature and there can be clarity—when the evidence is given and when the jury comes to determine whether to believe the evidence—about precisely what has happened to that particular individual.
Viscount Bridgeman: My Lords, in the absence of my noble friend Lord Glentoran who is in Committee at the moment, may I briefly refer to the position of organised crime in Northern Ireland?
Your Lordships will be well aware that, just as progress was being made with community relations both before and after the Belfast agreement, the problem of drugs escalated and with it the impact of organised crime, feeding on the fertile ground of polarised communities. In Northern Ireland these are to a considerable extent openly controlled from within the prisons. I hope that that experience will be noted when it comes to legislation and practice on the mainland.
May I also briefly refer to the treatment of supergrasses in Northern Ireland? I hope that both the Minister and the Lord President will pay careful attention to the Northern Ireland experience in the use and treatment of supergrasses. The proposed legislation to place Queen's evidence on a statutory basis for the protection of witnesses is likely to have a considerable effect on the use of supergrasses. I should hope that any proposed legislation as it affects Northern Ireland will pay attention to the totally ruthless treatment of these key witnesses and
1070
informants if their cover is blown; and, in addition, that any retrospective inquiries will protect them and prevent their being made more vulnerable.
Baroness Scotland of Asthal: My Lords, I reassure the noble Viscount, Lord Bridgeman, that the experiences in Northern Ireland will be taken into account. Your Lordships will have seen in the White Paper that we are considering what steps need to be taken for a national witness programme. One of the most distressing elements of the change in how organised crime is operating is the level of witness and victim intimidation in certain spheres, particularly in relation to the higher level of organised crime, with which we are dealing. I can therefore reassure the noble Viscount that the Government will carefully scrutinise these issues.
I should add that the number of cases in which such provision is used in our country, at 1 per cent, compares unfavourably with places such as the United States of America, where it is 26 per cent. Our conviction rate in such cases is similarly not as advantageous as that for America, Australia and some of the other countries which have made better use of both Queen's evidence and the opportunity to plea bargain openly and frankly. We will take those issues very much into account.
Lord Lloyd of Berwick: My Lords, the noble Baroness will not be surprised to hear that I welcome very greatly any progress on the use of intercept evidence in court. I hope that she will do all in her power to ensure, so far as she can, that the review is complete by the end of June.
On the other issue that has been mentioned, I welcome very much the suggestion that plea bargaining should be put on to a statutory basis for the purpose of eradicating organised crime and, in particular, terrorism. There are dangers, of course, but such a procedure has been found very successful—if my memory is correct—in Italy in dealing with the Mafia. It was for that reason that I recommended very strongly in the report that I wrote many years ago that something of this kind should be done.
One question occurs to me. We are told that £1 million a week is being recovered under the Proceeds of Crime Act. Can the Minister say to what extent that relates to crimes committed before the Act came into force, or whether it relates solely to crimes committed since the Act came into force?
Baroness Scotland of Asthal: On the last issue, my Lords, I am not absolutely clear whether it is post or prior to the Act coming into force, but I shall certainly check. However, I can tell noble Lords that, as a result of the Act coming into force, we have been able to recover a huge amount of money that we would never have been able to recover before. We hope to reach the £45 million target. As your Lordships will anticipate through the mathematics, at the rate of £1 million per week, we are hopeful of far exceeding that figure. If we have that information, I certainly undertake to make it available.

1071
I very much welcome everything that the noble and learned Lord said in welcoming the Queen's evidence and about putting it on to a statutory basis as regards plea bargaining. He is absolutely right that very significant advances were made against the Mafia in Italy using exactly these sorts of strategies. We have to take that into account when we decide how to respond to a very similar scourge.
Lord Harris of Haringey: My Lords, I should declare an interest as chair of the Metropolitan Police Authority. In welcoming my noble friend's Statement, I seek further clarity on the issue of additional resources that may be made available to the new agency. In particular, there is concern both that these are financial resources that might be diverted from other policing activities and that expertise might be diverted from local police forces. I should be grateful for an explanation of whether it is envisaged that the resources will be additional, and, if so, how the protection of expertise can be maintained.
I should also welcome some reassurance from my noble friend on the extent to which there will be close working between the new agency and local police services. There is a danger, I am sure, that the new agency might be seen as being parachuted into local areas to carry out particular operations, while it is the local police who will have to deal with any community consequences after such an operation. Local police may also have much more community intelligence which could inform the actions of the agency. So I would very much welcome some clarity about the relationship with local police services.
Baroness Scotland of Asthal: My Lords, I can add little to what I have already said. The noble Lord will know from the Statement that my right honourable friends the Chancellor of the Exchequer and the Home Secretary will be looking very closely at these issues. When those two look closely, one can anticipate that the issue of resources will be close to their hearts and their deliberations.
The partnership working between the new agency and the local police forces will be critical because local intelligence and international intelligence merge when we are considering issues of serious crime. Organised crime is just that, because the organisers have to be both international and local. So I can certainly reassure the noble Lord that it is not being contemplated that the new agency will simply parachute in without fully engaging local forces. It just would not work in that way. Partnership is going to be key to ensuring that this new agency takes off.
Your Lordships will know that the agency will include staff from Customs, NCIS and NCS—approaching, I think, about 5,000 members of staff. The agencies planning to move to the new agency currently have a budget of about £375 million. New legislation will set out the constitutional and governance arrangements of the new agency; provide it and its staff with necessary powers; ensure that it
1072
remains accountable to Ministers, Parliament and the public; and make provision for a range of legacy issues. All those issues will have to be resolved before the agency is finally up and running and comes into being. I hope that that is of some help to my noble friend.
Lord Renton: My Lords, I, too, welcome the Statement made by the noble Baroness. Will she bear in mind that in the past 40 years organised crime has varied from time to time in different parts of the United Kingdom? Can she assure us that the proposals that the Government have in mind will enable greater concentration on prevention and dealing with crime in places where it appears to be worst?
Baroness Scotland of Asthal: My Lords, I reassure the noble Lord, Lord Renton, that this service is being created to give us a more comprehensive understanding of organised crime across the country and to collate intelligence across the board. It is not just about drugs; it feeds into people trafficking, money laundering and all the other aspects of the most serious end of crime. We will have to use much more creatively and in a much more targeted way the intelligence about what is happening on the ground. We are by no means saying that what we do now is not of excellent quality. However, if we can organise that in a more structured way, we will get even greater benefits from the reorganisation.
Lord Marlesford: My Lords, the Statement points out that,
"each of our 43 police forces maintains a separate Special Branch. Terrorists respect no such boundaries".
Does that mean that there will be a national Special Branch? If not, why not? And would not "the National Special Branch" be a better name than the rather woolly name already coined for the agency? Perhaps in the consultation the Government will be open to considering better names.
Secondly, do the Government recognise that an essential prerequisite for achieving the objectives in the Statement is to have a central record of individuals, with biometric means of linking those individuals to their activities? Finally, on Al Capone: I know it was probably intended as a joke, but it refers to something 60 years ago that represented a major failure of the American justice system, which is why Al Capone was the only person convicted of tax evasion who ended up in Alcatraz.
Baroness Scotland of Asthal: My Lords, we want a number of his kind to go in the same direction and we hope that our British agency will be more effective than any others. I know that the House will be confident about that.
I cannot give any indication as to whether the name SOCA will change. I should share with noble Lords that many people of Afro-Caribbean extraction might like the name SOCA because it describes rhythmic and successful Caribbean dancing, so it may have a nice connotation for some. But I am sure that these are issues which we will look at in due course.
Lord Marlesford: My Lords, biometrics?
Baroness Scotland of Asthal: My Lords, as regards biometrics, I cannot tell your Lordships exactly what the central records will contain. Your Lordships will know that biometric data are the most useful data for us to have in relation to tracking; the intelligence services have been able to—but I should not say that, should I? I shall simply say that biometric data are an issue that has certainly excited a lot of proper attention in the detection of crime.
The Earl of Mar and Kellie: My Lords, could the noble Baroness clear up whether what she described extends over the United Kingdom or is merely a plan for England and Wales? I ask that because I live in Scotland.
Baroness Scotland of Asthal: My Lords, the agency will cover England and Wales. I will write to noble Lords about how the agency may co-operate with agencies in Scotland and Northern Ireland.
Lord Hylton: My Lords, the Statement did not say a word either about the trafficking of arms or about those people who hold illegal weapons in this country. Can the noble Baroness throw light on that subject, which is pretty urgent?
Baroness Scotland of Asthal: My Lords, did I understand the noble Lord to talk about arms in terms of guns and how that would be dealt with? Any form of trafficking will be covered by the new agency. However, I should address and correct what I just said when answering the noble Earl in relation to UK-wide. The new agency will have a UK-wide remit. However, in Scotland and Northern Ireland the Scottish Drug Enforcement Agency and the Police Service of Northern Ireland will continue to exercise those functions they currently undertake in partnership with the existing UK agencies. I was wrong to say that it would not be UK-wide; it is UK-wide, but it preserves two different distinctions and that is what confused me.
I believe that arms are covered. I will write to noble Lords. It depends whether arms fall into the organised crime bracket.

Energy Bill [H.L.]
6.5 p.m.
Further consideration of amendments on Report resumed.
Clause 107 [Use of green certificates issued in Northern Ireland]
Lord Whitty Lord Whitty moved Amendments Nos. 191A to 191C:
Page 89, line 14, leave out "Authority for Energy Regulation" and insert "authority"
Page 89, line 18, leave out subsection (2).
1074
Page 89, line 23, at end insert—
"(4) In Article 56(1) of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)) (power to amend Part 7 of that Order to take account of amendments of corresponding Great Britain provisions), the reference to amendments made to sections 32 to 32C of the 1989 Act includes a reference to subsection (1) of this section.
(5) Subsection (4) extends to Northern Ireland only."
On Question, amendments agreed to.
Clause 108 [Distributions to Northern Ireland suppliers]:
Lord Whitty Lord Whitty moved Amendment No. 191D:
Page 89, line 29, leave out from "are" to end of line 31 and insert "Northern Ireland suppliers.""
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendment No. 191E:
After Clause 108, insert the following new clause—
"SUPPLEMENTARY PROVISION RELATING TO RENEWABLES OBLIGATION IN GREAT BRITAIN

(1) In subsection (3) of section 32 of the 1989 Act (definition of renewables obligation), for "and 32C" substitute "to 32C".

(2) In subsection (7) of that section, for paragraph (d) substitute—

"(d) such generators of electricity from renewable sources as he considers appropriate; and".

(3) After subsection (8) of that section insert—

"(8A) In this section and in sections 32A to 32C—

'generated' means generated at any place whether situated in the United Kingdom or elsewhere, and cognate expressions shall be construed accordingly;

'Northern Ireland authority' means the Northern Ireland Authority for Energy Regulation;

'Northern Ireland supplier' means an electricity supplier within the meaning of Part 7 of the Energy (Northern Ireland) Order 2003."

(4) In section 32A of that Act (supplementary provision relating to orders under section 32), in subsection (3) for the words from "the differences" onwards substitute "no supplier would by virtue of the differences be unduly disadvantaged in competing with other suppliers".

(5) After that subsection insert—

"(3A) In subsection (3) 'supplier' means an electricity supplier or a Northern Ireland supplier."

(6) In subsection (7) of that section, for "obligation imposed" substitute "matters dealt with".

(7) The requirements of section 32(7) of that Act (consultation before making an order) may be satisfied in the case of an order containing provision made by virtue of this section by consultation that took place wholly or partly before the commencement of this section."

The noble Lord said: My Lords, Amendments Nos. 191E, 191F, 191G and 191H make further provisions relating to the issue of ROCs with respect to Northern Ireland. First, Amendment No. 191E makes a number of supplemental changes relating to the issue of Great Britain ROCs for renewable electricity supplied in Northern Ireland. To avoid overlap between GEMA's role and that of the Northern Ireland Authority for Energy Regulation in respect of such electricity, the Northern Ireland Authority will issue NIROCs for generating stations located in Northern Ireland, including its inland waters but not UK territorial waters adjacent to Northern Ireland, and GEMA will issue ROCs for all other generators. GEMA may not, however, issue a ROC in respect of

1075
electricity supplied in Northern Ireland, and must revoke any such ROC that it has already issued, if the Northern Ireland Authority notifies it that the authority is not satisfied that the electricity in question has been supplied to customers in Northern Ireland. For electricity supplied in Great Britain, the position will remain unchanged, with GEMA as the only issuing authority.
Turning to the other amendments in this group. Amendment No. 191F also provides for the sale of NIROCs that relate to Northern Ireland NFFO—pronounced "noffo"—output, separately from the renewables electricity to which the NIROCs relate. Without this provision, Great Britain suppliers are unlikely to participate in auctions of NIROCs with the underlying electricity since they would have no use for the electricity which cannot be exported from Northern Ireland to Great Britain because of the interconnector limitations.
Finally, the Government are taking powers in Amendment No. 191F to allow a proportion of the funds arising from the auctioning of Northern Ireland NEFO ROCs to be paid to DETI. The DETI's existing obligation to pay moneys received into the Consolidated Fund of Northern Ireland will apply to moneys that DETI receives as a result of exercise of this power. However, DETI intends to request that a budget allocation is made for an amount of money equal to any such payments into the Consolidated Fund to be used for the promotion of the use of renewable energy sources in Northern Ireland. This provision is similar to the provision already available in England and Wales and which is being sought by Scotland within this Bill. On the basis of the ROC prices reached in recent equivalent Scottish auctions of ROCs, the total proceeds of the Northern Ireland NFFO auction are expect to amount to between £4 million and £5 million per annum during the early years and declining thereafter until the contracts expire in 2010.
Amendment No. 191G makes clear that both GEMA and the Northern Ireland Authority are entitled to enter into arrangements for GEMA to carry out Northern Ireland renewables obligation functions of the Northern Ireland Authority. Clause 109 currently refers only to GEMA as being entitled to enter into these arrangements.
Amendment No. 191H replaces a reference to Ofreg with a reference to the "Northern Ireland Authority" and is a minor drafting change. I beg to move.
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendment No. 191F:
After Clause 108, insert the following new clause—
"ISSUE OF GREEN CERTIFICATES IN NORTHERN IRELAND
(1) Article 54 of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)) (which contains provision corresponding to provision contained in section 32B of the 1989 Act) is amended as follows.
(2) After paragraph (2) insert—
"(2A) In paragraphs (1) and (2) 'Northern Ireland' does not include any part of the territorial sea of the United Kingdom.
(2B) The provision that may be contained by virtue of this Article in an order under Article 52 includes—

(a) provision for the person to whom a certificate is to be issued to be determined either before or after the supply of the electricity to which it relates; and

(b) provision for a determination as to the person to whom a certificate is to be issued to be made in accordance with such arrangements as may be specified in or determined under the order.

(2C) In the case only of a certificate relating to electricity that has been acquired, or is required to be acquired, under a qualifying arrangement, the arrangements within paragraph (2B)(b) that may be specified in or determined under the order include arrangements—

(a) requiring the determination of the person to whom the certificate is to be issued to be made by reference to financial bids made in respect of the certificate or in respect of both the certificate and the electric ity t o which it relates; and

(b) requiring that person to make a payment, in accordance with his bid, to such person as may be specified in or determined under the order.

(2D) In the case only of a certificate relating to electricity that has been acquired, or is required to be acquired, under a qualifying arrangement, provision falling within paragraph (2B)( b) may require the relevant person—

(a) to make and implement the arrangements that are specified in or determined under the order; and

(b) to comply with directions given to him by the Authority for that purpose.

(2E) A person who receives a payment in accordance with provision made by virtue of paragraph (2C)(b) shall apply the money received in such manner as the Department may direct.
(2F) A direction under paragraph (2E) may require that the money received or part of that money be paid to the Department.
(2G) Part VI shall apply in relation to a requirement imposed by virtue of paragraph (2D) or (2E) on a person who is not an electricity licence holder as if he were an electricity licence holder."
(3) After paragraph (3) insert—
"(4) An order under Article 52 may confer on the Authority functions in Northern Ireland in relation to the issue of Great Britain certificates.
(5) In this Article—
'Great Britain certificates' means certificates that are or may be issued by the Gas and Electricity Markets Authority in accordance with provision included, by virtue of section 32B of the Electricity Act 1989, in an order under section 32 of that Act;
'qualifying arrangement' means an arrangement made pursuant to an order under Article 35 of the Electricity Order (or such an arrangement as modified or replaced by virtue of an order under Article 57 of this Order);
'relevant person' means, in relation to electricity that is acquired, or is required to be acquired, under a qualifying arrangement, the person who acquired it, or who is required to acquire it."
(4) The requirements of Article 52(6) of that Order (consultation before making an order) may be satisfied in the case of an order containing provision made by virtue of this section by consultation that took place wholly or partly before the commencement of this section.
(5) This section extends to Northern Ireland only."
On Question, amendment agreed to.
Clause 109 [GEM A's power to act on behalf of Northern Ireland regulator]:
Lord Triesman Lord Triesman moved Amendments Nos. 191G and 191H:
Page 89, line 37, after "GEMA" insert "and the Northern Ireland Authority for Energy Regulation ("the Northern Ireland Authority")"
Page 89, line 38, leave out from "arrangements" to second "for" in line 39 and insert "for GEMA to act on behalf of the Northern Ireland Authority"
On Question, amendments agreed to.
Lord Triesman Lord Triesman moved Amendment No. 191J:
Page 89, line 40, leave out "OFREG's" and insert "the 2003"
The noble Lord said: My Lords, this is a small amendment, as noble Lords may be delighted to know, which deletes the reference in subsection (2) of Clause 109 to Ofreg and replaces it with a reference to the Northern Ireland Authority. The result of this amendment is that subsection (2) of Clause 109 defines,
"the 2003 renewables obligations functions",
as being those functions conferred on the Northern Ireland Authority under or for the purposes of Articles 52 to 55 of the Energy (Northern Ireland) Order 2003. This brings consistency of language to this part of the Bill, with the relevant Northern Ireland legislation. It is desirable to have clarity and consistency, and it is on that basis that I commend the amendment. I beg to move.
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendment No. 191K:
Page 90, line 1, leave out "OFREG's" and insert "the 2003"
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendment No. 191L:
Page 90, line 2, leave out "OFREG" and insert "the Northern Ireland Authority"
The noble Lord said: My Lords, the speed has almost caught me out. I have turned past the amendment; forgive me. I think that we have covered the amendment.
The Deputy Speaker (Lord Brougham and Vaux): My Lords, it stands on its own.
Lord Triesman: My Lords, I apologise. It is also a textual amendment that inserts "the Northern Ireland Authority" to replace "OFREG". Whether or not it stands on its own, it has exactly the same impact as previous amendments. I beg to move.
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendment No. 191M:
After Clause 109, insert the following new clause—
"CONSULTATION IN RELATION TO NORTHERN RELAND RENEWABLES ORDERS
(1) This section applies where the Department of Enterprise, Trade and Investment in Northern Ireland amends the provisions of Part 7 of the 2003 Order (renewables obligations for Northern Ireland suppliers) by way of an amending order to take account of amendments of the 1989 Act made by this Chapter.
(2) In the case of a renewables order containing provision made by virtue of the amending order, the requirements of Article 52(6) of the 2003 Order (consultation before making a renewables order) may be satisfied by consultation that took place wholly or partly before the amending order came into force (including consultation taking place before the commencement of this section).
(3) In this section—

"amending order" means an order under Article 56 of the 2003 Order;

"the 2003 Order" means the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6));

"renewables order" means an order under Article 52 of the 2003 Order.

(4) This section extends to Northern Ireland only."
The noble Lord said: My Lords, I shall speak to Amendments Nos. 191M and 191N. The first relates to the timing of consultations on a renewables obligation order for Northern Ireland, allowing the DETI to consult on the detail as soon as possible and, if necessary, before it has made the amending order that it needs to make to reflect the changes introduced to the Electricity Act by the Bill. The new clause extends to Northern Ireland only.
The second amendment, Amendment No. 191N, allows the DETI to modify energy licence conditions in relation to amendments made to the energy order. Its principal purpose is to ensure that some or all the proceeds of the sales of the Northern Ireland NFFO NIROCs can, if appropriate, be used to offset the cost of the Northern Ireland NFFO to Northern Ireland consumers. That is already the case in relation to funds from the sales of the Northern Ireland NFFO electricity itself. That power will be able to be used for funds that have not been directed to other renewable uses by the DETI.
The amendments are useful and will ease the implementation and administration of renewable energy policy in Northern Ireland. I beg to move.
On Question, amendment agreed to.
Lord Triesman Lord Triesman moved Amendment No. 191N:
After Clause 109, insert the following new clause—
"MODIFICATION OF CONDITIONS OF NORTHERN RELAND ELECTRICITY LICENCES
(1) In Part 7 of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)) (renewable energy sources), after Article 58 insert—
"58A MODIFICATIONS OF LICENCES IN CONNECTION WITH ENERGY ACT 2004
(1) Where the Department or the Authority considers it necessary or expedient to do so in connection with—

(a) amendments of this Order made by section (Issue of green certificates in Northern Ireland) of the Energy Act 2004, or

1079

(b) provision made by an order under Article 56 to take account of amendments of the Electricity Act 1989 made by Chapter 3 of Part 2 of that Act of 2004,

it may modify the conditions of an electricity licence.
(2) The power to make modifications under this Article includes power to make incidental, consequential or transitional modifications.
(3) Before making a modification of a licence condition under this Article the Department shall consult the Authority and the licence holder.
(4) Before making a modification of a licence condition under this Article the Authority shall—

(a) consult the licence holder; and

(b) obtain the consent of the Department to the modification.

(5) Paragraphs (3) and (4)(a) may be satisfied by consultation—

(a) that, in the case of a modification within paragraph (1)(b), took place wholly or partly before the order in question comes into force; and

(b) that, in any case, took place wholly or partly before the commencement of this Article.

(6) Where the Department or the Authority makes any modifications under this Article it shall publish those modifications in such manner as it considers appropriate.
(7) The power conferred by virtue of paragraph (1)(a) may not be exercised after the end of the period of two years beginning with the commencement of this Article.
(8) The power conferred by virtue of paragraph (1)(b) may not be exercised in relation to an order under Article 56 after the end of the period of two years beginning with the day on which the order comes into force."
(2) This section extends to Northern Ireland only."
The noble Lord said: My Lords, I beg to move.
Baroness Carnegy of Lour: My Lords, the fourth and fifth lines from the bottom of page 8 in the Marshalled List make up proposed new paragraph (2) in the amendment, which reads:
"The power to make modifications under this Article includes power to make incidental, consequential or transitional modifications".
Are those modifications limited in any way? When Parliament legislates in such a way, it is usual to make quite sure that such modifications are limited to the matter under consideration in the relevant part of the Bill.
Lord Triesman: My Lords, the geographical limitation is quite clear; it is self-evidently to Northern Ireland. The energy licence conditions in general are modifications simply intended to ensure that the proceeds of the sale of NFFO NIROCs in Northern Ireland are used to offset costs to Northern Ireland consumers. I do not think that there is a limitation placed on the extent to which that may be achieved; it will probably he conditioned in large measure by the sums realised.
On Question, amendment agreed to.
6.15 p.m.
Lord Ezra Lord Ezra moved Amendment No. 192:
After Clause 109, insert the following new clause—
"CHAPTER 4
ELECTRICITY GENERATION USING CLEAN COAL TECHNOLOGIES
OBLIGATION IN CONNECTION WITH ELECTRICITY FROM COAL
After section 32C of the 1989 Act there is inserted—
"32D OBLIGATION IN CONNECTION WITH ELECTRICITY FROM COAL
(1) The Secretary of State may by order impose on each electricity supplier falling within a specified description (a "designated electricity supplier") an obligation to do what is set out in subsection (3) (and that obligation is referred to in this section and sections 32E to 32G as the "clean coal obligation").
(2) The descriptions of electricity supplier upon which an order may impose the clean coal obligation are those supplying electricity—

(a) in England and Wales;

(b) in Scotland; or

(c) in Northern Ireland,

excluding such categories of supplier (if any) as are specified.
(3) Subject to the provisions of this section and sections 32E and 32G, the clean coal obligation is offered to designated electricity suppliers who, before a specified day, produce to the Authority evidence of a specified kind showing—

(a) that it has supplied to customers in the United Kingdom during a specified period such amount of electricity generated from coal by using clean coal technologies as is specified in relation to such a supplier;

(b) that another electricity supplier has done so (or that two or more others have done so); or

(c) that, between them, they have done so.

(4) Before making an order, the Secretary of State must consult—

(a) the Authority;

(b) the Council;

(c) the electricity suppliers to whom the proposed order would apply;

(d) the generators of electricity from coal; and

(e) such other persons, if any, as he considers appropriate.

(5) In this section—
"clean coal technologies" means specified technologies for the generation of electricity from coal that meet specified pollutant emission performance criteria.
"specified" means specified in the order.
(6) An order under this section shall not be made unless a draft of the instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.""
The noble Lord said: My Lords, with the amendment are grouped Amendments Nos. 193 to 195, which are consequential. The amendment deals with the need as I see it for an obligation for the use of electricity from coal. I moved a similar amendment in Grand Committee on 12 February and have taken careful note of what was said on that occasion. I have drafted this amendment accordingly.
Coal now represents our most substantial energy reserve. We are running out of oil and gas in the North Sea and shall become increasingly dependent on imports. It is therefore important to work out ways in which those reserves of coal can be used effectively to

1081
diminish our import dependence. As we all know, the problem with coal is that, burnt in traditional methods, it creates a lot of pollution. However, there are ways in which it can be burnt to minimise that pollution.
The Government have supported the concept of clean coal technologies—I refer specifically to page 92 of the energy White Paper—and have drawn attention to the fact that they can be relevant not only to our use in this country, but even more so to countries such as China and India that will use substantial quantities of coal. They have very big reserves of coal for the future and it is important, from the point of view of the global environment, that they burn that coal in as efficient a manner as possible. Therefore, the existence of plant in the UK demonstrating the ways in which that could be done would be of considerable importance not only here, but in the promotion of our activities abroad.
The amendment is drafted to limit the possibility of introducing such an order until substantial consultations have taken place and until, under its proposed new subsection (5), "clean coal technologies" are defined as,
"the generation of electricity from coal that meet specified pollutant emission performance criteria".
In other words, we are talking about issuing orders for the use of coal after it has been treated in a green manner, and after very full consultation.
Let us be quite clear: even if, as I hope, such a provision were included in the Bill, it would take a long time before the fuel could come on to the market. It would be at least three years before one, two or perhaps even three medium-sized electricity generating plants would be constructed and the order could bite. Therefore, there is not very much commitment to financial involvement.
On the other hand, such a provision in the Bill would achieve two important things. First, it would encourage the coal industry, which now has grave doubts about its future, and to which I believe the Labour Party has traditionally given its wholehearted support. Here is a way of reinforcing that support, having regard to future environmental considerations. Secondly, as I have pointed out, this could open up enormous prospects for exports. But I do not believe that we can persuade possible overseas customers to accept our technology unless we have something to show them. At the moment we have nothing. We have a limited amount of research, which is much overshadowed by greater research efforts in the United States and elsewhere.
This could be a positive measure that is much in line with the objectives of the energy White Paper. It could help to diminish our growing dependence on imports and could give some prospect of a future to our largest remaining indigenous energy resource. Therefore, I beg to move.
Lord Jenkin of Roding: My Lords, I was intrigued by the comments of the noble Lord, Lord Ezra, about the traditional support given by the Labour Party to the coal industry and I thought of the enormous burden
1082
that now rests on the shoulders of the noble Lord, Lord Randall, because of his position as sole occupant of the Labour Back Benches. I beg the House's pardon, because the noble Lord, Lord Carter, has just appeared. That makes two.
The noble Lord, Lord Ezra, makes an important point. Very little is being done in this country to advance the cause of clean coal technology. Indeed, it is not many months since one of the effects of NETA—the electricity trading arrangements—drove DRAX almost out of business, operating for only four hours out of 24. That was not a clever move, because DRAX power station has the greatest amount of flue gas desulphurisation in this country. The noble Lord is correct to say that there is a huge amount of work being carried out in other countries and that should be the case here.
I remember a visit I made some years ago, as a shadow energy spokesman, to the Coal Industry Research Establishment, just outside Cheltenham. There I encountered a technologist who appeared to be working on his own on the underground gasification of coal as a much better way of exploiting our coal resources than by sending men down the pits. I put my arm around his shoulder and said, "My friend, I don't know whether you realise it, but you may have the entire future of the coal industry on your shoulders". I do not know what became of that research, but it is one of the ways in which—through underground gasification—one can produce a product that can be treated effectively with a variety of refining techniques and produce what the noble Lord, Lord Ezra, seeks: the ability to take heat from coal without generating carbon dioxide and other noxious gaseous emissions. We ought to be doing that.
After consulting briefly with several people in the electricity industry, I found that they had not heard of the amendment tabled by the noble Lord, Lord Ezra, and they felt that to introduce it at this stage might be premature. But I hope that the Government will take seriously the comments of the noble Lord about the need to step up research on clean coal technology. It is essential because, as the noble Lord said, we have hundreds of years of reserves and it would be foolish if a technology were devised that we could not use. Although we may not feel able to support this particular amendment, the thought behind it is extremely important.
Baroness Carnegy of Lour: My Lords, the noble Lord, Lord Ezra, knows a great deal about this matter. It would appear that we need the widest possible range of energy sources and we need to use our own coal in the best possible way. I can see the problems of timing, but the main point is that the Government must bear in mind the tremendous advantage that there has been to this country by exploring for oil in the deep sea. That technology has been sold to our enormous advantage across the world—to China and many other countries—because the oil industry had sufficient vision to see that, as the oil in the North Sea reduced,

1083
the industry's skill and technology could be sold. Surely we need to do that in the case of clean coal—and that is the noble Lord's most important point.
I hope that the Government will not just dismiss the amendment as a pipe dream—the matter should be attended to now regarding the export of expertise. We must ensure that we have that expertise to export.
Lord Whitty: My Lords, the role of clean coal technology is likely to be important in our energy policy and the sustainable use of our coal resources. Coal-fired power generation is likely to be with us for many years and if we are to meet our energy targets we need to use it significantly more cleanly than at the moment. I somewhat refute the suggestions that the Government have been doing nothing about this matter. We have recognised for some years that clean coal technology has a role to play and we have been investing in R&D in this area. In fact we have committed some £9 million of support for this programme, including 39 projects and another £4 million for cleaner coal technology over the next two years. That includes not just the cleaner use of technology and the mitigation of negative carbon effect; the DTI also has a programme under way looking at the feasibility of underground gasification of coal, referred to by the noble Lord, Lord Jenkin, which could also make a contribution. As the noble Baroness, Lady Carnegy, said, it could help not only us but elsewhere in the world.
In addition we are starting to develop, in collaboration with the energy industries, a new carbon abatement technology strategy and coal will be a key element. Some of that will be published next year. So I do not believe that the Government's commitment to clean coal technology should questioned. We have our own R&D and we learn from international R&D.
However, the amendments before us would effectively create a clean coal obligation. A mechanism for clean coal similar to the renewables obligation would be hugely more complicated. We know that renewable technologies do not create any emissions, but for fossil fuels there are not only carbon emissions but a number of other gases which can damage the environment, particularly sulphur and NOx, for which developments are also taking place. The measurement of how far the clean coal technology was contributing to carbon saving also needs to take account of what we are doing in relation to other gases. Also, it is not easily offset against the renewables obligation and other more straightforward measures that are required of industry in that regard.
We will implement some other measures that will encourage the control of emissions. The Large Combustion Plant Directive, which will primarily focus on sulphur and nitrous oxides when it is implemented in 2008, will also have an effect on coal burning. The emissions trading scheme that is due to start next year will encourage the control of carbon dioxide emissions from coal and other fuels. Both measures will help to drive the markets to more sustainable and more novel uses of coal within the technologies available—and will help us to develop
1084
better technologies. To express that in terms of an obligation would be difficult and complicated. It would divert from the renewables obligation and it would not be clear how much of a contribution it could make compared with other measures to support and deliver clean coal technologies that are either in place or will be in place in a few years' time, which will make some contribution to our carbon reduction objectives.
I support clean coal technology and want to see measures to speed up its adoption, but I do not think that an obligation is the way to do it.
6.30 p.m.
Lord Ezra: My Lords, I thank the noble Lord, Lord Jenkin of Roding, for his supportive remarks and the noble Baroness, Lady Carnegy. I thank the Minister for his encouraging remarks. What worries me is how we move from supportive remarks and from limited expenditure on research and development to having a plant or two in this country. I cannot see how that will happen. The way we are going, we could go on dribbling a few million pounds more here and there into research and development, which is minute compared with what is being done in the United States, for example, from which experience we should be learning.
When do we reach the point at which we can have a plant to demonstrate, to potential customers not only in the UK but in China, India and elsewhere? That is the problem that worries me, which I shall continue to explore and tackle. I hope the Minister and his colleagues in the Government will give it further consideration. The White Paper referred specifically to a demonstration plant. It states on page 92, which I quoted earlier: "With this in mind—namely, to have a plant which can be used as a demonstration for other countries—
"we have already put in place a programme of support for advanced traditional cleaner coal technologies which is intended to bring forward demonstrator projects that may help to showcase the relevant technology more widely".
When is that going to be done? When will we see the hardware? When will we move from talk and limited amounts of R&D to having a bit of plant in place? It was stated in the White Paper, but lacking in the Minister's remarks. He did not indicate when we might see the plant in operation. That was the purpose of my amendment.
However, I would like to reflect on all that was said and consider whether to return to the issue at the next stage or in some other way. In the mean time I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 193 to 195 not moved.]
Lord Ezra Lord Ezra moved Amendment No. 195A:
After Clause 109, insert the following new clause—
"RENEWABLE TRANSPORT FUEL OBLIGATION

(1) In order to comply with EU Directive 2003/301EC, which requires Member States of the European Union to demonstrate how biofuels are to be placed on their markets in increasing quantities to 2010, and to comply with the further requirement

1085
that Member States shall inform the Commission by 1st July 2004 of their initial targets for December 2005 and how they plan to meet these, there shall be a renewable transport fuel obligation for the United Kingdom.

(2) The obligation shall 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.

(3) For the calendar year 2006 this proportion shall be I per cent by energy content and this proportion shall increase annually by 1 per cent until 2010.

(4) Producers, blenders and other relevant companies and persons shall make such returns to Her Majesty's Customs and Excise as may reasonably be required to demonstrate such compliance with the obligation both as to the amount of biofuel produced and used and the origin of the relevant feedstocks.

(5) Biofuel producers, blenders and other relevant companies and persons shall receive the biofuel duty rebate due to them on fulfilment of their obligations under this section.

(6) A shortfall on their obligation shall incur a proportional loss of such rebate as set out in subsection (5).

(7) Any shortfall on the obligation shall in addition incur a penalty in proportion to the shortfall and this penalty, expressed as pence per litre, shall be fixed annually.

(8) Any such penalty payments shall be pooled and the total amount distributed annually to compliant suppliers pro rata to supplies placed by them the market.

(9) No fuel shall be recognised as a biofuel for the purpose of the obligation unless the carbon dioxide saving on a full life cycle analysis can be shown in the returns made under subsection (4) to be in excess of a 60 per cent improvement compared with the relevant fossil fuel comparator and in the case of biodiesel this shall be ultra low sulphur diesel and for bioethanol it shall be ultra low sulphur petrol.

(10) For the purposes of the obligation, biofuels shall be defined as fuels produced from the biodegradeable fraction of agricultural products, wastes and residues (including vegetable and animal substances), forestry products and waste and the biodegradeable fraction of industrial and municipal waste.

(11) The power conferred by this section on the Secretary of State and the Treasury to make an order or regulations is a power exercisable by statutory instrument under the affirmative procedure."

The noble Lord said: My Lords, this amendment, which deals with biofuels, was moved in Grand Committee. It is an important element in energy policy and it would be an important addition to the Bill. It proposes a renewable transport fuel obligation. From what we have just discussed I imagine that the Government do not particularly like the term "obligation", but it is appropriate in this case.
I have taken full account of what was said in Grand Committee. The revised amendment refers specifically to the EU directive 2003/30/EC, which has been available for some time—I believe that it was published last July—and on which consultations are meant to be taking place.
The proposal before us is to introduce legislation that would support the application of that directive. There is no doubt, both in the Government's mind and elsewhere, that there can be a big contribution to their objectives on reducing emissions by introducing progressively a proportion of renewable fuels into the energy consumed by transport. Through the development of biofuels that objective could not only be served but it would give an additional outlet for the agricultural industry, which is going through so much difficulty at the present time.
Many countries are already introducing an element of biofuel into their petrol. The biggest example is Brazil, where up to 20 per cent biofuels have been introduced into petroleum usage, but the Brazilians have substantial amounts of sugar at their disposal which creates biofuels. We are talking in much smaller terms of increasing annually by 1 per cent until 2010. That could be an enormous benefit both in the achievement of the environmental objectives and for the agricultural industry. We believe that the amendment is in line with the EU directive and we hope that the Government will be able to support it. I beg to move.
Lord Palmer: My Lords, I have put my name to the amendment because I believe that we have the opportunity to make a major step forward in achieving our national aims of cutting CO2, improving local air quality, increasing the sources of supply of road fuels and boosting the productivity of our farming sector at an affordable cost. I remind your Lordships that I am the unpaid president of the British Association for Bio Fuels and Oils, more commonly known as BABFO. I know how disappointed the noble Lord, Lord MacGregor, is not to be able to speak to the amendment.
The United Kingdom is moving towards a position of net imports of road fuels. World prices are also rising. Brent crude has been close to 30 dollars per barrel for some time. Political uncertainty in areas where we have to buy oil makes it sensible to build a domestic industry from our own sustainable resources. I cannot think how many times in this Chamber I have mentioned that North Sea oil will not last for ever.
In today's climate with world terrorism, a degree of self-sufficiency must be welcome. We still import 18 per cent of our petrol products. That figure is due to rise by 2 per cent this year.
As the noble Lord, Lord Carter, mentioned in Grand Committee, at present about half a million hectares of land lie idle under set aside—a scandalous waste of a natural resource. A similar area of land has been arable and could be brought back into cultivation for fuel. Such a move would be a major national gain in productivity, as the agricultural overhead costs relating to that land are effectively already being met by existing businesses. Such a productivity gain should be attractive to the Chancellor.
The Treasury has already provided a 20p per litre rebate for biodiesel and the same is promised for bioethanol by 2005. However, that is simply not enough to provide the kick-start to the industry that we need as biofuels cost twice as much as fossil fuels before VAT and duty.
I find that one of the most depressing things is how, once again, this country is being left behind by our European partners. Indeed, the noble Lord, Lord Ezra, mentioned what is happening in Brazil. Other countries are far and away advanced in technology, in usage and with a more relaxed tax regime than we are in this country.

1087
One of the reasons I feel so strongly about this is, as a farmer in Scotland, I discovered by chance that my oilseed rape was being exported to Austria and Germany and made into fuel. If they can do it, why cannot we?
Everybody I meet is lost as to why the Government will not embrace this with open arms; every countryside body supports it; every farming body supports it; every environmental body supports it; and all the farming press support it. Only last week, two well respected magazines mentioned this very amendment. One even had a half-page form for farmers to fill out and send to their MP.
All this leads one to believe that biofuels should no longer be left in the wilderness and just to confirm that, on 11 March the other place debated biofuels. It is one of the most interesting and informative debates I have ever read in the other place. I wish I had time to quote all 36 columns from Hansard. Every speaker, from all sides of the House, argued the case for biofuels in a most constructive manner. All speakers, without exception, were pro-biofuels. Indeed, the amendment we moved in Committee was even mentioned.
In the words of the honourable lady, Mrs Spelman,
"no one has dissented on the matter under discussion. This is quite extraordinary".—[Official Report, Commons, 11/3/04; col. 1741.]
Indeed it is and I so wonder why. Yet it was sad to read at col. 1746 that the Minister said that the "case was persuasive" and yet the Government felt unable to support the amendment.
The amendment would ensure that all the benefits I have described would accrue to the nation as a matter of certainty. I commend it to the House and hope that the noble Lord, Lord Whitty, will accept it. After all the years of fighting for this cause, we are so nearly there.
I leave your Lordships with one final but perhaps vital thought. A tonne of fossil fuel not burned today is available for future use, but every tonne of biofuel not produced today is lost for ever.
Lord Dixon-Smith: My Lords, I hesitate to intervene in the debate not because I have any quarrel with the principle being enunciated but because I have something to say about the effectiveness of biofuels. There is no doubt that from an agricultural point of view the introduction of biofuels—be they bioethanol from wheat or sugar beet in this country or biodiesel from oilseed rape—is highly desirable. However, we should not assume that it will solve the nation's energy problems and that aspect concerns me.
I will not bore the House with all the arithmetic, but let us put the problem in perspective. If all the land that is set aside in this country were used for the production of biodiesel, it would produce only 3 per cent of our annual consumption of diesel oil. That is all. If all the land in the country were put into the production of biodiesel, we would still have the most enormous deficit in fuel.
That is not to say that such a contribution is not worth making. To the extent that biodiesel is carbon neutral, it is better than pure consumption of mineral hydrocarbon fuel,
1088
but we have a huge problem. The difficulty is that plants are inefficient converters of solar energy. If, for instance, one put the same area of land into photoelectrics—I know that the present economics make it impossible—we would produce 10 or 15 times as much energy. We need to think carefully about what we are doing when we are in the business of green energy.
I do not oppose the policy—it is completely supportable—but we should realise that it can make only a marginal contribution to our national energy problems. I speak in order to make apparent the scale of those problems. They will not be solved by any easy measures and it is important to realise that the scale of the difficulties we face nationally and globally are far more severe than anything most people have begun to think about.
6.45 p.m.
Baroness Carnegy of Lour: My Lords, my noble friend clearly believes that the people who advocate biofuels are over-egging the argument. Should all the set-aside land in the country be turned to that crop, and should we get 3 per cent of our energy from it, it would be wonderful because all that land is useless. In fact, it is a blot on the landscape and it depresses everyone.
As the Minister knows, there is a great problem for farmers: they do not know in what direction they should go because the problems of the CAP are by no means solved. Farmers throughout the country are trying to decide how to react and to respond and it is extremely difficult to know what to do.
From the agricultural point of view alone, to be able to produce a small amount of energy from crops grown for that purpose would be a great help. It would be an objective and eventually help us move away from our false position on funding. Doubtless, that funding will diminish in time if the EU can persuade its members thus. Therefore, the Minister should raise his head a little more when he goes sneaking into the DTI to be briefed on the Bill. It is not merely a question of how much energy can be produced.
I want to counterbalance what was said by my noble friend Lord Dixon-Smith. He knows all about farming and will appreciate my comments. However, he was right to point out that it is not a huge part of the whole, but it is an important element and we are being extremely sleepy about it. I speak as someone who lives in an area where a great deal of rape is going to Europe to be processed in the way described by the noble Lord, Lord Palmer. It is extremely depressing.
Lord Tombs: My Lords, I support the amendment partly on its own merits and partly on broader grounds to which I shall turn in a moment.
I would not write it off on the grounds of its limited contribution, as did the noble Lord, Lord Dixon-Smith. I believe that the contribution available from that amount of land from photovoltaic sources is far less accessible than what is proposed in the amendment. Therefore, I think it is worth doing.

1089
The broader aspect I wanted to tackle is that so far what is described as the Government's energy policy is really an electricity policy. It involves sources that substitute for conventional means of generating electricity. Electricity is a big polluter but it is not the biggest. The biggest polluters are transport and gas, to which no attention has been given. This is at least a toe in the door towards looking more broadly at other forms of energy which pollute. I commend that broader point to the Government's consideration. I would like to believe that they are thinking more broadly than the easy route that they have so far followed. I support the amendment.
Lord Carter: My Lords, in speaking to support this amendment I should also declare an interest as the unpaid vice-chairman of the British Association for Bio Fuels and Oils, or BABFO.
I will come clean. I phoned the Public Bill Office on Friday afternoon to add my name to the amendment to find out that I was too late to do so. Even former Chief Whips get the procedure wrong occasionally.
I will deal quickly with the points raised by the noble Lord, Lord Dixon-Smith. Nobody is suggesting that this is the answer to our energy problems. I wish to make two simple points. First, it would be useful if we could use land that is currently in set-aside. I will return to that point. Secondly, there is a proposal that all London taxis should run on biofuels. That would make a significant reduction to the rate of pollution in London.
I moved this amendment in Grand Committee. As we have heard from the noble Lords, Lord Ezra and Lord Palmer, the amendment refines the arguments that were expressed then, so there is no need to repeat them at length. There is a very strong case for biofuels on environmental grounds, as they contribute to the reduction of CO2 emissions. Recent figures show that emissions in the field of road transport are increasing. That is the one area of activity where they are doing so. On economic grounds, it is very efficient. We are quickly meeting our environmental objectives. It provides a viable agricultural alternative to the rural economy.
I will quote from the evidence that was given to the Environment and Agriculture Sub-Committee—EU Sub-Committee D—on which I sit. The committee is currently investigating climate change. We heard evidence from Sir David King, Chief Scientific Advisor to the Government. He said that we should support all sorts of technologies that will lead to reductions in carbon dioxide emissions. I said that the technology that he mentioned was for the long run, but a simple technology—the use of biofuels—is immediately available. He then said:
"I do think, once again, that we need this broad menu approach. Biofuels across Europe is seen to be a big step forward in this way. We do have to recall just the one limitation here, and this is around the question of land use. If we are moving away from farming for food production, then biofuels might be a good way to move into land use".
1090
I said that very large areas of land with nothing growing on them at all which are in set-aside could be used for biofuels. He came up with a marvellous quote:
"Biofuels are considerably smarter than set-aside, yes".
As we are discussing agricultural alternatives, I hope the Minister will not use the example of the biomass of the willow coppice. This argument is now completely exploded. The mid-term review had made the future uncertain for farmers. The idea that they will put land into willow coppice and wait from seven to 15 years for a return is not in accord with reality.
Since we met in Committee, there have been a number of developments. Friends of the Earth has had a meeting with interested parties. They produced some interesting ideas on tradable and levy-exemption certificates. Two members of BABFO, Wessex Biofuels and Wessex Grain, have done some extremely sophisticated modelling on the way that these might work. They point to the existing scheme in the electricity industry—renewable obligations certificates or ROCs. They have devised a simple mechanism that could be used.
The feedback from those involved in informal consultation with the departments involved in biofuels—Defra, the Treasury, The Department for Transport and the Regions and the DTI—suggests that the current reluctance to commit to an obligation centres around the belief that an operable mechanism is not yet available, and that any commitment would prejudice the subsequent setting of UK biofuels targets.
A simple obligation mechanism along the lines already operated in the electricity industry could be readily established and would allow a flexible and efficient incentive to future biofuels production and use across a range of future targets.
While mandates and obligations are often assumed to have a similar application, they vary in one significant area. Where mandate requires a set action, effectively with no exception, obligation allows for non-compliance, but at a price. Although mandatory inclusion of biofuels would be superficially attractive to the Government as it would not be state funded, those mandated would have no choice but to obtain supply and pass on the cost. There is no clear incentive to do this efficiently, and no control over the cost, which would be passed on as "hidden taxation". In the case of obligation, the financial impact in the market is limited to the penalty on those not complying, and the proceeds passed to those who do comply as an incentive to increase supply. An extremely sophisticated financial model has been produced which could be made available to officials.
There was a debate in the House of Commons in March where this was supported by all parties, and there was also an Early Day Motion which has had a substantial number of signatures.
I am sure that my noble friend the Minister has been briefed to say that biofuels are one of a number of possibilities but we must await the outcome of a consultation. When will this consultation finish? Indeed, has it even started? The Government have known since July 2003 that targets stated by July this year are to come into effect in 2005. They have been extremely slow in getting that consultation started: I

1091
am not sure that it has started yet. Can my noble friend tell the House whether he would expect the results of that consultation to be available before this Bill completes its progress through the House of Commons?
I understand the Government's difficulty in going all the way to support a mandatory obligation. There is another possibility, which is to have a permissive approach. This would put the principle of an obligation into the Bill, but allow the Government to determine the timing, percentages, and so on, by regulation—what might be called a "sunrise clause". As most of this will come from fields of rape, that is particularly apposite.
I am sure that all of us who support the principle of obligation would be willing to discuss a more permissive approach in an amendment for Third Reading with the Minister and his officials. I hope that my noble friend can make some encouraging noises to that effect in his reply. We want to see a renewable transport fuel obligation in the Bill, but we are willing to discuss ways of achieving that aim which the Government would find acceptable.
Baroness Byford: My Lords, I thank the noble Lord, Lord Ezra, for putting forward this amendment, which we debated at great length in Committee. I do not want to cover all of the ground that various noble Lords have touched on today. However, I would like to pose some questions. This afternoon I hope that we can persuade the Government to take a step further in their view on this amendment. Even if they are not willing to accept it, perhaps they may give us some encouraging words and return to the issue at Third Reading. I hope that adding my voice to this amendment will have that effect.
When this was debated in Grand Committee, the noble Lord, Lord Whitty, said that he had great sympathy for the arguments put forward. Later on,
when talking about climate change objectives, he said:
"Biofuels is clearly one of the few options in the short-tomedium term whereby transport could make such a contribution. It could also have some benefit, although relatively marginal, to air quality, as my noble friend Lord Carter said, and to agriculture and the rural economy".—[Official Report, 12/2/04; col. GC 541.]
I would like to add my voice to the hopes experienced by the various people within the agricultural community. The noble Lord will not have been surprised at some of the headlines when the Budget was announced and there was nothing in it on this matter. Everyone was hoping to see headlines on 15 March announcing a "breakthrough in biofuels". Elliot Morley said that the Government would not support the renewable transport fuel obligation amendment to the Energy Bill. He added that any decision on implementing the directive, which lays down minimum targets for member states, would also be subject to public consultation. The noble Lord, Lord Carter, also spoke on that matter. I ask the Minister very directly when consultation is due to start, when it is due to finish, and how soon it will be in the public domain.
1092
The Minister will not be surprised that on 17 March, after the Budget, a headline in Farmers Weekly read:
"Fuel fury from farming leaders".
The farming community had very much expected something from the Budget. The publication stated:
"Farming leaders have slammed Chancellor Gordon Brown for a 'short-sighted' view on biofuels and a hefty tax rise on red diesel".
The vice-president of the NFU, Meurig Raymond, went on to say:
"Today's budget leaves the fledgling biofuel industry in limbo … At a time of increasing public concern towards the environment and energy supply, the Chancellor's views on biofuels can only be seen as short sighted".
I hope that the Government have taken those matters on board.
I do not wish to repeat what everybody else has said, but I shall refer to the debate that my honourable friend Michael Jack introduced—I think that it was on 11 March, but I shall not disagree with the noble Lord, Lord Palmer—during which Caroline Spelman said:
"However, it is worth noting that in January this year, the UK trade in oil was at a deficit of £37 million for the first time for more than 12 years, and that a deficit has been recorded showing a decline of £416 million from the previous month—
those are big figures—
"So the situation is changing. That underlines the point that biofuels offer a strategic, if not immediately cheaper, alternative. That is another strong reason for their serious consideration".
She continued:
"Several Members have pointed out that biofuels give the Government an opportunity to reduce carbon emissions by offering a closed carbon cycle. According to British Sugar"—
I am sorry that my noble friend Lord MacGregor is not in his place today, because I know that he would have spoken to this amendment—
"a saving of up to 70 per cent. can be achieved through the use of biofuels".—[Official Report, Commons, 11/3/04; col. 1742.]
I accept the interesting point raised by my noble friend Lord Dixon-Smith that, even if it happens, it would be only a small proportion. I do not think that any noble Lords present say that it will solve all our crises, but I come from an era in which we want to have eggs in many baskets. The figures that I have just cited explain why I think that this is probably one of them.
In his winding-up speech, the Minister Mr Morley recognised the weight of support for the Commons debate but added:
"A number of Cabinet Sub-Committees deal with energy policy and consider the issue of biofuels and the implementation of the energy White Paper, including this issue … We recognise that the biofuels directive can have an effect, although the targets are indicative—it should not be assumed that they are currently the Government's targets. Consultation will take place".
Again, we in this Chamber get slightly frustrated in this regard. Not one department but several must deal with the matter; and consultation will happen but we do not know when. One thing about which we can be certain is when the Bill will have cleared this I-louse. The Minister went on to say that,
"although we could not support the form of the amendment tabled in the other place, the Government are not opposed in principle to some form of biofuels obligation for road transport … We will

1093
consider that as part of the process of consulting on the implementation of the biofuels directive. When that consultation is made public"—
and I challenge the Minister as to when that is—
"therefore, it will include the issue of an obligation, which will be welcomed by many Members".—[Official Report, Commons, 11/3/04; col. 1746.]
That is where we are at the moment; again we are in this very unsatisfactory position, as we have been without this Bill going through the House. On certain aspects we are waiting for consultations to happen. We are being asked to legislate for something, yet we do not know the outcome of the consultation. Other noble Lords have said it; I shall not repeat it. I accept that the amendment would be only a small part, but from the point of view of farmers, the agricultural industry and others who are looking forward to using different technologies, if the Government do not respond more positively, this will be a wasted opportunity.
7 p.m.
Lord Whitty: My Lords, I think that noble Lords know that I regard biofuels as an important contributor to the climate change objectives. They are among the few aspects that are almost instantly available in the context of transport's contribution, an otherwise difficult area where the problem is still escalating, which is not the case in other sectors, as noble Lords have said. Biofuels could contribute to the agriculture and transport sectors and help to achieve environmental diversity and security.
However, the contribution must be seen as proportionate. The noble Lord, Lord Dixon-Smith, was perhaps too much of a wet blanket on the matter, but nevertheless we should recognise that it has a limited effect on the overall figures. The main way in which the industry and campaigners have argued that the Government should support the issue involves quite large tax incentives. We have already given 20p on biodiesel and bioethanol, which was confirmed for the next three years in the Budget. Although people will argue about the matter, that is roughly the same incentive as given, relative to the price of petrol and diesel, in countries that have done so much better in developing biofuels.
We have already made some substantial moves, but there is the important development of the directive, as noble Lords have said. We will consult on the options for meeting the objectives of the directive. On timing, the Department for Transport will issue the consultative document after Easter. The normal 12-week consultation period will apply and therefore we will complete consultation around the summer. Given that we cannot do everything through fiscal incentives, we must consider the possibility of an obligation along the lines spelt out in the document, perhaps meeting some of the problems that simply adopting the terms of the amendment would create. For example, how would the obligation be policed? I assume that the main method of obligation is through the fuel companies. How would it be possible to impose such an obligation on companies not based in the UK when dealing with imported oil? What would be the best way of dealing with non-compliance and the question of who is committing the offence?
1094
There are a significant number of practical concerns about how we would implement an obligation. Nevertheless, it is one of the means whereby one could deliver the objectives of the European directive, whether or not we agree the exact percentages within it. We certainly intend to consult on the matter. Accepting the amendment would commit us to pursuing that method of delivering substantial use of biofuels and the details of the quantum specified in the amendment without addressing some of the practical objections.
The debate in this House and elsewhere on the amendment and related matters is a useful precursor to the consultation exercise. However, it would not be appropriate for the House to persuade the Government to adopt the amendment as it stands before consultation is completed.
Lord Carter: My Lords, before the Minister sits down, perhaps I may ask some brief questions to seek clarification, even though we are on Report. If, by Third Reading, we were to persuade the Government that we could overcome the practical objections, and were able to produce an amendment that was permissive in the way that I have suggested—which would leave timing, percentages and so on in the Government's hands—would it include the principle of an obligation? I asked the Minister whether he could make any encouraging noises that would enable the Government to agree to the amendment or perhaps the approach suggested when the Bill reaches the Commons.
Lord Tombs: My Lords, before the Minister replies, perhaps I may refer to his comment that it is difficult to tax or to apply obligations to overseas-owned companies. Does he accept that in the electricity renewables obligation we do just that with French, German and American-owned companies operating in this country?
Lord Whitty: My Lords, yes, that is so when we are dealing with a limited number of suppliers and a limited number of channels into the electricity supply system whereas this obligation as drafted in the amendment would apply to a wide range of fuels. Therefore, it increases the complexity. I do not say that there is not a way round it but it is an important increase in the practical objections to the amendment.
On my noble friend's suggestion, I am sure that my colleagues and I would be prepared to talk to noble Lords and others about this area. However, I do not think that we shall reach a definitive conclusion in time for the process within this House, and probably not the process within another place. We already have a date for Third Reading. In view of progress today, it may or may not be met. Nevertheless, it is not far off. We need to ensure that we have genuine consultation, without the Government having made up their mind. I am open to discussing any alternative amendment that the noble Lord, Lord Carter, or anyone else, brings forward. But anything which appears to drive the

1095
Government to one conclusion on this matter would be somewhat difficult. With that qualification, I shall be happy to talk to anybody.
Lord Ezra: My Lords, I thank all noble Lords who have taken part in the debate, including the Minister. All seem to be in favour of doing something along these lines. There has not yet been consultation on the directive, the results of which could lead to a conclusion on how the directive was to be carried out. This could take some time.
None the less, before the Bill leaves this House it would surely be helpful if it made some provision on this important issue on which we have had two fairly lengthy debates. I am glad that the noble Lord, Lord Carter, supported by the noble Baroness, Lady Byford, put forward the suggestion about a more flexible amendment. The Minister was not sure about the timing. None the less, his response was that his door was open; he was ready to talk. I suggest, therefore, that we arrange a meeting between interested Peers and the Minister to devise an amendment—it can be brought forward at the next stage—which will not tie down the Government too much but which emphasises the importance which we all attach to this important issue. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Ezra Lord Ezra moved Amendment No. 195B:
After Clause 109, insert the following new clause—
"CHAPTER 4
MICROGENERATION
STRATEGY FOR MICROGENERATION
(1) For the purposes of promoting and developing the use of new and renewable energy sources, the Secretary of State shall within twelve months of the passing of this Act publish a strategy for microgeneration ("the strategy").
(2) In drawing up the strategy or any revision of the strategy the Secretary of State shall consider the role of microgeneration in—

(a) reducing the emission of carbon dioxide,

(b) alleviating fuel poverty,

(c) reducing the need for reinforcement of electricity networks, and

(d) ensuring security of supply of electricity.

(3) In preparing the strategy or any revision of the strategy the Secretary of State shall consult such persons as in his opinions of producers of energy by means of microgeneration.
(4) The strategy shall include such targets for the generation of energy by microgeneration as in the opinion of the Secretary of State are practicable and cost effective.
(5) It shall be the duty of the Secretary of State to take reasonable steps to—

(a) implement the strategy, and

(b) ensure that any targets included in the strategy are met.

(6) The Secretary of State may from time to time revise the strategy and any revised strategy may set new targets for the generation of energy by microgeneration and it shall be the duty of the Secretary of State to take reasonable steps to—

(a) implement the revised strategy, and

(b) ensure that any targets included in the revised strategy are met.

(7) In this section the following terms shall have the following meanings—
"new and renewable energy sources" means sources of production of energy from or by means of—

(a) wind power,

(b) solar power,

(c) ground source heat,

(d) micro combined heat and power systems,

(e) micro hydro power, and

(f) other low or zero carbon sources;
"microgeneration" means generation of energy by means of equipment installed in, or for use by, a single unit or a small number of units of residential accommodation or office accommodation."

The noble Lord said: My Lords, Amendment No. 195B deals with a strategy for microgeneration. I declare an interest in the subject as I did in Grand Committee. I am interested in particular in the promotion of small-scale generation of electricity.
I emphasise that those who are involved in microgeneration were extremely pleased that the Chancellor mentioned in the recent Budget that it was intended to reduce the rate of VAT on microgeneration equipment from 2005 onwards subject to current tests being carried out successfully. This is an important step forward.
We consider that it should be complemented by another step: to devise a strategy for microgeneration development. When I moved a similar amendment in Grand Committee, the Minister said that he thought it unnecessary because the subject of microgeneration was being dealt with in a number of other ways. My response was that while that is no doubt the fact, it would be helpful if all these strands could be brought together in one document. It would help to focus attention. It would help to achieve what the Government attach great importance to; namely, to increase domestic energy efficiency.
This equipment will be available towards the end of this year and during next year. The sale of increasing quantities of the equipment will help to achieve not only a great increase in energy efficiency in the home—it will enable electricity as well as heat to be produced—but will also contribute to a reduction in CO2 emissions. There is substantial scope for the sale of such equipment in the boiler renewal market. It amounts to about 1 million items per year. So there is a substantial prospect of great improvement in the efficiency of domestic energy consumption through the promotion of this type of equipment.
The Government have already taken one step to promote this concept and I hope that they will be prepared as a second step to devise a strategy for microgeneration which will bring together all that is being done elsewhere, focus attention on the issue and enable us to go forward on the twin planks of government energy policy: to increase energy efficiency, in particular in the domestic market; and to reduce emissions. This development would help to achieve both objectives. I beg to move.
Lord Jenkin of Roding: My Lords, I added my name to the amendment because it seemed to epitomise what should flow from the final break-up of the Central Electricity Generating Board. So long as the CEGB was the primary producer of electricity, it was bound to consist of only large plants and huge transmissions lines, with the distribution that we know. Now that has gone. We are operating in a much freer market. There are opportunities for new technologies of exactly the kind the noble Lord, Lord Ezra, described in order to diversify the supply of electricity in this country.
I believe that that is right. It needs to be a focused strategy. That is what the amendment seeks. That is why I was happy to put my name to it.
7.15 p.m.
Baroness Miller of Hendon: My Lords, regrettably, time is running out. It was not helped by having two Statements. My noble friend Lord Jenkin and I were delighted to put our name to this important amendment.
Noble Lords may remember that in Amendment No. 2 on Clause 1 on Report we included microgeneration in the many matters on which the Government are required to report annually. The amendment has been so well moved by the noble Lord, Lord Ezra, and supported by my noble friend that I need do no more than indicate my support.
Lord Whitty: My Lords, the noble Baroness is correct. Slightly against my advice, the House passed an amendment requiring us to report on a number of matters including microgeneration. Therefore, in a sense the first part of the amendment is already on the face of the Bill as it will leave this House.
The second part deals with setting a target for microgeneration and a strategy for ensuring that targets are met. I am strongly in favour of the technologies of microgeneration of all kinds. They can contribute towards achieving targets for renewables and CHP, and the overall target for cutting CO2 emissions. That is why we have done a number of different things; I shall not go over all of them again.
That is why we allowed the contribution of CHP to be reflected in talking about annual output and annual export declarations. We have established the Distributed Generation Co-ordination Group, included research for microgeneration and micro-CHP, and so forth. The Chancellor referred to micro-CHP and a possible VAT reduction, which is subject to effective validation. Therefore, one can see that there is a whole range of support.
If, in addition to the broader objectives to which microgeneration will make a contribution, we want to impose a separate strategy, that will probably confuse the issue too far. We have a strategy for CHP to which micro-CHP will contribute. We have a strategy for
1098
carbon reduction more generally. I do not see the need for a "micro-strategy" to be set up as an alternative or separate strand. However, microgeneration—embedded generation of all sorts—will make a major contribution to the achievement of all our targets. But I cannot accept the second part of the amendment.
Lord Ezra: My Lords, I thank all noble Lords who have taken part in this short debate. I have noted very carefully what the Minister has said. The important point to emphasise is that this is a new technology. While we have supported CHP earlier, that is fine. But this is a new technology. The production of CHP in its microform is new. It is an area where we are leading in Britain, where every encouragement should be given.
Some measure of encouragement has been given already by the Chancellor. We consider that further encouragement should be given. On that basis, I should like to test the opinion of the House.
7.22 p.m.
On Question, Whether the said amendment (No. 195B) shall be agreed to?
Their Lordships divided: Contents, 106; Not-Contents, 87.

Division No. 2

CONTENTS

Addington, L.

Howe of Aberavon, L.

Alexander of Weedon, L.

Howe of Idlicote, B.

Anelay of St Johns, B.

Howell of Guildford, L.

Astor, V.

Hunt of Wirral, L.

Attlee, E.

Hylton, L.

Avebury, L.

Jenkin of Roding, L.

Barker, B.

Jopling, L.

Biffen, L.

Kimball, L.

Blaker, L.

Kingsland, L.

Blatch, B.

Laing of Dunphail, L.

Brooke of Sutton Mandeville, L.

Livsey of Talgarth, L.

Brougham and Vaux, L.

Luke, L.

Byford, B.

Lyell, L.

Caithness, E.

McNally, L.

Carnegy of Lour, B.

Maddock, B.

Chalker of Wallasey, B.

Maginnis of Drumglass, L.

Colwyn, L.

Mancroft, L.

Cope of Berkeley, L.

Mar and Kellie, E.

Craigavon, V.

Marlesford, L.

Deedes, L.

Masham of Ilton, B.

Denham, L.

Mayhew of Twysden, L.

Dixon-Smith, L.

Miller of Chilthorne Domer, B.

Dundee, E.

Miller of Hendon, B.

Ezra, L.

Monro of Langholm, L.

Fearn, L.

Monson, L.

Ferrers, E.

Murton of Lindisfarne, L.

Fookes, B.

Newby, L.

Fowler, L.

Noakes, B.

Freyberg, L.

Northover, B.

Geddes, L.

Norton of Louth, L.

Glenarthur, L.

Oakeshott of Seagrove Bay, L.

Glentoran, L.

Palmer, L.

Goodhart, L.

Park of Monmouth, B.

Gray of Contin, L.

Peel, E.

Hamwee, B.

Phillips of Sudbury, L.

Hanningfield, L.

Pilkington of Oxenford, L.

Harris of Richmond, B. [Teller]

Razzall, L.

Hodgson of Astley Abbotts, L.

Redesdale, L.

Hogg, B.

Rennard, L.

Howe, E.

Renton, L.

1099

Rodgers of Quarry Bank, L.

Southwark, Bp.

Roper, L. [Teller]

Steel of Aikwood, L.

Rotherwick, L.

Stoddart of Swindon, L.

Russell, E.

Thomas of Walliswood, B.

Russell-Johnston, L.

Tope, L.

Saltoun of Abernethy, Ly.

Trumpington, B.

Sandberg, L.

Ullswater, V.

Scott of Needham Market, B.

Waddington, L.

Seccombe, B.

Wallace of Saltaire, L.

Sharples, B.

Walmsley, B.

Shutt of Greedand, L.

Walpole, L.

Skelmersdale, L.

Williams of Crosby, B.

Smith of Clifton, L.

Willoughby de Broke, L.

NOT-CONTENTS

Acton, L.

Hoyle, L.

Ahmed, L.

Hunt of Kings Heath, L.

Andrews, B.

Irvine of Lairg, L.

Archer of Sandwell, L.

Jay of Paddington, B.

Ashton of Upholland, B.

Jones, L.

Barnett, L.

King of West Bromwich, L.

Bassam of Brighton, L.

Kirkhill, L.

Bernstein of Craigweil, L.

Layard, L.

Boothroyd, B.

Lockwood, B.

Borrie, L.

Lofthouse of Pontefract, L.

Brennan, L.

Macdonald of Tradeston, L.

Brooke of Alverthorpe, L.

MacKenzie of Culkein, L.

Brookman, L.

Mackenzie of Framwellgate, L.

Burlison, L.

Massey of Darwen, B.

Carter, L.

Morgan, L.

Chan, L.

Morris of Aberavon, L.

Chandos, V.

Nicol, B.

Clark of Windermere, L.

Patel of Blackburn, L.

Clarke of Hampstead, L.

Pendry, L.

Clinton-Davis, L.

Pitkeathley, B.

David, B.

Plant of Highfield, L.

Davies of Coity, L.

Ramsay of Cartvale, B.

Davies of Oldham, L. [Teller]

Randall of St. Budeaux, L.

Desai, L.

Rendell of Babergh, B.

Dixon, L.

Dubs, L.

Renwick of Clifton, L.

Elder, L.

Rooker, L.

Evans of Parkside, L.

Sainsbury of Turville, L.

Evans of Temple Guiting, L.

Sawyer, L.

Farrington of Ribbleton, B.

Scotland of Asthal, B.

Gale, B.

Simon, V.

Gibson of Market Rasen, B.

Smith of Gilmorehill, B.

Golding, B.

Stone of Blackheath, L.

Goldsmith, L.

Symons of Vernham Dean, B.

Gordon of Strathblane, L.

Taylor of Blackburn, L.

Goudie, B.

Temple-Morris, L.

Gould of Potternewton, B.

Tomlinson, L.

Grocott, L.[Teller]

Triesman, L.

Harris of Haringey, L.

Warner, L.

Harrison, L.

Warwick of Undercliffe, B.

Haskel, L.

Whitaker, B.

Hayman, B.

Whitty, L.

Hogg of Cumbernauld, L.

Wilkins, B.

Hollick, L.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
Lord Davies of Oldham: My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion I suggest that the Report stage begin again not before 8.32 p.m.
Moved accordingly, and, on Question, Motion agreed to.

Zimbabwe
7.32 p.m.
Baroness Park of Monmouth Baroness Park of Monmouth rose to ask Her Majesty's Government what is their policy towards Zimbabwe in the light of the Commonwealth Heads of Government meeting in Abuja.
The noble Baroness said: My Lords, in March last year, I spoke of Zimbabwe as a country that until two years before was the breadbasket of southern Africa, with a sophisticated, successful economic and public infrastructure, with no race problem and blessed with the rule of law. The collapse of all that had brought inflation at 280 per cent and widespread poverty and misery—a humanitarian nightmare. One year on, inflation has reached 600 per cent and rising. The country does not have enough foreign exchange to pay for fuel, electricity, water, or raw materials for industry. Meanwhile, South African businessmen are buying up firms and plants at knock-down prices, in a process described as the cannibalisation of the country.
People are eating grass; and a teacher's monthly wage might buy him one day's ration of mealie meal, but only if he is a member of ZANU-PF. HIV has wiped out whole families and black agricultural workers are disenfranchised and denied food. The plight of the African population is dire, not only because of starvation, but because they are defenceless against daily brutality and violence. The free press and the courts have both been destroyed. One aspect of Mugabe's rule that should give us concern is the youth militia, which was the subject of a powerful "Panorama" programme, and on which the regime is spending considerable sums. The Sierra Leone war left 50,000 dead, 500,000 homeless and 10,000 mutilated. In Zimbabwe, by decision of the state, all boys and girls from the age of 11 must join the militia. No one may move to tertiary education unless they have served in this force, and no one may train as a teacher or nurse if they have not gone through the camps. The camps are producing moral cripples, who know nothing but brutality and hate, and they will be a terrible legacy.
In a powerful statement, Archbishop Tutu said what has long needed saying by an African about the deafening silence and denial of the African leaders. He attacks their policy of defending Mugabe to ensure the "sovereignty" of African nations, to find,
"African solutions to African problems",
and to resist the,
"Use of human rights by Western nations to put Africa into shape".
He said that the peer review system of the African Union will be,
"A futile exercise if we are not ready to condemn human rights unequivocally without fear or favour, whatever the struggle credentials of the perpetrator".
He said that there are no peculiar African rights, and what is happening in Zimbabwe is wholly unacceptable.
I propose a course of action for Her Majesty's Government in the aftermath of the Commonwealth Heads of Government Meeting at Abuja. That course was foreshadowed by the Prime Minister's statement there, rightly rejecting charges of racism and neo-colonialism, when he said that Britain wanted change for Zimbabwe's black people who make up the majority of Mugabe's victims, as well as for the white farmers driven from their land. This is nothing to do with old-fashioned colonialism, it is simply to do with regimes that do not treat their people properly. I hope very much that he will ensure that the Commission for Africa shares this view, and takes active steps to enable OSCE-type observers to enter the country soon to assess the position. The Catholic Church in South Africa has done this, and has made a devastating report. Why do we hear nothing from the Church here? I am glad to see that a bishop is speaking tonight.
I do not suggest UN observers, because that institution has proved powerless, or unwilling, to bring the issue of Zimbabwe to either the Security Council or the General Assembly in four years, and has allowed the block vote of the African Union to prevent any discussion in the UN Commission on Human Rights. What have Ministers said to the AU, while discussing the peace facility, the African Army, which we are to pay for from development funds? What have they said about Zimbabwe, what did the Prime Minister say to Colonel Gaddafi?
Let us be under no illusion that observers must be on the ground soon. It will be useless to send them in a month before the next election. No elections can be valid until a free press is restored, the green bombers are disbanded, much of the Public Order and Security Act is repealed, and the many black farm workers who are disfranchised regain their vote. In a recent by-election, the MDC was unable to hold even one rally, and the tribal chiefs warned that anyone voting for the MDC would be evicted, and that they, the chiefs, would lose their jobs if the MDC won. Maize was distributed by government officials and—surprise, surprise—the ZANU-PF candidate, a retired air chief marshal, was elected. All confidence in the voting procedure has collapsed, and will have to be restored in a country that has seen every single one of the 58 opposition MPs attacked, threatened in their homes, tortured, and in two cases murdered.
I urge Her Majesty's Government, working with the Commission for Africa, the United States, Denmark, Sweden and perhaps Holland, to begin to plan both for observers and for the urgent measures that will need to be taken, apart from economic support, to restore and maintain order in a country whose police is demoralised and whose judiciary has been decimated. If they can act eventually with the UN, the European Union and the African Union, so much the better. However, the EU/AU relationship is likely at present to make the European Union deferential to the very sentiments that Desmond Tutu has denounced, and to be concerned to follow a political agenda that would not serve the people of Zimbabwe.
The same is true of the UN. A small group could work with DfID, the World Food Programme, the World Bank, and the NGOs including the Armani Trust, and such important figures as the African church leaders. Archbishop Ncube, in Bulawayo, and Archbishop Tutu in South Africa have spoken our against tyranny and have valuable non-political contacts at the grass roots. What is needed now is to follow Archbishop Tutu's campaign for the world to give the people of Zimbabwe the same support that it once gave for the fight against apartheid. If the Secretary-General of the UN cannot do that, there is something wrong with the UN.
When Zimbabwe is freed from the present tyranny, it will need to rebuild and restore the sophisticated, non-racial infrastructure of skilled professionals that once made it such a successful country, and which could do so again. Many of those people sought asylum here. Many are former teachers, lawyers, nurses, doctors, and others with skills that we need. Unlike asylum seekers from Kosovo, Afghanistan or China, they speak good English, were educated in the British system, and came here because they had been arrested, often tortured and persecuted without redress, because they supported the opposition party or simply because they were natural leaders. Getting here was not easy, but they had the naïve belief that England meant sanctuary as it had done for the Ugandan Asians and for many others fleeing to freedom in our long history. They thought that they would find sanctuary here—not so. First, we instituted a visa system. Under pressure, the Government agreed that no one would be deported back to Zimbabwe by force. However, asylum seekers, some of whom had been tortured but whose applications to stay had failed, often because of grossly inadequate legal advice, at once lost accommodation and benefits, were denied the right to work and, in 2003, were urged to apply for voluntary repatriation as the Home Office considered Zimbabwe a safe place. That letter was eventually withdrawn. Now they are merely told that they must at once leave the country. Where can they go?
The Home Office argues that refugees should seek shelter in neighbouring countries. Very many do. But it is the most sophisticated and skilled, and the most threatened, who manage to come here—people such as the brave air force warrant officer who reported to the police after seeing ballot boxes being tampered with during the 2002 elections, and was promptly arrested and tortured. What are Her Majesty's Government doing to help small countries such as Botswana to deal with the influx of refugees? What pressure are they bringing on the United Nations to do something in the region and to monitor the often brutal treatment of refugees in the camps in South Africa?
Zimbabweans here only want to work. They do not want benefits and they have real skills to offer. There are teachers among them who could be really valuable in inner-city schools where it is difficult for young black boys to resist the gang culture in favour of education. Indeed, the Home Secretary expressed that anxiety when he was the Secretary of State for

1103
Education and Science. There are mechanical engineers, clerical officers, people skilled in labour relations and in marketing, who could and should be working. When Zimbabwe is free and those who came here—many of them among the potential political leaders—return to their country, if they have survived their treatment here, what do you suppose their views on England will be? What will have happened to their skills?
I urge the Government to recognise that these people have nowhere to go and to grant them either humanitarian protection or discretionary leave and, above all, the right to work. The Government should implement the recommendation of the House of Commons report in January this year that,
"in the case of failed asylum seekers who are unable to return to their countries because of the human rights situation there, the Government should make appropriate use of the power to grant a temporary right to remain in the United Kingdom".
This is something immediately within the power of Her Majesty's Government to do when so little else can be done for a suffering country. Let us have some joined-up government. The Home Office should not be frustrating our declared national commitment to helping Zimbabwe when and where we can. What is happening now is a scandal and a disgrace. It is also extremely short-sighted.
7.42 p.m.
Lord Acton: My Lords, recent reports have it that Mr Mugabe plans to announce his retirement date at the ZANU-PF congress in December. I doubt it. Mr Mugabe has spent most of his life seeking and exercising power; such people do not retire easily.
Another reason for my doubts is that in 1983–84 Mr Mugabe sent the 5th Brigade into Matabeleland. Its members massacred between 6,000 and 20,000 Ndebele and threw their bodies down disused mine shafts. They tortured, raped and beat the Ndebele people at will. I suspect that Mr Mugabe fears that if he gives up power the Ndebele may seek revenge on him.
But supposing Mr Mugabe retires, the main contenders to succeed him are said to be Mr Emmerson Mnangagwa, Speaker of the Zimbabwean Parliament, and Mr John Nkomo, the ZAN U-PF national chairman and Minister of Special Affairs. Mr Mnangagwa is Mr Mugabe's choice of successor, but Mr Mugabe's failure in every other respect makes this endorsement highly suspect. Mr Mnangagwa is not popular and in 2000 lost his parliamentary seat. He was at one time a singularly intimidating Minister of State for Security. I would fear a Mnangagwa presidency.
Mr John Nkomo is Ndebele. I knew him in the early 1980s when he tried bravely to stop the Matabeleland horrors. We shared a love of horseracing and he visited me at my Harare home. I would cheer at the thought of the presidency of the John Nkomo of 20 years ago. But since his party, ZAPU, fused with ZANU-PF in 1988, he has helped take the decisions which have wreaked havoc upon Zimbabwe, as the noble Baroness has described.
My former father-in-law, the late Sir Garfield Todd, once Prime Minister of Southern Rhodesia, said that he could never forgive Mr Mugabe for what he had
1104
done to good men like John Nkomo. A presidency of today's John Nkomo would be that of a man steeped in the horrors that ZANU-PF has perpetrated in recent years. Whether it is led by a Mugabe, a Mnangagwa or an Nkomo, this is a ZAN U-PF regime, and ZANU-PF is responsible for Zimbabwe's tragedy.
Britain's policy is, first, to give the people of Zimbabwe the chance to decide democratically whether they want to continue rule by ZANU-PF or prefer another party. Secondly, Britain generously pours food aid into Zimbabwe for the 7.5 million people at risk, something of which I am very proud.
This is not a struggle between a former colonial power and a former colony. Britain and other concerned nations, especially the African giants Nigeria and, above all, South Africa, must work together. Britain's diplomatic goal must continue to be a truly democratic choice by the voters. Ultimately, this is not about a Mugabe, a Mnangagwa or an Nkomo; it is about the nearly 12 million people of Zimbabwe who have surely suffered enough.
7.46 p.m.
Lord Blaker: My Lords, there is much bad news out of Zimbabwe but the Commonwealth decision was good news, not only because it rightly continued the suspension of Zimbabwe but because of the way in which it was reached. I understand that President Mbeke tried to persuade the African members of the Commonwealth to support Zimbabwe's immediate readmission. As we know, this was rejected and all of the African members of the Commonwealth supported its continued suspension.
Does the Minister detect in that decision a change of mood among the African countries, away from automatic support of Mr Mugabe, because of the damage he is doing to the prospects of southern Africa? This was not the first time that President Mbeke had rallied the African countries in support of Zimbabwe. He did so in the Human Rights Commission of the UN and in the Non-Aligned Movement in Malaysia last year.
The other piece of good news is the role of the bishops in Zimbabwe, to whom my noble friend Lady Park—whom I congratulate on securing the debate—referred, and the work of three other bishops who are busy spreading the word in neighbouring countries about what is really happening in Zimbabwe.
As to the question of what should be done, we must clearly continue to press for an appropriate resolution in the UN Human Rights Commission, which is sitting at the moment in Geneva. A resolution proposed by the EU will be presented by the Irish representative.
We should also use other forums to deal with the Zimbabwe problem. I still take the view that African problems should preferably be solved by African countries, especially in the light of the undertakings given by them in respect of good governance, the rule of law and human rights.

1105
But the developed world does have a role to play through international organisations. Before long, we shall hold the presidency of the European Union; we shall hold the chair of the G8 next year. Both organisations have the ability to influence the actions of African countries but so far there is little sign of their doing so. The time has come when they have a positive duty to do so apart from any question of self-interest.
The economies of the SADC countries will surely suffer more and more severely the longer Zimbabwe is an economic ruin. Apart from South Africa from time to time, the SADC countries will not be good places in which to invest nor with which to trade. The G8 countries should make it clear to them that it is very much to their advantage to restore Zimbabwe to health.
As to the third organisation, the Commission for Africa, which was proposed by the Prime Minister, can the Minister clarify whether its remit will cover Zimbabwe? If it does, noble Lords will wish it well. We will regard it as important, especially if it covers Zimbabwe. We will follow its work with hope and wish it success.
7.50 p.m.
The Lord Bishop of Southwark: My Lords, I am grateful to the noble Baroness for the opportunity for your Lordships to consider the situation in Zimbabwe once more. Sadly, the latest information that we have received from Church sources in Zimbabwe tells of political crisis, economic collapse, social disintegration and a state of near despair.
A fortnight ago a bishop from one of our linked dioceses in Zimbabwe spoke at my diocesan synod. He told of a government determined to continue in power and now supported by legislation. Any opposition is repressed by the Public Order and Safety Act, which prevents people demonstrating in any way, and the Access to Information and Protection of Privacy Act, which prevents people saying or publishing anything critical of the leader. The bishop spoke of a new generation being caught up in the power games through the use of National Youth Service training. Young people who fear going into the National Youth Service flee from their homes but there is no access to higher education without a certificate saying that the service has been completed. The result is the loss abroad of some of the best young people who will not return while the present regime is in power.
The country can ill afford the loss of such talent because the economy is in a dire state, with shortages of raw materials and currency and the collapse of public services, except the army and the police. Food distribution has been politicised. People have to show the right party card to have access to supplies. The financial hardships are contributing to the disintegration of society, but this is made worse by the HIV/AIDS pandemic, which is now affecting one in five Zimbabweans.
What is to be done? In December, the leaders in Abuja spoke of the desire to facilitate an early return of Zimbabwe to the councils of the Commonwealth, to promote national
1106
reconciliation and assist towards a return to normality and economic prosperity. It will be of interest if the Minister can indicate whether any progress has been made or is likely to be made in the foreseeable future. Noble Lords will quite understand that pressure from the British Government, as the former colonial regime, can easily be discounted by the Government of Zimbabwe and their allies. One of the disappointments of the past months has been the lack of challenge on the Government of Zimbabwe from the leaders of neighbouring African countries, particularly South Africa. They surely hold the key to the Abuja recommendations. Perhaps the Minister can indicate whether she has discerned any positive signs there.
The sensitivity of the British Government's position is mirrored by that of the Anglican Church in Zimbabwe. The noble Baroness asked why we do not hear of the Church here. She is obviously not aware of the diocese of Rochester's action in breaking official links with the diocese of Harare because of the craven support its bishop has given to President Mugabe. Conversely, the three bishops of the twin dioceses with which my diocese is linked have been courageous in challenging the ruling powers. We have been supporting them vocally and financially. Yet their criticisms can easily be discounted as the unpatriotic words of puppets of a Church holding allegiance to the Church of England, the Church of the colonial power. It is conveniently ignored that today each province is independent and the majority of the Anglicans in the world are African, with clear minds of their own.
I believe that it is in such people of all denominations in Zimbabwe that hope lies. On Saturday, in Southwark Cathedral there were some 50 Mothers' Union members from Zimbabwe. They inspired us with song and dance, but they inspired us even more with their stories of taking in of AIDS orphans, their help with primary health care, their teaching of the next generation, and their unofficial distribution of food and aid.
Bishops may talk and preach, and they do; government Ministers may negotiate and pressurise, and they should; and progress often seems slow. But the future of Zimbabwe is hopeful because the MU members on Saturday are more typical of their fellow Zimbabweans than those who hold temporary power, and they and their children will be there helping with the task of nation building, when today's oppressive powers have gone to their reward.
7.54 p.m.
Lord Skidelsky: My Lords, I thank the noble Baroness, Lady Park of Monmouth, for giving us a chance to discuss this increasingly tragic subject. Mugabe is on the way to establishing a fully-fledged dictatorship in Zimbabwe. Like any dictator he has abandoned the pretence of ruling through Cabinet or Parliament. The onslaught on the political opposition, the free press, and private enterprise has been cranked up. ZANU-PF militia and police batter opposition supporters in rural areas to death on a regular basis, newspaper editors are imprisoned for any criticism of the president or the Government, the legal system is unravelling. Just recently a law was passed allowing people to be imprisoned for 30 days without seeing a judge.

1107
Licensed torture by so-called "veterans" includes beatings on soles of feet, burning, electric shocks and sexual torture, including the rape of children. The Zimbabwean economy is in meltdown, with inflation, as the noble Baroness, Lady Park, mentioned, at 600 per cent, mass starvation looming, most farms abandoned and the few remaining commercial enterprises subject to illegal or pseudo-legal seizure.
In short, Zimbabwe has become a classic example of the "failed" state. While academics and, indeed, Kofi Annan himself demand a "right to intervene" to prevent humanitarian disaster, the international community has done almost nothing to bring this particular disaster to an end. The EU travel ban on Mugabe and his henchmen is full of holes. The EU refuses to impose economic sanctions as,
"this would have a negative effect on all Zimbabweans".
Until now the strategy has been to encourage constructive dialogue between Mugabe and the Opposition. But it is as plain as a pikestaff that Mugabe is not interested in national reconciliation or constructive dialogue with anyone. In December, he showed his contempt for the Commonwealth, which had suspended Zimbabwe, by quitting the organisation voluntarily.
Her Majesty's Government have a particular responsibility in the matter, for reasons that I need not elaborate. In my submission, the time has come for much tougher measures and I would urge tougher measures than noble Lords have previously been prepared to contemplate. I should like HMG to go to the UN Security Council for a Chapter VII resolution, on the ground that the Mugabe Government is a threat to regional peace. Certainly a combination of starvation and state criminality is highly destabilising. I would favour a resolution that would call on Mugabe to give up, say within six months, the power that he fraudulently obtained in the election of March 2002 and has been using to ruin his country ever since, to be followed by elections for a new president and parliament under international supervision. If the Zimbabwean Government reject this, the Security Council should apply the measures allowed under Article 41, which include,
"complete or partial interruption of economic relations … and other means of communication, and the severance of diplomatic relations".
As a final step, which I mention only with great reluctance, Her Majesty's Government should suspend food aid. Reprisals by the regime against Zimbabweans and foreign nationals would be treated as criminal acts for which officials would be held responsible and brought to trial. That is the punitive part.
At the same time we should be ready to offer Mugabe an exit strategy. In return for giving up power, he and those on the EU's named list should be given a guarantee of immunity from prosecution and a right of sanctuary. Why should we not construct a modern St Helena—assuming that the original is no longer available—as a place of exile for deposed tyrants? At least it would give them an incentive not to hang on to power for ever as the only way of escaping criminal prosecution and it would also avoid the embarrassment of having to ask someone
1108
to take them in. The conditions of such a retirement home could be made reasonably pleasant, with courses of lectures in political science and healthy outdoor activities.
To return to the seriousness that the topic demands, unless we improve on the puny measures that we have taken so far, the slide into horror will continue and we will bear a large share of the responsibility.
8 p.m.
The Earl of Caithness: My Lords, I am grateful to my noble friend Lady Park for again giving us the opportunity to debate this important subject. In the past four years we have debated it quite a lot and in the past four years Zimbabwe has moved from a prosperous county to a failed African state. GDP is down 40 per cent and is still declining rapidly, probably by 10 per cent this year. Three and a half million people have fled the country: at least 2 million have gone to South Africa, where they now dominate the shanty areas and threaten South African stability. Infant mortality and maternal mortality are at record levels.
It was in Abuja in 2001 that the African leaders signed up to a programme on AIDS, saying that it was an epidemic that needed urgent attention from everybody. Yet AIDS has continued to increase. It is in epidemic form and is being spread by forced migration, poverty and a collapse of the health services.
AIDS is Zimbabwe's largest export. Deaths from AIDS are running at 3,000 a week and, together with normal deaths, have seen a decline in the national population by 2 per cent per annum, and a decline in life expectancy to 36 years—down from 59 years in 1990. The death rate is becoming similar to that resulting from the plagues which ravaged Europe in the mid-1600s.
Current economic problems have been made worse by the recent steps by the state to criminalise the activities of the foreign exchange and gold markets. Twelve out of the 17 commercial banks are in dire straits and at least four have failed.
What does this mean in real terms? Let us take, for example, the situation of a girl born today. She has a one in four chance of dying by the age of five. Her mother has a 16 per cent chance of dying in childbirth. She has less than a 30 per cent chance of going to school. She has a 60 per cent chance of becoming HIV-positive before the age of 18. On average, she will not live beyond 32 years of age. It is more than 50 per cent certain that she will flee the country and try to make a living elsewhere. That is the human situation in Zimbabwe now.
Part of the problem in Zimbabwe is compounded by the President of South Africa. In Abuja in 2001 and in 2002, the graveyard for President Mbeki was dug and, sadly, he went into it. He is no more worthy to be considered a great African leader, let alone a world statesman. What he has done is to the huge detriment of the whole of southern Africa.

1109
The situation today is somewhat similar to the situation in the mid-1970s, when Smith was in power. The then President of South Africa, President Vorster, told Mr Smith the realities of life, and what he did was for the benefit of South Africa. Mr Mbeki has not told President Mugabe the realities of life. It has taken the South African Communist Party to point out the home truths to their own president.
May I ask the Minister what has happened to the committee established at Abuja to examine a way forward, comprising Australia, Canada, India, Jamaica, Mozambique and South Africa? May I also ask the Minister what has happened with the IMF compulsory withdrawal procedures over Zimbabwe's failure to pay its arrears?
President Mbeki has quite deliberately let Zimbabwe down. The cynical are saying that it is because he wants the South African businesses to be able to buy up the Zimbabwean businesses on the cheap.
8.3 p.m.
Lord St John of Bletso: My Lords, I join in thanking the noble Baroness, Lady Park, for introducing this important debate. It is now all the more important that, following the news blackout in Zimbabwe, this issue is raised in a public forum, and it is particularly gratifying that it is again being raised in your Lordship's House.
I recently returned from a few days' visit to South Africa, where I was fortunate to be able to hear at first hand the post-Abuja views on Zimbabwe of several political, media and business leaders.
For several years I have advocated an African solution to this African problem and have maintained that megaphone diplomacy from this country has had a limited effect so far. To a large degree, this view was founded on certain high-level assurances I received last year from within the region that a deal had been brokered to move Mugabe into a ceremonial role, and to install a new prime minister by changing the constitution, which would lead to a government of national unity to start rebuilding the nation.
In view of my recent discussions, however, I believe that we can no longer stand by and watch the fast-deteriorating situation while we wait for this promised deal to materialise. I entirely agree with the approach of my noble friend Lord Skidelsky. It is now more essential than ever for Britain to rally her partners in the European Union and to press the United Nations to pass a resolution that unequivocally condemns the total and repeated breach of human rights in Zimbabwe. I feel that such a move would increase the pressure on other African leaders, particularly President Thabo Mbeki of South Africa, to take a firmer hand.
We must not underestimate the gravity of the situation in Zimbabwe. We must ensure that the last four years of horrendous events in this decimated country do not produce a kind of mental fatigue and
1110
an uninterested shrug of the shoulders. Yes, we have heard these stories before and, yes, the situation continues to deteriorate.
There is no doubt that the news blackout has been an effective tool for the Mugabe regime. It is not only people around the world who now have no clear picture of what is happening: even Zimbabweans living in the cities are oblivious to what is happening around them. Daily breaches of human rights go unreported; appropriation of food aid by officials of the ruling Zanu PF goes unreported; anarchy and mob rule go unreported. Day by day, this country of enormous potential slides into chaos, and poverty has become endemic.
Mugabe retains his grip on power by ingratiating the party and military elite by giving them confiscated farms. Rumours that Mugabe is seriously ill continue to circulate, but I am reliably informed that, despite a bout of mild food poisoning several weeks ago, the President remains in fairly good health.
President Mbeki of South Africa remains a central and key figure in the search for a solution. His inexplicably meek and mild attitude towards Zimbabwe at the recent CHOGM meeting in Abuja was alarming, particularly in contrast to the strong stand of President Obasanjo of Nigeria. Indeed, Mbeki's approach is almost impossible to reconcile with his status as an architect of NePAD. Mbeki has occasionally talked tough, but his policy remains soft diplomacy.
As long as President Mbeki sits on the fence and tinkers at the fringes of the issue, Mugabe will remain unmoved. Some suggest that the origins of his caution might lie in South Africa's general election next month but this is hard to believe, since the ANC is running at 70 per cent in the polls and his re-election is assured. President Mbeki's stance in Abuja was in part based on the premise that Britain had reneged on its agreements to bring about land reform in Zimbabwe. But the Lancaster House agreement clearly stipulated that farmers would be paid in return for their land. That is the key issue. No one disputes the need for land reform. I still believe that we are approaching the endgame in Zimbabwe. Let us take action now to bring about a satisfactory solution and quickly.
8.8 p.m.
Lord Avebury: My Lords, we have heard a number of constructive suggestions in this short debate. I want to concentrate on a matter where the Government have a direct responsibility; that is, the continuation of the investigation by the expert panel into the illegal exploitation of natural resources in DRC in which the Government of Zimbabwe had a despicable role to play.
The Security Council urged:
"all States concerned … to take appropriate steps to end these illegal activities, by proceeding with their own investigations".
That is a legal obligation under Article 25 of the UN Charter. I ask the noble Baroness: have the Foreign Office and the security forces been working to implement that undertaking? It was alleged that Oryx, a UK company, was used as the vehicle for plundering the

1111
diamond resources of the DRC by the Zimbabwe defence forces, who were offered mining concessions in return for their co-operation in the DRC civil war. They pursued those interests through Osleg, a company incorporated in Harare in December 1998. The directors included the permanent secretary for defence, Job Whabira, and the ZDF commander, General Vitalis Zvinavashe.
In November 1999, Osleg entered into a partnership with Comiex, a DRC government company, to form Cosleg, which became the owner of 98.8 per cent of shares in Sengamines, a company formed in Kinshasa on the same day. That company was awarded an 800 square kilometre concession to mine diamonds in the neighbourhood of Mbuji-Mayi, one of the richest deposits in the whole of Africa.
Oryx was brought in to carry out the operations. A prospectus for a reverse listing on the London market by sale to a Bermudan company, Petra Diamond Ltd, stated that Oryx Zimcon had been "given" the concession. The flotation was called off because the regulatory authorities had made it clear that a London listing was unacceptable for a company involved with the Zimbabwe military in the exploitation of diamonds in a zone of conflict.
Will the Government ask those authorities what information they had on file to see whether that threw more light on the transactions which led Oryx to obtain the concession and what stake the ZDF still had in the operation? Have the Government seen the "documentary evidence" that Oryx was being used as,
"a front for the ZDF and its military company Osleg",
and that,
"Osleg nominated Oryx to hold its 49 per cent interest in Sengamines"?
If not, will they take steps to obtain it?
Oryx brought a libel action against the Independent in respect of an article published by the newspaper in November 2002. Last Thursday it was announced that the two sides had agreed to settle; effectively Oryx had climbed down. The courts had ordered it to produce documents that could have established the connection with the ZDF. The only way that it could avoid that was to settle. Will Ministers ask the company for those documents or an explanation as to why they were not produced?
This is an opportunity to provide Africans and particularly our Commonwealth partners with evidence that the 11,000 soldiers who were sent to the DRC—and many of them did not come back—were there to generate profits for the military kleptocrats in the worst traditions of colonialism.
8.11 p.m.
Lord Howell of Guildford: My Lords, we are all extremely grateful to my noble friend Lady Park for securing this debate as part of the unending and marvellous fight that she maintains for justice in the unhappy country of Zimbabwe.
I have stood at this Dispatch Box so often pleading for a stronger policy and for stronger action against the Mugabe regime, and especially against those
1112
bankrolling Mugabe's hideous and illegitimate rule; and I have pointed so often, as have my noble friends, to the obvious failures of quiet diplomacy and the feebleness of the South African leadership, again referred to this evening; and we have warned so often that the Harare principles are being flouted and disregarded, ironically in Harare, that repetition of these points, which have all been touched on by my noble friends, seems almost useless and in vain. In the few minutes available, it would probably be better and more useful to confine myself to four precise and practical points about government policy towards this tragic area and arena.
First, our foreign policy today seems to lean so heavily on the European Union, I shall begin with the EU Commission—the supposed driving force of Union policy. Do the Government see the Commission as playing a more effective role in resolving the Zimbabwe crisis? We have the EU/Africa ministerial meeting and the EU/SADC conference coming up, and lots of preparations by officials in the mean time. So what proposals will we be putting forward to increase the pressure on the ZANU-PF thugs and their manipulators? Will we suggest improving the targeted sanctions, which the noble Lord, Lord Skidelsky, rightly said are full of loopholes? Have we raised—this is a new suggestion—the question of South Africa cutting off the electricity supplies from Eskom, which supplies all the electricity in Zimbabwe? Eskom briskly cuts off non-payers in South Africa in the townships—they are blacked out quickly enough—so why not the non-payers in Zimbabwe? That really might bring the regime to its senses fast enough. It was used previously by China against North Korea and it certainly brought that country to the negotiating table, so why not consider that?
Secondly, what about pressure at the UN, which my noble friend Lord Blaker and the noble Lord, Lord Skidelsky, raised? There is an EU resolution before the UN Commission on Human Rights, which is very strongly supported by the MDC leadership and, I believe, by Ireland. Is it now possible to detach some of the usual bloc African vote at the UN and gain support for this? It is becoming increasingly clear that many African leaders are fed up with Mugabe and the disastrous impact he has on the whole of southern Africa and its development. Or why do we not propose a UN regional conference on the crisis? There must be ways forward without getting bogged down in the UN labyrinth of disagreement.
Thirdly, I return briefly to the role of Libya. The noble Baroness, Lady Amos, said this afternoon that Libya's role in supporting Mugabe had been raised when the Prime Minister met the eccentric Colonel Gaddafi. Raised—yes, but is it being followed up? What is now proposed? Does Mugabe's access to oil still depend on Libya or has it been or will it be stopped? Or was that something that was just left hanging in the air? I am quite surprised that those very urgent matters did not figure more prominently in the Prime Minister's report on his visit this afternoon.

1113
Finally, I turn to that cricket tour matter which has rather gone out of the headlines now that it seems to be inevitably going ahead next month—to my personal shame. The other day the noble Baroness, Lady Symons, became—could I call it, a wee bit irate? She spoke strongly, shall we say, when someone suggested that the Government could do a sight more to have halted the tour, which is now going ahead. I still cannot understand why the Government did not simply point to the appalling security situation—which is obviously getting worse by the day—and give the English Cricket Board cover for calling off the tour. If she could explain when she winds up why that did not happen and why, sadly, the tour is going ahead, I would be grateful.
I have little hope that any of these suggestions will be heeded, despite all the protestations about helping Africa, despite all the commissions and despite all the fine rhetoric that comes from ministerial sources. But if this debate leads to some of these issues being examined it will achieve something in an appalling and increasingly dangerous and shameful situation.
8.17 p.m.
Baroness Symons of Vernham Dean: My Lords, I thank the noble Baroness, Lady Park of Monmouth, for introducing today's debate on Zimbabwe. As the noble Lord, Lord Howell, said, she has been a strong and very faithful friend to the people of Zimbabwe for many years, as she demonstrated so eloquently again this evening. I congratulate all your Lordships on dealing with such an important subject in such brief and cogent terms.
The Government's objective for Zimbabwe has not changed. We want to see the early return of a democratically accountable government who respect human rights and the rule of law while pursuing sound economic policies aimed at alleviating the suffering of the Zimbabwean people.
The political, economic and humanitarian crisis inside Zimbabwe continues to deepen, as many of your Lordships described. In response, we and our partners in the international community are doing all we can to increase the pressure on the ZANU-PF regime to enter into a process of dialogue with the opposition, as a first step towards finding a solution to the enormous problems besetting the country.
As we have heard again this evening, there are many who say that in the face of this deepening crisis Britain should speak out more loudly and that we should make our outrage at the situation in Zimbabwe felt at every turn. That was very much the tenor of the contribution of the noble Lord, Lord Howell. It is very tempting to say "yes" to the noble Lord, Lord Howell, and to say "yes" unequivocally. But your Lordships need to be very clear about why we do not do this.
The fact is that we have very real responsibilities in Zimbabwe. We have the responsibility of our colonial history, which is at the same time the force that binds
1114
us to the interests of the people of Zimbabwe and also the burden in the current situation—because President Mugabe attempts constantly to use that for his own ends. We have to stay fully engaged, as the right reverend Prelate said, but we must never play into President Mugabe's hands when he tries to point at the United Kingdom as the cause of Zimbabwe's woes, or, worse, when he portrays our interests—our deep sense of concern for the people of Zimbabwe—as the selfish interference of the white former colonial power. That is why we are working so strenuously with our international partners; South Africa and Nigeria stay engaged and we strongly encourage their efforts. But—and it is a very big "but"—it is of course enormously disappointing that they have not previously supported us on a UN Commission for Human Rights resolution. We hope that they will seize the opportunity presented to them again this year.
We need our friends in the region to live up to the high standards of humanitarian concern and care that the United Nations and the Commonwealth espouse, so I agree very much with what the right reverend Prelate the Bishop of Southwark said, and I remind the noble Baroness, Lady Park, that UN action can be taken only with the consent of the nations in the United Nations, in which South Africa and Nigeria are key players. I say very gently to the noble Lord, Lord Skidelsky, that the question is not whether Zimbabwe would respond to a UN resolution, but whether we could get that UN resolution, and whether in attempting and failing to do so we would give some terrible comfort to Mr Mugabe.
In current circumstances, I think it very unlikely that the point of the noble Lord, Lord Howell, about electricity being cut off or light failing to go into certain homes in Zimbabwe would be taken up. If noble Lords had difficulty getting the right words on paper, how much more difficult will it be to get the right action on the ground? I am afraid that I thought that the noble Lord, Lord St John of Bletso, was right when he said that the attitude of African governments will be absolutely crucial in this argument. I disagree with what the noble Lord, Lord Howell, said. The repetition of such points is absolutely vital; we cannot repeat them often enough. In this Parliament, and very particularly in this House, the arguments are repeated over and again. Even if we are not successful, they are still worth repeating.
I shall move on to the meeting with Mr Gaddafi. The Prime Minister raised our concerns, as my noble friend pointed out this afternoon, and we shall follow up the discussions. However, as has been pointed out in this House before, very often such matters are better done quietly rather than being blazed through loudspeakers.
Last month, in our effort to build up our international consensus, the EU showed its determination to keep the pressure on Zimbabwe's leadership when it agreed to continue its targeted measures for another year. Despite the points made by the noble Lord, Lord Skidelsky, we were able to get a reasonably good result. Indeed, the list of those targeted by the travel ban and assets freeze has

1115
been extended from 79 to 95 people. Those who have been added to the list include several of the individuals who bear very particular responsibility for the abuses of human rights in Zimbabwe, such as those responsible for the closure of the Daily News and the hounding of other independent media, those closely associated with the fraudulent elections which have become the rule in Zimbabwe, the leader of the so-called war veterans, and the new set of Ministers appointed by Mugabe in his most recent reshuffle on 9 February.
I assure the noble Lord, Lord St John of Bletso, that the UK Government have been a consistent advocate of a robust EU approach on Zimbabwe. We believe that the EU has sent a clear message to the government of Zimbabwe that we want to see an end to economic mismanagement and repression and a return to democratic government which respects human rights and the rule of law. The MDC has certainly welcomed the new EU measures, and described them as,
"a clear indication that the international community will not fold its arms while the regime in Zimbabwe continues to trample upon people's basic needs".
Much has been said about the human rights situation, which is very grave and continues to deteriorate, as the noble Baroness, Lady Park, and the right reverend Prelate reminded us. As the noble Lord, Lord St John of Bletso, said, we have seen repeated use of draconian legislation to crush the independent media and silence democratic voices. Zimbabwe's only independent daily newspaper, the Daily News, remains closed, leaving the daily print media, like the broadcast media, a government-controlled monopoly.
The noble Baroness spoke of last month's "Panorama" programme covering Zimbabwe's national youth training programme. It was indeed a truly horrifying account of the militarisation of Zimbabwe's youth and an insight into how it is being exploited to meet ZANU-PF's objectives. The UK and our EU colleagues have made it clear that we expect to see the disbanding of that training programme. Although there seems little hope of that at this stage, the documentary clearly hit a nerve in the Mugabe regime, because last week saw the arrest of an independent film-maker in Zimbabwe who has been wrongly charged with having helped to make it.
Earlier this month, we also had the report Playing with Fire, which stated that 90 per cent of opposition MPs had been subjected to human rights violations since 2000, including 24 per cent who have survived assassination attempts, and 16 per cent who have been tortured. I am sad to say that three died following such disgraceful treatment.
A further worrying development has been the passage of a new regulation which will allow the Zimbabwe authorities to hold people in prison without bail for 28 days before bringing charges—a point made by the noble Lord, Lord Blaker. Opposition figures described the new regulations as the "imposition of a state of emergency by stealth". Quite clearly the Government of Zimbabwe are devising new powers for themselves to make it easier to stamp out all legitimate opposition.
1116
The UK, with our EU partners, has been at the forefront of the international condemnation of these abuses in Zimbabwe. We will continue to press South Africa and other countries in the region to raise their voices in condemning the regime for its appalling record on human rights. As Archbishop Desmond Tutu said recently, and the noble Baroness, Lady Park of Monmouth, reminded us, democracy and human rights are not western values, they are universal values. Zimbabwean citizens are as entitled to benefit from them as citizens elsewhere. I have mentioned that we are taking forward another motion at the UN Commission on Human Rights, which is currently meeting in Geneva. We will be lobbying hard in support of that resolution.
The Commonwealth Heads of Government met in Nigeria last December and agreed, by consensus, to continue with Zimbabwe's indefinite suspension from the councils of the Commonwealth. That decision was right for the Commonwealth and right for the people of Zimbabwe. It reaffirms the Commonwealth's commitment to its core principles of good governance, enshrined in the Harare Declaration. The Prime Minister gave a full account of those events in another place on 9 January.
The Commonwealth's decision was not made by white neo-colonialists, as Mugabe would have us believe, but was reached by a committee of six Commonwealth leaders—Australia, South Africa, Jamaica, Canada, India and Mozambique—which considered the whole of our approach. The noble Lord, Lord Blaker, asked whether there had been any change in the heart of some African countries on such issues. I can tell the noble Lord sincerely that the jury is out. Regarding the noble Lord's point about the UN Commission on Human Rights, which is currently meeting in Geneva, we will be lobbying hard on that, but we have faced disappointment in the past and we shall be watching closely to see what happens. We shall be looking at who does what on this issue.
My noble friend Lord Acton was right to ask us to concentrate on the 2005 elections. For those to be seen as free and fair and for the results to be accepted as reflecting the will of the Zimbabwean people, we will need to see a change in the wider political environment to ensure that the ordinary people can vote freely and that the opposition, civil society and independent media are allowed to function without fear of violence and intimidation for a significant period in advance of the elections. In that respect the UN has a role to play in monitoring Zimbabwe's elections. I am sorry to say that when the UNDP offered to send an assessment mission to Zimbabwe, the government withdrew their request for its monitors. Quite clearly they do not want the elections to be subject to external scrutiny. But I assure the noble Baroness and those of your Lordships who have expressed concern that we will continue to push for independent monitoring. That will be

1117
essential if the results of the elections are to be accepted as reflecting the will the Zimbabwean people, freely expressed.
The noble Earl, Lord Caithness, painted a terrible, but, sadly, accurate picture about the humanitarian situation in Zimbabwe and I thank my noble friend Lord Acton for his remarks about UK efforts in our aid for the people of the country. An appalling statistic that I will give your Lordships is that the EU cares for more people in Zimbabwe than their own government, as seen by the fact that the EU has donated humanitarian assistance worth £184 million between 2002 and 2003. Within the EU, the UK is by far the largest bilateral aid donor to Zimbabwe and the second largest overall, after the United States. We have contributed some £65 million in humanitarian programmes since September 2001. We are continuing our efforts on HIV/AIDS prevention and have set aside £20 million for that over the next five years.
Latest estimates are that up to 7 million Zimbabweans will require food ahead of next month's harvest. This year's harvest is unlikely to provide even half the food needs of the population, mainly due to lack of seeds, fertiliser and agricultural inputs. It is a tragedy for a country that, up until a few years ago, was able to export grain to its neighbours. It is now the fastest shrinking economy in the world. I draw to your Lordships' attention that we are worried that the grain might be used in advance of next year's elections as a political lever. Again, we have raised such questions with the Zimbabwean Government through our multilateral fora and shall continue to do so. We shall also continue to work with the European Commission, the US and the World Bank to consider how we can best get Zimbabwe back on its feet once democratic government has been restored.
I want to address briefly the points raised by the noble Baroness, Lady Park, about asylum. I know how passionately she feels. She chaired a meeting on the issue last month which was attended by officials from both the Home Office and the Foreign Office. The statistics show that we are giving protection to Zimbabwean asylum seekers who come to the UK—some 870 in the recent period since 2003.
If an application is refused, there is a right of appeal. Should the right of appeal prove unsuccessful, that means that for the individual a return to Zimbabwe is assessed to be safe. But as the noble Baroness knows, our view at present is that it is inappropriate forcibly to return individuals to Zimbabwe. That is why, as a result of our concerns about deterioration, towards the run up to the presidential elections we announced the suspension of the removal of those returning to Zimbabwe.
I know how passionately the noble Baroness feels about the matter. There is not time to go into all the detail that I might have wished, but I will make sure that her remarks go before my right honourable friend.
There is a good deal to say on the points raised by the noble Lord, Lord Avebury. I know how strongly he feels about them and he was kind enough to give us
1118
some advance warning. We have made repeated requests to the UN to release the information relevant to UK companies and individuals that was collected by the panel to which he referred. A formal letter requesting that information has been hand delivered to the office of the legal adviser at the UN in New York and we are awaiting a reply. I shall write to him in further detail on those points. I shall write to your Lordships about the Commission for Africa, which was raised by two noble Lords.
We have had our exchanges on the question of cricket. I believe that we all have responsibilities and that no one can exculpate themselves from those responsibilities—that was the point I was making in the House the other day. It is the point I make about the cricket board, the Government and the Opposition. I hope that the noble Lord, Lord Howell, speaks as passionately to his friends on the cricket board, if he has them, as he did just now in the House.
We are looking to be actively engaged with our international partners. We want the return of a democratic and prosperous Zimbabwe. We will continue our efforts. I know that there are differences in the House about how we do that, but I hope that there is no difference about the sincerity of what we are trying to do. We may vary in our analysis of the best approach, but I hope that I have been able to convince your Lordships that in the Government there is a strong determination not to let the issue go off our agenda or from the agenda of the multilateral fora to which we are affiliated.

Energy Bill [H.L.]
8.32 p.m.
Further consideration of amendments on Report resumed after Clause 109.
Baroness Miller of Chilthorne Domer Baroness Miller of Chilthorne Domer moved Amendment No. 195C:
After Clause 109, insert the following new clause—
"LIFTING OF LIMITS ON THE SUPPLY OF PRIVATE WIRE
Notwithstanding any statutory provision to the contrary, there are no numerical limits to the supply to domestic customers of—

(a) the use of private wire in Combined Heat and Power generation or renewable energy systems; and

(b) surplus power from public wires from local community sustainable energy systems."

The noble Baroness said: My Lords, in moving the amendment I shall speak also to Amendment No. 195D. The amendments seek to discover a little further than in Grand Committee why the Government feel they need to limit so strictly the community generation of power and the breaking down of barriers that that sector of power generation faces and to cover the issue of metering.
On the first issue it is perhaps unfortunate that the timing of the Bill's passage through your Lordships' House is in advance of two European sub-committees,

1119
one of which is examining climate change and the other issues related to Amendment No. 195C; the generation of power supplies by community organisations.
The sub-committee recently took evidence from Woking Borough Council about the difficulties it faced having brought in an innovative scheme to undertake the community generation of power, including combined heat and power, for the benefit of Woking residents. However, the council found that not only did it have to install a private wire system to supply its customers, but also that the use of the system was numerically strictly limited. When the report from the EU sub-committee is published, it will illustrate better than I can why the Government need to pay more attention to current restrictions and why they are detrimental to the Government's aims in this policy area. The first amendment therefore seeks to explore who benefits from the imposition of these strict, new limits.
The second amendment requires a wider explanation from the Government as to why they have not used the Bill to introduce the concept of net metering. In the wording of the amendment, I tried to explain that net metering involves both buying in from the National Grid and contributing to it, as one would with a micro-generation plant. Both activities should be at the same price. Currently, if you buy in from the National Grid that is set at one price, but generating and selling to the grid is at a severely disadvantaged price—several pence less per unit.
The effect is that individual householders have much less incentive to undertake more micro-generation. I appreciate that the renewables obligation will enable them to receive some cheque at the end of each year and that the Government grant aid for capital expenditure towards the purchase of items such as photovoltaics that would enable generation. Nevertheless, the fact that householders can sell into the grid only at such a reduced price must be a disincentive to taking responsibility for investing in and using renewable forms of energy. I should be glad to hear from the Government in whose interests are the restrictions and limitations that they have chosen to keep in place rather than using the Energy Bill to change the situation. I beg to move.
Lord Whitty: My Lords, on the second amendment, the Government have recently allowed small generators to be issued with renewable obligation certificates on the basis of their annual rather than monthly output. That helps anyone who has a small generator to gain a few ROCs every year. That will come into effect from 1 April and it will benefit householders, for instance, who have installed a photovoltaic frame in the roof of their house.
We have therefore taken some steps in trying to help, but simply to net off electricity ignores the fact that electricity is priced differently at different times of the day and that the way in which it would be calculated would not necessarily lead to a straightforward netting off. Indeed, it could lead to some distortion in the supply to
1120
the National Grid and the price paid to the small generator. The answer is not as simple as the amendment would suggest.
I understand that the first amendment, which is complex in its effect, is designed to help CHP. In relation to minimising the regulatory burden on small generators, we must ensure that the security of the system is not imperilled and we must also minimise the potential adverse effect on individual consumers. So when the noble Baroness asks in whose interests we act, it is in both of those interests—which, ultimately, is in the interests of consumers.
We undertook widespread public consultation on the class regimes for electricity exemptions until October 2001 and made significant changes. Although I understand that the balance may be argued about, it is a substantially better balance in that a private network operator may now distribute up to 2.5 megawatts of electricity to domestic customers, which may supply about 2,500 households, and an additional 1 megawatt may be provided where a generating station is embedded in the distribution system. Although the exemptions regime remains concerned with the security of the system and the protection of the consumer, that additional 1 megawatt for embedded generation is most likely to assist local CHP operations and will therefore benefit them as well.
The Government did not require, as some had recommended, that private networks provide all domestic customers with third party access—that is, access to the competitive market—but we took the view that the 2.5 megawatts, together with the 1 megawatt allowed for distribution from embedded generation, represented a level beyond which it would be inappropriate to deny access to that market. It is of course entirely open to any operator to supply a greater number of domestic customers, but it must do so, like any other domestic operator, under licence. Ofgem can then consider what licence conditions should apply.
However, the point that we reached in 2001, while maintaining security of supply and the interests of the consumer, provides some benefits to small generation and small CHP generation in particular. We are not convinced of the argument for going further than that at this stage.
Baroness Miller of Chilthorne Domer: My Lords, I thank the Minister for that reply and was certainly aware of the Government's move involving individual householders and the renewables obligation certificate, as I was in your Lordships' House leading from our Benches on the order last week. However, I still thank him for reminding the rest of the House about that move. Nevertheless, that is a welcome but small move that does not overcome the need for net metering. When the Government come to consider the issue more substantively, they will realise over the next few years that, if they are as truly interested in the outcome—that is, reducing carbon emissions to the atmosphere—as they say they are, they will increasingly find that individual households and communities acting together are the most powerful way to do so.

1121
Therefore, although I shall not press the amendments this evening, because they have not yet come of age, if you like, because they have not garnered support from the Conservative Benches either, it is in the power of the individual and individual communities to affect our future. So it is with regret that I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 195D not moved]
8.45 p.m.
Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 196:
Before Clause 110, insert the following new clause—"
CHAPTER A1
COAL MINE METHANE
SCHEME FOR THE PROMOTION OF COAL MINE METHANE
(1) For the purposes of promoting and developing the use of coal mine methane the Secretary of State shall within six months of the passing of this Act make regulations to establish a scheme, to be called a feed in tariff scheme, for the generation of electricity from coal mine methane.
(2) A feed in tariff scheme is a scheme whereby the Non-Fossil Purchasing Agency or such other body specified by regulations made pursuant to this section shall have a duty pursuant to those regulations to purchase electricity generated by means of coal mine methane.
(3) Regulations made pursuant to this section—

(a) shall include provisions that specify any price or prices at which the Non-Fossil Purchasing Agency or any other body specified by regulations shall purchase electricity pursuant to this section;

(b) may in particular specify any other body to which subsection (3) applies; and

(c) may contain such incidental or supplemental provisions as in the opinion of the Secretary of State are necessary to enable the operation of the feed in tariff scheme.

(4) Regulations made under this section are subject to the negative resolution procedure.
(5) In this section "coal mine methane" means methane from abandoned coal mines."
The noble Lord said: My Lords, the amendment stands in my name and that of several noble Lords in different parts of the House. We have discussed coal mine methane on several occasions in the House and had a good debate in Grand Committee, but I fear that I must remind the House what we are on about.
Coal mine methane is a hazardous gas. It escapes into the atmosphere from active and disused coal mines. Those emissions are the responsibility of government, which took over the liability for abandoned mines from British Coal when it was privatised in 1994. From now on, I shall talk about emissions from abandoned coal mines.
Coal mine methane has a global warming potential 23 times greater than carbon dioxide. That is to say that you would need to trap 23 times more carbon dioxide for each tonne of methane. Therefore, capturing this waste gas for generation cuts its global warming potential by over 100 per cent and saves nine times more CO2e—that is, CO2 equivalent—per kilowatt hour than wind power. It is a clean, strategic
1122
source of energy with the potential to contribute up to 450 megawatts of generation capacity by 2010. That would be the equivalent of hundreds of wind turbines.
In Grand Committee we moved an amendment to accord renewable obligation status to coal mine methane, on the grounds that we have hundreds of years of coal availability in this country from abandoned mines. That has already been said in the debate today. We need to avoid the seepage of methane into the atmosphere. In Grand Committee I mentioned Arkwright, a village in Derbyshire, that had to be evacuated because it became uninhabitable as a result of methane leaking into the atmosphere. Our other argument was that, as the Germans have given RO status, we should do so too.
The essence of the Government's reply was that coal mine methane is not a renewable—if all the coal were to be dissolved by microbiotic action that that would be the end of it. They said that methane is not a clean fuel and there would be some emissions from generating power from it. They argued that it is not measurable, and I shall return to that point later.
The strongest argument that the noble Lord, Lord Whitty, put forward was a familiar one that we have already debated today—that if they got help it would undermine long-term renewables objectives. That is absurd. I dealt with that earlier and am not going to do so again.
They went on to say that the Germans are doing this differently. In Committee on 1 March, the noble Lord, Lord Whitty, said that the Germans,
"are doing it by means of a system which they refer to as a 'feed-in tariff, which results in favourable pricing of the methane connection into the system".
Later, he said:
"The feed-in tariff is not state aid because effectively no money is foregone or provided to the coal mine methane sector. Therefore it does not fall foul of state obligations".
When the noble Lord, Lord Williams of Elvel, listened to the argument, he interposed:
"I have listened very carefully to the debate and I feel that noble Lords opposite have a point. Why can we not do what the Germans do regardless of the renewables obligations?".—[Official Report, 1/3/04; col. GC 174.]
That is the question to which we return this evening. Amendment No. 196 is an effort to respond to the suggestion that the noble Lord, Lord Whitty, made on that occasion that we should do what we can in the way that Germans have to get round the issue of state aid provision.
Amendment No. 196 provides a power for the Government to make regulation for a scheme called a "feed-in tariff scheme". That is defined in subsection (2) thus:
"the Non-Fossil Purchasing Agency shall have a duty … to purchase electricity",
from the coal mine methane operators.
So far that would follow the German model. However, I should offer an explanation of what is meant by a feed-in tariff: it sets the price at which a designated organisation is obliged—as we propose, by government regulation—to purchase electricity from a

1123
renewable or sustainable electricity generator. The purchaser could be the distribution network operator, the transportation grid operator or an independent agency. As I have already suggested, an example of the latter would be our own Non-Fossil Purchasing Agency (NFPA), which supervises the market in non-fossil fuel obligation contracts. The price at which the obligation would be exercised would encourage sustainable use of coal mine methane. It would be set for a fixed contract period, in order to be effective in building the industry and raising finance.
The Non-Fossil Purchasing Agency was set up to act as an agent through which electricity suppliers contracted collectively with renewables generators. It would be possible to have a separate coal mine methane purchasing agency, but we do not suggest that; we suggest that the existing body, the NFPA, should do that. The system would work in the same way as the German one does. The German experience is that creating a framework where a premium is paid for CMM capture allows private industry to build projects that mitigate huge amounts of methane. They do not require knowledge of the absolute quantities being emitted. The German Government have recognised that CMM emissions were a major global and local hazard, and that something had to be done about them.
During the debate on innovation, my noble friend Lady Byford referred to the other argument with which one has been faced. When she raised the issue, she was told by the noble Lord, Lord Sainsbury, that the amounts would be very small and therefore not worth doing. What are the facts? In 2003, member companies of the Association of Coal Mine Methane Operators captured 765,000 tonnes of CO2 equivalent—one divides that by 23 to get the tonnage of methane trapped. An equivalent 574 megawatts of wind turbines would be required to achieve the same output.
The noble Lord, Lord Sainsbury, was most woefully misinformed. I, and others, who have been meeting Ministers to discuss the subject for over two years, have formed the impression that, for reasons best known to themselves, Defra officials have steadfastly set themselves against any fresh support for CMM. In Grand Committee, they refused a renewables obligation. That is very well; we have moved on from that and taken the hint from what the noble Lord, Lord Whitty, said during the debate. We have opted for a variant of the German scheme and tabled an amendment that would introduce a feed-in tariff. It has worked well in Germany, and there is no reason why it would not work here using an adapted NFFO structure.
If all the effort expended by officials to prevent CMM development ever taking off in the UK could be put into finding a way of supporting the industry, surely a mechanism could be found. The methane is there; it is seeping into the atmosphere; it could be trapped, used and burnt to generate electricity. The idea that somehow one cannot give any more help to
1124
coal mine methane because it might frighten people off investing in wind power seems absolutely absurd. I beg to move.
Baroness Miller of Chilthorne Domer: My Lords, in supporting the amendment, I speak on behalf of my noble friend Lord Ezra. Due to circumstances beyond his control, he is particularly sorry that he cannot be present to support the noble Lord. They have worked together for a long time on the issue.
The Government wish to reduce the amount of gases which go into the atmosphere contributing to climate change. The noble Lord, Lord Jenkin, has brought forward an amendment which should overcome those issues to which the Government objected in Grand Committee; namely, the fiscal incentives which were unacceptable to them. The amendment, therefore, is redrafted. We hope that it will achieve the outcome which noble Lords on all sides of the House seek and that the Government will accept it.
Lord Davies of Oldham: My Lords, the noble Lord thought that the Government might rely on some old arguments. It is not the function of the Report stage to reiterate arguments heard in Committee. I seek to follow the noble Lord on that. I shall produce only one old argument and two new ones. I shall also produce two negative arguments and one positive argument. I hope that the response will be sufficiently positive to encourage the noble Lord to withdraw the amendment.
First, on the new argument, we are in straight conflict with the noble Lord. We do not accept his illustration that the success of the German model is one we should follow. Germany's feed-in tariff scheme for renewable energy has recently been reviewed by its federal economic ministry's advisory council which concluded that the scheme was expensive to the economy as a whole, would be lacking in environmental benefits once the EU emissions trading scheme is operational, and that it should be abolished.
We made this point in Committee. The difference between the UK's support of renewable energy using the renewable obligation and the Germans' support of renewable energy via their market system reflects the fact that the German electricity market is far less liberalised than that of the UK. Therefore, its experience is not readily translatable to the scene here.
I put forward an older argument which the noble Lord, Lord Jenkin, with his usual prescience has foreseen. He knows that I shall argue that such a feed-in scheme would conflict with the principles and objectives behind the Government's energy White Paper which underpins the Bill. If we introduced such a scheme for methane, it would be contrary to the White Paper's principle at paragraph 1.21 that,
"we do not propose to set targets for the share of … electricity supply to be met from different fuels";
and, secondly, at paragraph 6.7 that,
"we will not intervene in the market except in extreme circumstances".
A feed-in tariff for CMM would clearly conflict with both those principles.

1125
Such a tariff would also be more expensive for consumers as there would be no incentive to drive down costs such as there would be with a market mechanism and, as a clear market intervention, it would diminish the efficiency of our liberalised electricity market. I give way to the noble Baroness who is stopping me in midstream.
Baroness Byford: My Lords, indeed I am and I am sorry for doing so. However, if the Government have decided in this case that they will not interfere with the market, how is it that the market is being interfered with as regards wind farms?
Lord Davies of Oldham: My Lords, they are not. The renewables obligations are there. We have a target which we want to see achieved. That is recognised. What is sought here is a feed-in mechanism, a direct interference with the market. That is a different concept.
Perhaps the noble Baroness would exercise a modicum of patience. I understand her eagerness to challenge me, but she challenged me as I was seeking to arrive at a rather more positive response to the proposals made by the noble Lord, Lord Jenkin. I should like a hearing on that front in the hope that the noble Lord and both Front Benches might think that we have made some progress. We have certainly looked long and hard at the way forward for coal mine methane.
As I have indicated, we do not accept the feed-in tariff, but we propose to set up a new scheme to encourage industry to control emissions of coal mine methane. I hope that our proposed solution will commend itself to the House. The new arrangement will be a competitive grant scheme to be administered by the Coal Authority. It will provide an incentive to the private sector to control coal mine methane emissions through a competitive bidding process, leaving them to decide on the most cost-effective means of control—whether it be through electricity generation or by flaring the methane. We are considering what level of funding would be required, to be dispersed over seven years, to control the majority of methane emissions from the existing sites where it is possible to control emissions.
That proposal is constructive, but it is at an early stage. In principle, it is considered to be the most effective means for controlling such emissions. It has the benefits that it would involve genuine competition with opportunities for industry participation; it is designed to reduce emissions cost effectively; it would fit with existing licensing constraints; and we could implement it fairly quickly.
I hear what the noble Lord said about the extent of methane emissions. Our recent study—overseen by a project board that included the DTI, Defra, the Coal Authority and representatives from the CMM industry—reached the conclusion that methane is not quite as significant as it is sometimes made out to be. It concluded that only some 52 kilotons of methane are
1126
vented every year that could be controlled. That amounts to around 2.5 per cent of total UK methane emissions.
Allowing for those sites that are already utilising methane, that falls to about 21 kilotons of uncontrolled emissions or 1 per cent of total methane emissions. Let us get some perspective on the scale of the issue; that is equivalent to just 0.07 per cent of the UK's total greenhouse gas emissions. I am grateful to the noble Baroness, Lady Miller, who, in her speech, emphasised the fact that our objective is how to reduce the emission of these noxious gases into the atmosphere. That is the scale of the problem.
I hope that it will be recognised that we fiercely contest the argument that we could follow easily the German example. We maintain that interference in the market is something to be avoided if we possibly can. We have a constructive proposal for addressing the issue. We share with all parts of the House a commitment to dealing with that problem. On that basis, I hope that the noble Lord will think that I have responded positively enough for him to consider that he has made good progress with his general representation on the matter and that he will feel able to withdraw his amendment.
9 p.m.
Lord Jenkin of Boding: My Lords, I am not sure how many Ministers the noble Lord, Lord Ezra, and I, and our colleagues, have met over the past three years, but it must be five or six. The noble Lord, Lord Davies of Oldham, is the first who has succeeded in offering any help to this industry. For that, one must express gratitude. I and, no doubt, the officers of the association will wish to study very carefully the words that he has used and to examine the figures that he has quoted. The noble Lord said that representatives of the association had taken part in this study, but I am not sure that they would necessarily endorse the figures that the noble Lord mentioned.
Nevertheless, it would be very churlish of me to say, "We fear the Greeks even when bearing gifts". In this case, I am not sure that that would be right. The noble Lord really has moved to respond to the case that has been made over the years, which was made quite forcefully in Grand Committee.
I express my gratitude to the Minister. Some progress has been made on this, and in these circumstances it would be wrong to press the amendment, as we had originally intended to do. We may want to return to the subject at Third Reading, when perhaps a little more will be known about the scheme that the noble Lord has announced this evening. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 111 [Power to modify licence conditions]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 196A:
Page 90, line 30, after "systems," insert—
"(aa) power to set an upper limit or a lower limit (or both) on the charges set by the holder of a transmission licence for the use of its system by persons authorised to generate or supply electricity under the 1989 Act; and"
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 196B, 198A and 198B, which stand in my name and are grouped together. These amendments have been tabled as fall back amendments, in order to provide an opportunity for some further discussion on the highly controversial subject of transmission charges.
I took some comfort from a statement made by the noble Lord, Lord Davies of Oldham, when he responded to my amendment on this subject in Grand Committee on 12 February. Referring to figures that I produced to illustrate the extra cost to Scottish generators, he said:
"But the figures relate to the current and first proposals and I have no doubt that there will be great toing and froing over the figures".
A little later, he said:
"I recognise that the figures are accurate but they will be under constant and ever-present negotiation over the next few months".—[Official Report, 12/2/04; cols. GC 573–74.]
I am happy to say that this is absolutely correct. The major generators in Scotland have been meeting together and also meeting with the relative agencies, in an attempt to agree the form of words for an amendment to which they could all subscribe. The prize would be substantially to close the very wide gap that presently exists between those generating in Scotland, who would be substantially disadvantaged by the proposed changing methodology for access to the transmission system, and those who are already part of that system in England and Wales, and who would fare very much better. Indeed, without exception, they will all pay less.
As I explained in Committee, all but two of those that are presently recompensed for using the system will actually receive more money. In sharp contrast, Scottish Hydro-Electric will face an increase from £5.44 per kilowatt to £20.69, or 380 per cent, while ScottishPower will rise from £2.45 per kilowatt to £11.28, or in percentage terms, an increase of 430 per cent. Clearly, this state of affairs cannot be allowed to prevail.
Based on Ofgem figures, the Government have said that if the current approach was adopted, generators overall in Scotland would see a net reduction in their payments of £5 million. This is because of the removal of interconnector charges and connection charges and the opportunity for Scottish generators to earn revenue from the provision of balancing services to NGC as the Great Britain system operator. However, this does not consider the impact on individual Scottish generators. I give one example only. The impact of the current proposals on British Energy's Scottish generation assets would be an increase in charges of approximately £11 million, or 56 per cent.
I do not wish to use this occasion to weary the House by going over the many details that I spelled out in Committee in support of my argument, but I feel that I must again make reference to the danger facing Peterhead power station in the north-east of Scotland. Peterhead enjoys the reputation of being one of the most efficient gas-fired power stations, not only in the United Kingdom but in Europe, and it will be crucial
1128
in coping with the closure of coal-fired stations and the intermittent nature of most sources of renewable energy.
Under the proposals, it would pay 20 per cent of all the charges levied on generators throughout the United Kingdom. If the proposals are accepted, Peterhead may well have to close, which would put the Government's renewables policy at serious risk.
I had hoped that the amendment being prepared by generators in Scotland would have been available by now. Regrettably, this is not so, although good progress is being made and it is possible that such an amendment may be available in time for Third Reading immediately after Easter. If not, it will have to be tabled in the House of Commons. I understand that the discussions have required a degree of compromise all round. I am very hopeful that a form of words will be tabled which will have the blessing of the Government as well as the generators. It is in everyone's interest that this matter is resolved soon.
I understand that NGC will be consulting on revised proposals shortly, including a dampening of the locational element of charges that will lessen the impact on Scottish generators. However, considerable uncertainty still remains over the structure of the GB charges. This is not acceptable at this late stage in the process and NGC must urgently provide fuller information so that the companies can assess the commercial impact of its proposals. I beg to move.
Baroness Carnegy of Lour: My Lords, I support my noble friend, as I did in Grand Committee. This is a serious issue and a resolution has to be found. I shall not, of course, repeat the figures my noble friend has set before the House but I shall remind the House and the Government of why this is so important.
When we discussed the point in Grand Committee, the noble Lord, Lord Davies, reminded us that the matter was still out for consultation. He quoted various figures, claiming that the costs to Scottish generators of the plans that the grid has at the moment were neutral. Scottish generators have obviously contested these figures—convincingly, it seems to me. I shall not repeat the arguments because the Minister knows them very well.
To add to his argument, the noble Lord, Lord Davies, said in Grand Committee that the Government considered that Scottish generators will receive considerable advantage from the arrangements the Government have in mind to help renewables generators in remote areas. I understand we will come to that in Amendment No. 217H. The Scottish generators point out that it may well have the reverse effect to that envisaged by the Government.
While, of course, anyone who is operating wind power—as the Scottish generators doubtless will be—will welcome that assistance, should it come, the amount of transmission lines which will be brought about by such generation will cost the generators a great deal. That extra expense in the transmission system will eventually reach the customers in increased costs. Does the noble Lord realise that a planning permission application has gone to the Scottish Executive for 300 windmills on the Isle of Lewis in the

1129
Outer Hebrides? They will supply 365,000 households, which is 1 per cent of total demand. There will be an enormous transmission cost attached to that electricity. The power from that island, which, as the noble Lord knows, is a long way out towards the Atlantic Ocean, will have to come across into Scotland and it will doubtless join the big line that is being set up from Beauly to Denny in Stirlingshire. That wind farm will add greatly to the cost of electricity in Scotland, even if the cost of the wind farm energy going into the system is reduced, as the amendment suggests. I am not sure why the Minister says that the Government will not intervene in the system as that is a big intervention. It is certainly one that those of us in Scotland will welcome.
The noble Lord indicated that there was a lot of toing and froing between the generators and the Grid about this, which my noble friend also mentioned, and we hope that there will be a good outcome. But so far, there is no sign of one. Something has to be done to make sure that Scotland is not landed with very much more expensive electricity than other countries. Noble Lords may remember that in Committee, the noble Lord, Lord Tombs, described what it felt like when he was working for Scottish generators and went to negotiate in London. It was suggested to the people in London that they might meet in Scotland on one occasion. They said that Glasgow was a very long way away. The noble Lord pointed out that he came from Glasgow to London, the same distance as they would have to go from London to Glasgow. That is what it feels like negotiating in London.
This Parliament exists for all the people of the United Kingdom—all the electricity users. As this negotiation goes on, the case of the south-east dominates the thinking. Surely this Parliament has the duty to provide a fallback provision in the Bill, to enable the Secretary of State to ensure fairness across the United Kingdom, whether by these amendments or by one that my noble friend may move later. This amendment is simply a fallback provision, a temporary measure available to the Secretary of State to cap or make transitional adjustments to what Scottish generators are required to pay and thus to what Scottish customers are required to pay. If the Government do not do something in this House, I think that they will have a difficult time in another place. I support my noble friend's amendment.
Baroness Byford: My Lords, I rise to speak to this amendment briefly. I am very grateful to my noble friend Lord Gray of Contin for explaining very clearly the reasons why he has brought this amendment back again. For anyone who was not in Committee, the figures he gave, and the way that it will affect Scottish power, must be mind-boggling. To go from £5.44 per kilowatt to £20.69 is a huge increase. The one thing that my noble friend has asked for is some form of certainty. If I understand him correctly, the position is that the individual companies do not know where they are going and it is part of the problem. My noble friend
1130
Lady Carnegy of Lour clearly supports this amendment and suggested that the Government's Amendment No. 217H may make matters worse.
I should be very grateful if, when he replies, the Minister could reflect that particular issue. Otherwise, we shall not have the benefit of Amendment No. 217H until we reach it—when we need to be able to consider it in the light of this amendment. Perhaps the Minister could touch on it, if not in detail then with a broad brush, because I believe that my noble friends have raised important issues.
Lord Davies of Oldham: My Lords, in returning to this important debate, I am grateful to noble Lords. Of course we understand the concerns which underlie the amendments, and the way in which noble Lords have spoken to them with considerable emphasis.
I have some difficulty with regard to Amendment No. 217H. Part of the difficulty is that cold water has already been poured on that constructive concession. On the other hand, the noble Baroness herself was looking forward to it with slightly more optimism. It is quite difficult for me to talk about an amendment which is not part of this group. I would be in great danger of ruling myself out of order—save to say that what we intend is to take on board the particular problems of specific areas in a limited way.
I reject the overall arguments with regard to the Scottish position. While understanding where the arguments come from, we would seek to show just how we are involved in continuing discussions to resolve some of the issues.
Baroness Carnegy of Lour: My Lords, I am sorry to interrupt, but I want to make it plain that I mentioned the oncoming amendment only because the noble Lord used it as part of his argument when we were discussing these amendments last time.
The Scottish generators very much took issue with that. I mentioned it only for that reason. The noble Lord need not talk about that amendment at this point. They used it as part of the argument, so I thought that I should include it as my noble friend had not.
Lord Davies of Oldham: My Lords, the noble Baroness is being more than kind in saying that I do not need to respond to it. She certainly raised the issue first. However, she will recognise that it was also raised with considerable force from the Front Bench, and I was seeking to respond to the duality of the representation. It is difficult for me to do so with regard to that amendment, except to trail the obvious point that we have accepted that there are difficulties in this area. The difficulties are sufficient to indicate that, in due course, we will be making a concession in that limited respect, while at the same time seeking to meet the main thrust of the noble Lord in moving the amendment.
We think that the Scottish industry will gain and will lose, as we have indicated in Committee. After all, BETTA operates on behalf of the whole of the United

1131
Kingdom, brings the benefits of the market across the whole of the United Kingdom, and customers stand to gain from that competitive market. Nevertheless, we recognise that there are specific issues with regard to the Scottish position.
The noble Lord was generous enough to indicate that there are very intensive, ongoing discussions on these issues. We are by no means at the end of the road and, at this point in time, I am not expressing anything in the way of categoric responses—refutations of the positions which he has adopted—save in the most general terms, which he will recognise that we defend.
BETTA is a package of reform. Some elements will result in higher costs to the Scottish generators, as the noble Lord has been articulate in emphasising. Others, such as lower connection costs and the abolition of interconnector charges, will result in lower costs.
The particular issue of Peterhead was mentioned. If an issue arose regarding guaranteeing local security of supply, the National Grid would need to enter into a contract with Peterhead. Perhaps other solutions could be found in the short term.
We would expect such specific localised issues—when I say "local" I do not want to be disparaging, because I recognise how significant such issues are to the community—which are different from the more general position in Scotland, to be recognised. That point is well taken. I want that to be accepted as an earnest of our seriousness about having discussions that cover the particular issues facing Scotland.
Noble Lords will recognise that the National Grid has been concerned in the consultation process to work out ways in which some of these issues can be tackled without infringing the broad principles on which BETTA is to be established. It is a nationwide market that will bring advantages to the whole of the country and all of the countries within the United Kingdom.
Particularly in relation to Amendments Nos. 197A, 198A and 198B, I understand the argument about giving generators time to adjust to the increases in the transmission charge. At first glance that seems a very reasonable argument, which the noble Lord made with his usual reasonableness. However, that would discriminate against generators elsewhere and in England and Wales who would be competing in the same market. It just would not be fair for Scottish generators to receive the benefits of the national market of BETTA on day one but not pay the full costs. That would also delay Scottish consumers receiving the full benefits of BETTA.
In Grand Committee we discussed just how severe those costs would be. As I sought to emphasise, and I do not resile from this position at all, while there may be acute difficulties in particular areas, the broad perspective facing Scotland is a fine balance of gains and losses. It is the noble Lord's right to emphasise the areas where there are clear losses. As he will recognise, my task is to defend BETTA's overall value in bringing universal benefits to which Scots will have access on an equal basis.
1132
In Grand Committee I disputed the noble Lord's figures, and I wrote to him to do the same. He produced some fairly devastating figures of his own. I hope he will recognise that, in arguing the general case, I am basing it on the best estimates of cost for Scottish consumers and generators. The whole purpose of BETTA, after all, is to bring the substantive benefits of competition to the whole of the nation.
I hope that the noble Lord will recognise that we do not have a fixed position. Substantial consultation continues and will have a changing outcome in terms of the costs to be borne. I certainly am showing a commitment to the necessary flexibility, with which we can deal more properly in our later consideration of the Bill, about specific generators in Scotland and specific local problems. I hope that he will feel that he has once again articulated a very important area of concern, which has obliged the Government to respond by engaging in continuous consultation and negotiation in a situation that remains flexible.
Lord Gray of Contin: My Lords, I thank my noble friend Lady Carnegy of Lour for her remarks in support of my amendment. I also thank the noble Baroness, Lady Byford, for her help from the Front Bench. The Government can be in no doubt that we are fighting on a united front on this matter, but I also thank the Minister for the very courteous way in which, as always, he responded. The debate we have had on this group of amendments has been very useful because I am glad that the Minister confirmed that minds are not yet closed and that discussions are still taking place. It is to be hoped that, in due course, either at Third Reading or in another place, an amendment to which all parties can subscribe will be made to the Bill. I am most grateful to the Minister for what he said. It would be churlish to force this to a Division and in the mean time I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn
[Amendment No. 196B not moved.]
Baroness Miller of Hendon Baroness Miller of Hendon moved Amendment No. 196C:
Page 91, line 8, leave out "that subsection comes into force" and insert "this Act is passed"
The noble Baroness said: My Lords, I would like to move Amendment No. 196C and speak to Amendments Nos. 197ZA, 198C, 203B and 208CA. They are all in identical terms and each seeks to alter the time limits in the sections to which they relate, from a period commencing with the date when the relevant subsection comes into force—whenever that may be—to a specific defined date; namely, to a specified date after the Act is passed. In each case, we have not proposed any alteration to the commencement period from that proposed by the Government. In the cases of Clauses 111, 114, 116 and 145, that is 18 months; and in the case of Clause 152, that is three months.
Each of the clauses that we propose should be amended sets a limit on the time by which the Secretary of State can exercise the powers granted by that clause. Clauses 111 and

1133
114 relate to the implementation of the new electricity trading and transmission arrangements by the modification of licences. Clause 116 is a power to give directions to Ofgem in relation to the grant or refusal of transmission licences.
Clause 145 is a very wide power to modify or amend standard gas and electricity licences. Clause 152 relates to the modification of standard licences in relation to appeals from decisions of Ofgem, where the time limit of the Secretary of State to decide whether he wants any such modifications proposed by the Government is three months.
We certainly do not argue with the limitation of the period in which the Secretary of State must exercise his powers under the respective clauses. We accept the length of the periods proposed by the Government. Our disagreement is only with the date from which that power should run. The Government, in each case, say that it should be from some unspecified date when the appropriate subsection comes into force, whereas we propose that the time should begin to run from the passing of the Act.
Under the Government's proposals, these closely connected provisions need not even come into effect on the same date, because Clause 169(2) enables the Secretary of State to make different commencement orders for different parts of the Act. The five sections grant very important powers to the Secretary of State, and we do not quarrel with these. Nor do we disagree with the necessity provided for in these sections for adequate prior consultation before the powers are exercised by the Secretary of State.
What we do not agree with is the fact that the Bill sets no clear date by which the wide-ranging executive power to implement the BETTA programme, or to modify licences relating to energy administration, or relating to appeals from Ofgem, must be exercised.
The Bill will introduce a major overhaul of the power industry. Certainty is therefore what is required by those involved. I point out that the approach of the Government in the case of the BETTA programme is inconsistent with that adopted for what was called the new electricity trading arrangements (NETA) in the Utilities Act 2000, where time began to run with the commencement of the Act.
The Bill has had a very long gestation period, beginning even before the White Paper, possibly even with the drafting of what became the Utilities Act 2000. The Minister may very well tell us that he expects the Secretary of State to set the machinery in motion on day one after the Bill is passed, and I sincerely hope so. However, there is absolutely no reason why the exercise of the Secretary of State's powers under the clauses should extend beyond a very generous 18 months, or in one case three months, from the passing of the Bill.
The amendments will concentrate the Secretary of State's mind on bringing certainty to the power industry, which is very necessary. I beg to move.
Lord Whitty: My Lords, I understand the noble Baroness's arguments but, in practice, it would not be a sensible approach to shift the starting point for the time limit. As she said, the implementation of BETTA requires the use of a range of powers to change licence conditions. It makes sense for those to be timelimited—everyone accepts that—but only from the period that the commencement to use the powers starts. If, for example, a technical problem is found immediately prior to implementation, commencement would not begin until that had been sorted out. If the clock were already ticking, that could set back the whole BETTA project if the matters could not be resolved before the time expired.
The noble Baroness asks why the provision is different from those under the Utilities Act. With this provision, we are of course bringing in a new regime, which could introduce greater complications, some of which we discussed on the previous amendment. By bringing the whole Scottish system into the English system, greater complications could arise in the technical drafting of regulations. I therefore think it sensible that the commencement date start from when the regulations are introduced.
Amendments Nos. 203B and 208CA deal with the special administration regime. Clearly we would expect to bring that regime in as soon as possible after Royal Assent, but we need to retain the flexibility to deal with any consequences of the introduction of BETTA, in respect of special administration and appeals. For those practical reasons, I hope that the noble Baroness will not press the amendment.
Lord Jenkin of Roding: My Lords, the Minister did not acknowledge my noble friend's central argument, which was that the provisions generate significant uncertainty for the industry, as it is affected by all the clauses. Can he say anything that might help the industry to recognise exactly how the powers will be used and when, to use his phrase, the clock will start ticking?
Lord Whitty: My Lords, the uncertainty and its resolution relate to the drafting of the regulations and their precise details. My argument is not that an industry does not need certainty as rapidly as possible; clearly it does. However, if we start the clock ticking immediately on Royal Assent and if the drafting of the regulations, which will of course have to be quite widely consulted on, leads to greater complexities and then time runs out, that will be doing the opposite of creating certainty. We would have been consulting on regulations, 99 per cent of which people might agree with, but which for one technical reason could not go ahead on the date that the legislation would by then have proposed.
The danger of that is greater in relation to BETTA than it was in relation to NETA. I was going to say that that was because of the Scots, but noble Lords know what I mean. We are bringing two regimes together,

1135
whereas previously we were simply modifying the regime under a new structure and regulator. It does not help the certainty issue to give a closing date—a deadline—that may be before the sensible time that it takes to finalise the regulations.
Baroness Miller of Hendon: My Lords, I thank my noble friend for repeating what I tried to say about certainty being the essence of what was needed for the power industry. It is hopeless when there is no certainty. I understand exactly what the Minister is saying; he need not look so worried, because I will certainly not divide the House.
It is absolutely imperative in my opinion, however, that the Government settle down and get everything done as quickly as possible. That is the issue. The trouble with leaving matters to unspecified dates until regulations are introduced is that that could be at Christmas, spring next year or whenever. The truth is that had the Government been willing to accept such an amendment easily, which I what I had hoped for, that would have concentrated their minds to make progress with the consultation and the regulations and then be able to complete the job. However, in view of what the Minister has said, I want it on the record that we feel that it is unfair that the industry should be uncertain. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 114 [New standard conditions for transmission licences]:
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 197:
Page 92. line 26, leave out from "under" to end of line 27 and insert "Part 1 of the 1989 Act, or
( ) under this Act,"
The noble Lord said: My Lords, in moving the amendment I shall also speak to Amendments Nos. 201 and 203. They are designed to refer to all of the provisions that allow for modification of standard licence conditions and are simply the correction of a small drafting error. They ensure that standard conditions, on an ongoing basis, include modifications under both the Electricity Act and the Energy Bill. Accordingly, I hope that the House will support these small drafting amendments that seek to improve consistency in the Bill. I beg to move.
On Question, amendment agreed to.
[Amendment No. 197ZA not moved.]
Schedule 17 [Conversion of existing transmission licences: licensing scheme]:
[Amendment No. 197A not moved.]
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 198:
Page 211, line 6, leave out "desirable" and insert "to be necessary or expedient"
The noble Lord said: My Lords, never let it be said that we are not a listening Government when sensible arguments are put at any stage of a Bill. We listened to the significant representations that were made. They were not unduly protracted, but were made with considerable force and argued that we should make a
1136
change because noble Lords were concerned that the power in this paragraph would provide for the tearing up of,
"any agreement or code that the Secretary of State thinks it desirable".—[Official Report, 24/2/04; col. GC 72.]
That would be a terrifying power and is not one that we have ever intended. We indicated in our response that the power was restricted to a narrow purpose—that is, when a change is needed to an agreement or codes as a consequence of changes to a transmission licence for the purpose of BETTA.
However, it was clear that there was great anxiety in Committee over this issue and we were pressed to come back with a different form of wording. As ever, we have considered those representations with the greatest of care and have tabled an amendment that brings the language in line with the drafting in the other clauses relating to BETTA—that is to say, from a "desirable" test to a "necessary or expedient" test. Noble Lords will recognise how enormously grateful I am for the advice that was proffered on that last occasion. I beg to move.
Lord Jenkin of Boding: My Lords, at the risk plagiarism, may I tell the Minister I am enormously grateful to the concession he has made and it greatly improves the Bill? It makes the whole Grand Committee procedure worth while.
On Question, amendment agreed to.
[Amendments Nos. 198A and 198B not moved.]:
Clause 116 [Grant of transmission licences]:
[Amendment No. 198C not moved.]
Schedule 18 [Property arrangements schemes]
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 199:
Page 217, line 10, leave out paragraphs 21 and 22.
The noble Lord said: My Lords, the amendment again fulfils a promise that we made in Committee. Considerable criticism was made of the contents of paragraphs 21 and 22 in schedule 18. This amendment removes them. I beg to move.
On Question, amendment agreed to.
9.45 p.m.
Lord Woolmer of Leeds Lord Woolmer of Leeds moved Amendment No. 200:
After Clause 121, insert the following new clause—
"Exemption of nuclear and large scale hydroelectricitygeneration from climate change levy
EXEMPTION OF NUCLEAR AND LARGE SCALE HYDROELECTRICITY GENERATION FROM CLIMATE CHANGE LEVY

(1) The Climate Change Levy (General) Regulations 2001 (S.I. 2001/838) are amended as follows.

(2) In regulation 47(1), leave out "provided that it is not electricity generated from a large hydro generating station".

1137

(3) In regulation 47(2)—

(a) in the definition of "generator", leave out "except in the definition of "hydro generating station" below,"

(b) in the definition of "hydro generating station", leave out "other than stations driven by tidal flows, waves, ocean currents or geothermal sources",

(c) leave out the definition of "large hydro generating station",

(d) in the definition of "renewable sources"—

(i) leave out "or nuclear fuel" and insert",",

(ii) at end insert "and also includes nuclear fuel".

(4) Nothing in this section affects the power of the Commissioners of Customs and Excise to make or amend regulations under section 30 (climate change levy) of and Schedule 6 (climate change levy) to the Finance Act 2000 (c. 17)."

The noble Lord said: My Lords, at this late hour I shall be brief. First, I give the apologies of my noble friend Lord Lea of Crondall who has sat through much of three days of Report stage and unfortunately as we reached this amendment was unable to be with us. I extend on his behalf apologies for absence.
Her Majesty's Government are firmly committed to a national goal of a 20 per cent reduction in carbon dioxide emissions by 2010. I am sure that we wish them well in that ambition. However, as well as being a tax on energy, the climate change levy, introduced in April 2001, is, I presume, intended to contribute towards reducing carbon dioxide and other greenhouse gases. There is common agreement that nuclear power for electricity generation results in no carbon emissions or other greenhouse gases. The same goes for hydroelectricity.
Common sense appears to be that nuclear power for electricity generation should not have to pay the climate change levy; yet it does. A quarter of all climate change levy revenue is collected from nuclear power-generated electricity. I welcome the fact that high quality combined heat and power from coal is given a dispensation for the levy. That seems to show a welcome flexibility. I hope that the Government can extend not only flexibility but good sense to the nuclear industry and nuclear power.
I support the Government's efforts to back wind power as an energy source with low greenhouse gas emissions. It will be an expensive option with significant issues surrounding reliability and back-up capacity, but that may be a price worth paying to achieve low-carbon technology. The Government would be correct to back wind power as a major source of low emissions energy. Figures published recently by the Royal Academy of Engineering demonstrate that offshore wind power varies between two and three times the cost of new nuclear plant.
Most objective commentators are clear in their conclusions. If the UK is to achieve its Kyoto commitments, we need a significant nuclear contribution. There is some inconsistency in the way in which the emissions trading scheme will differentially impact against carbon dioxide producers, yet the climate change levy
1138
appears to discriminate against an important industry that can contribute to reducing carbon dioxide emissions in our climate.
Exempting from the climate change levy electricity generation for nuclear power and large-scale hydroelectricity can make a significant contribution to reducing greenhouse gases. It would bring consistency in the Government's approach to the use of the weapons of the climate change levy and the emissions trading standards. I beg to move.
Lord Jenkin of Roding: My Lords, I was happy to add my name to the amendment in the name of the noble Lord, Lord Woolmer of Leeds, and his colleagues. I too regret the absence of the noble Lord, Lord Lea of Crondall. He brings to these debates a mordant wit, which would serve us well on this occasion. One needs a considerable sense of humour to recognise that what the Treasury—it was a Treasury introduction—called a climate change levy was not actually anything of the sort.
To the ordinary man in the street—I say this with great respect to the noble Lord, Lord Woolmer, who moved the amendment with charm and modesty—the Treasury naming the tax the climate change levy gave the public the view that it was an important step in our efforts to achieve our Kyoto targets for the reduction of greenhouse gases. But it is not. Otherwise, why should there be no dispensation for large-scale hydro, which produces no carbon dioxide, or for nuclear power, which also produces no carbon dioxide? To paraphrase the Treasury, it is an energy tax with a dispensation for renewables as defined.
That was not the impression given to the public when it was introduced: it was thought that the tax was specifically directed to help achieve our Kyoto targets. It is very much like Humpty-Dumpty—I make words mean what I want them to mean. I am not sure whether Humpty-Dumpty might have been the metaphor over the door of Alastair Campbell.
The noble Lord, Lord Woolmer, made clear that it is plain dotty to call something a climate change levy and to make the firms—the customers—pay the levy, even though they are buying electricity from generators who generate no carbon dioxide. It is totally and utterly illogical and it is high time that it was put right.
I am one of those who was persuaded by the report of the Royal Society a year or two ago that we need a carbon tax. I know that that is not everyone's favourite dish, but it would make a great deal more sense than the so-called climate change levy because it is nothing of the sort.
For those reasons, I was happy to add my name to the amendment. It is an attempt to make sense out of what was a very misleading instrument when it was introduced by the Treasury in 2000. It is an economic instrument which can work in diametrically opposite directions. It may have played its part in driving British Energy to the wall—after all, anyone who bought nuclear power from British Energy had to pay

1139
the climate change levy. Why should people choose that rather than go for some of the other sources, on which they might pay less?
The Government have committed themselves to a strange and tortuous business. The amendment is an extraordinarily valuable effort to try to make some sense of it because manifestly it is a nonsense.
Baroness Miller of Chilthorne Domer: My Lords, we on these Benches would welcome a carbon tax. However, we do not support the amendment because, although rightly it calls for us to debate the issue, it perpetuates the mechanism that the Government have put in place. Perhaps in Committee we should have proposed a carbon tax as a way of achieving the outcomes. Nevertheless, there is an emphasis on the inadequacy of the current mechanism.
Lord Gray of Contin: My Lords, I support the amendment for all the reasons enunciated by the noble Lord, Lord Woolmer of Leeds, and my noble friend Lord Jenkin of Roding. Living as I do in the Highlands of Scotland, and having represented a Highland seat in another place for 13 years, I had a great deal to do with the North of Scotland Hydroelectric Board, as it used to be, over many years. Hydroelectricity and nuclear power have played a significant role in the development of the Highlands of Scotland. The hydroelectricity schemes constructed in the post-war years not only provided useful employment but also ensured electricity for domestic use to some of the most remote parts of the country. Furthermore, by such methods power was and is provided for both domestic and individual purposes in its cleanest form. An important part in helping the Government to achieve their Kyoto obligations is also ensured by the clean methods used by those generators.
For a long time I have resented the fact that nuclear power has been penalised most unfairly by being subjected to climate change levy. It is totally absurd that those who generate electricity by the most pollution-free methods should have such an imposition thrust upon them.
Finally, and while on the subject of hydroelectricity, can the Minister confirm that over the next five years Scottish Hydro-Electric will lose its subsidy and the Government will replace it with a levy on all consumers in the area, which will cost those consumers £270 million? I appreciate that I am shooting from the hip. I do not expect the Minister to give me an answer to that tonight; but perhaps in due course he could write to me to confirm whether those figures—which are causing a lot of concern in that part of the country—are correct.
The hour is getting late and I do not wish to take up more of the House's time. I support the amendment wholeheartedly.
Lord Whitty: My Lords, I do not want to enter the argument about the nuclear contribution to the energy policy at this stage and I will not do so. However, a
1140
number of the comments that have been made prompt me to reinforce a point that I was going to make more gently.
Noble Lords seem to be advocating a substantial change in the tax base, from a climate change levy to a carbon tax levy. That is not appropriate for this Bill; it would be a finance Bill provision, as would the technical change in exemptions from present forms of taxation. That would probably be ruled out of order in another place.
Nevertheless, we are debating them here, and I will deal with the substantive point because I think noble Lords are being disingenuous.
Lord Gray of Contin: My Lords, the Minister must realise that we are not in another place—we are in the House of Lords. My comments were perfectly in order.
Lord Whitty: My Lords, I did not suggest anything different. All I said was that if we want this piece of legislation to survive then we have to take account of the position in another place as well.
The point of the renewables levy exemption is to encourage new forms of renewable energy to come forward—such as solar, wind and tidal power—which have the potential to become competitive with other forms of electricity generation as their technology advances. They need help to get to that stage.
In the case of large-scale hydroelectric power—as in the case of nuclear energy—the technologies are already known and developed. They are already able to compete on a level playing field with the carbon-based or fossil fuel-based energy sectors. They are not disadvantaged relative to other forms of nonrenewable generation. If we were to exempt nuclear power from this, far from ending a discrimination against nuclear power we would be providing discrimination in favour of it.
Whatever the average citizen's view of nuclear power, I doubt whether the noble Lord would find much popular support for that. Exempting nuclear power would not help us meet our Kyoto undertakings; it would not provide a sufficient incentive to bring any new sources of nuclear power into the reckoning; and there are other issues of environmental impact involved.
The essential point is to bring forward new technologies, not to exempt old ones, whatever their merits or otherwise. There are different views on that matter around this House.
10 p.m.
Lord Dixon-Smith: My Lords, I am fascinated. Is the Minister saying that when new technologies such as wind power become established and part of the scenery they will then become eligible to pay the climate change levy? That seems the implication of his remarks. I am sure that the wind industry would be interested to know that.
Lord Whitty: My Lords, no doubt the structure of taxation will change over time. At present, the point of the climate change levy is, first, to tax the use of energy

1141
in general, and, secondly, to bring forward new carbon-free technologies. Those new technologies require some additional help; the nuclear industry and the hydroelectric industry do not. For those reasons, they are not exempt. That logic would be completely destroyed by the noble Lord's amendment.
Lord Woolmer of Leeds: My Lords, the Minister speaks about arrangements that may well have been the Government's intention, but the public are genuinely baffled by a climate change levy that appears to be intended to help to reduce carbon dioxide emissions but discriminates against one of the major contributors to clean technology as regards emissions.
The nuclear issue will not go away; it is a major, important contributor to achieving the Kyoto targets. Members may not be able to say that in the other place, but if we cannot say that frankly in this Chamber, we do a disservice. Virtually no independent commentators deny that nuclear power is a major contributor to achieving Kyoto targets. I sincerely believe that eventually some government of this country will recognise that. I shall support the other attempts to generate power. As many noble Lords know, I chair the Regional Energy Forum, which involves private industry in Yorkshire and Humber. I work month in and month out to try to support new technologies, but that does not blind me to the fact that they alone will not be sufficient.
Obviously, I am disappointed that the Minister felt that we could treat this only as a money item. It has been a useful debate just to remind the House that the issues still exist. However, we have gone as far as we can today. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 123 [Standard conditions for electricity interconnectors]:
Lord Whitty Lord Whitty moved Amendment No. 201:
Page 96, line 21, at end insert "or under this Act"
On Question, amendment agreed to.
Clause 124 [Consequential amendments of the 1989 Act]
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 202:
Page 96, line 40, leave out subsection (3).
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 221 and 223. Section 11A of the Electricity Act 1989 sets out the procedure for modifying standard electricity licences. In particular, there is a mechanism by which, if Ofgem proposes a modification to a standard electricity licence condition, a certain percentage of licensees must object, otherwise the amendment proposed by Ofgem will be made.
"Relevant licence holder" is defined in Section 11A(10). To be a relevant licence holder you must hold a licence of the type to be modified, and the condition to be modified must be switched on in your licence. At present, Section 11 A refers only to the switching off under Section 33(2) of the Utilities Act. However, there are other ways in which a licence condition may be switched off; for example, Clauses 123 and 114
1142
provide for that. I understand from Ofgem that the terms of a licence may also provide for certain conditions to be switched off. As there are numerous ways to switch off licence conditions, it seems sensible to amend the definition of "relevant licence holder" so that it simply refers to the fact that, if a condition is not in effect, a licensee is not entitled to vote. Our intention is simply to tidy up the drafting of who is a relevant licence holder. I beg to move.
On Question, amendment agreed to.
Clause 127 [Standard conditions for gas interconnectors]:
Lord Whitty Lord Whitty moved Amendment No. 203:
Page 99, line 41, at end insert "or under this Act"
On Question, amendment agreed to.
Clause 133 [Applications for energy administration orders]:
[Amendment No. 203A had been withdrawn from the Marshalled List.]
Baroness Miller of Hendon Baroness Miller of Hendon moved Amendment No. 203AA:
Page 103, line 40, at end insert—
"(1A) Subject to subsection (1B) below, before making (or proposing to make) an application in relation to any company under this section, or consenting (or proposing to consent) to such an application by GEMA, the Secretary of State must—

(a) have consulted the directors of that company, and

(b) be satisfied that there is no reasonable prospect that the company would otherwise be able to avoid going into administration or insolvent liquidation within the meaning of section 214 of the 1986 Act.

(1B) Subsection (1A) does not apply—

(a) if a certificate of the kind mentioned in section 134(3) is to be provided to the court in relation to the application;

(b) in a case where notice has been given to the Secretary of State under one or more of sections 137 to 141 of a relevant procedure and he considers that the procedure is reasonably likely to come into effect, so far as is necessary to enable him to make an application (or consent to one by GEMA) under this section before the expiry of the notice; or

(c) so far as is necessary in any other circumstance where the Secretary of State is satisfied that no step open to him or GEMA, other than his making or consenting to an application under this section without delay, would prevent the immediate cessation (or promptly remedy the cessation) by the company of the activities authorised by its relevant licence.

(1C) For the purposes of subsection (1B), a relevant procedure is one which, by virtue of any of sections 137 to 141, can only be implemented after giving notice of 14 days to the Secretary of State and GEMA, but the enforcement of security over property is only a relevant procedure where the property in question is operationally necessary for the continuity of electricity or gas supply to at least 100,000 premises."
The noble Baroness said: My Lords, the amendment is a revised version of the proposals made in Grand Committee. It is intended to meet the Government's objections. We are pursuing the principle behind the

1143
amendment because there is a major potential problem which needs to be remedied. The aim of the amendment is to prevent the premature appointment of energy administrators. It does so by ensuring that there is proper consultation with the directors of the protected company before such a drastic step is taken.
It is agreed on all sides that the Secretary of State should satisfy himself that there is no reasonable prospect that the company can avoid going into administration or insolvent liquidation before making the application for the order. That will normally involve consultation with the company.
The Government put two arguments against this modest and sensible requirement, both equally unsustainable. First, they suggested that if an application to appoint an energy administrator proved to be mistaken or unnecessary in the event, it could easily be withdrawn. That view indicates a total lack of understanding of what happens in the real world of commerce. The intervention of the Secretary of State will unquestionably have a serious effect on the company's credit ratings and the willingness of other concerns to trade with it. It could precipitate insolvency even if the company were solvent at the time the application was made. The need for consultation with the directors is to prevent an ill judged and damaging application.
The Government's other objection was that there could be reasons of urgency for making the application. Attractive as that argument is on the face of it, it is entirely specious because Clauses 137 to 141 provide for a series of restrictions on the making of compulsory and voluntary winding-up orders, on the making of administration orders, on the appointment of administrators by creditors and, lastly, on the enforcement of securities. Each of those clauses puts the procedure on hold for 14 days, which gives the Secretary of State more than adequate time to consult and reflect on the situation.
However, to meet that objection, our new subsection (c) provides that in cases of extreme emergency the restrictions can be overridden by the Secretary of State. The amendment gives a clear and unambiguous signal that energy administration will be used only when it is truly the last resort. The amendment as drafted does not restrict that purpose. I urge the Government to accept the amendment. I beg to move.
Lord Jenkin of Roding: My Lords, I reinforce what my noble friend said about the need to live in the real world. I well remember the occasion, because I was at Buckingham Palace at the time, when the news came through that Mr Maxwell had thrown himself off his yacht and was presumed drowned. At that time, I was a non-executive chairman of a company which supplied paper to the Daily Mirror. Within minutes we had put the Daily Mirror on a cash-with-order basis. There was no other way we could ensure that we were going to be paid. That lasted until eventually we were able to resume normal relations. That is what happens. If that were done by one supplier, I have no doubt it
1144
would have been done in relation to a great many other people who were concerned with the Maxwell empire. Indeed, one knows what happened to the pensioners.
Therefore, one has to recognise that if any event triggers a collapse of confidence in a company, the results are instantaneous and cataclysmic. As drafted, the Bill does not recognise that. The amendment goes a long way to meet the concerns which have been voiced.
I do not deny that at some stage a government may have to step in, as indeed they did with British Energy. As I said in Grand Committee, I think that on the whole that was handled pretty well. However, there needs to be very careful consideration and consultation before that drastic step is taken; otherwise the consequences could be incalculable.
Lord Whitty: My Lords, I understand the concern that is being expressed here about this power. The Secretary of State should not seek a special administration order until she is absolutely clear that that is necessary, which would normally involve talking to the directors of the company concerned and others.
We also have to live in the real world in the reverse situation where there is such an urgent situation and a need to act and supplies could be cut off were no action to be taken. The Secretary of State surely would be under at least a political and moral duty—we would need to use these powers to make it a legal duty—to act to install a special administration order in those circumstances.
I recognise that the noble Baroness has sought to meet those circumstances with her three exclusions, which relate, first, to public interest; secondly, to alternative insolvency procedures being under way; and, thirdly, to what she described as the urgency situation. But the amendment does not quite read that way. In any case, if the presumption is that the Secretary of State does not have those powers, acting in extreme emergency situations would be inhibited by the amendment.
Having said that, I appreciate that the noble Baroness has tried to meet my earlier objections. I also appreciate that the Secretary of State would need, in almost all circumstances but not quite all, to have gone through the procedure set down in this amendment in relation to the directors of the supplier concerned. For the sake of security of supply and the industrial and household consumers dependent on that supply, we must allow the Secretary of State the powers to act in the very special and extreme circumstances that this provision is intended to address.
Baroness Miller of Hendon: My Lords, despite the fact that the Minister speaks very nicely and says that he understands it all, in my opinion he does not understand the crucial point of this amendment, which is important. He is wrong in what he says, but at this time of night I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[BARONESS MILLER OF HENDON]
Clause 135 [Energy administrators]:
[Amendment No. 203AB not moved.]
Clause 145 [Modifications of particular or standard conditions]:
[Amendment No. 203B not moved.]
[Amendment No. 203BA not moved.]
Clause 149 [Appeals to the Competition Commission]
Lord Kingsland Lord Kingsland moved Amendment No. 203C:
Page 115, line 12, leave out "whose interests are materially affected by it" and insert "with a sufficient interest in that decision"
The noble Lord said: My Lords, in moving Amendment No. 203C, I shall speak also to a number of other amendments. I hope that your Lordships will forgive me if I begin with Amendment No. 208.
In Grand Committee, the noble Lord, Lord Triesman, said that it was the intent of the Government to create a "tailored approach" to rights of appeal. As I understood him, he meant that the Bill was designed to establish a right of appeal that was something less than a full re-hearing but more than judicial review.
More precisely, the noble Lord said that the purpose of the Bill was to require the Competition Commission, as the body hearing appeals, to
"adopt the same approach as would, for example, the Court of Appeal in hearing an appeal against a decision of a lower court".—[Official Report, 1/3/04; col. GC 162.]
We believe that the Government have met that undertaking in their amendment at Report stage. The amendment clearly entitles the Competition Commission to re-assess the factual basis on which weights were accorded, and then compared, by Ofgem, and then to make its own independent assessment.
Your Lordships will be relieved to know that I shall turn now to the other amendments in the group in the order in which they are set out. As your Lordships will recall, Amendments Nos. 203C and 203D aim to ensure that persons with a "sufficient interest" in the relevant decision will be entitled to appeal against it rather than only those persons who are "materially affected" by the decision.
The test of sufficient interest has been elaborated by case law and has, on the whole, been interpreted generously. When we raised this issue in Grand Committee, the noble Lord, Lord Triesman, said that he found it difficult to imagine what additional parties we would hope to enable to appeal under a more generous test of eligibility. But our concern was actually the reverse of that. Our concern was that, on the test of material effect, there was no guarantee that all of the parties to an industry code would be equally entitled to appeal in relation to a particular Ofgem decision.
After all, a decision may be perceived as thoroughly bad in principle by those with a sufficient interest in it, even though it might not materially affect them in the accepted sense of these words. On the test used by the
1146
Bill as it stands, they would not be able to appeal against any such decision that they believed was wrong and should be challenged. This cannot be right.
The legal implications of using the material effect test are also unclear. But for these provisions in the Bill, those parties with a sufficient interest in a decision would be entitled to bring an action for judicial review. Will they still have that right? In other words, if they fail the material effect test to bring an appeal to the Competition Commission, can they go to court and show, instead, that they, none the less, pass the easier test of sufficient interest, entitling them to judicial review? To create the potential for two legal processes that operate in parallel in relation to exactly the same decisions simply cannot be sensible.
Alternatively, will the legal effect of the Bill be, though without any express intention to this effect, that the rights of those with sufficient interest are ousted by the existence of an alternative remedy from which they have been excluded? Might the courts decline judicial review on the basis that Parliament has provided an alternative that it has not seen fit to make available to the sufficient interest applicant? I have not seen any justification for thus disfranchising members of the industry in relation to their existing rights to a review. On the contrary, the stated intention of the appeals provisions in the Bill is to enhance rather than to diminish those rights.
As a matter of law, I do not believe that it can be clear how the courts would approach these questions. There is little precedent to guide us. Neither of the two possible options seems in any way attractive. The use of a novel material interest test in the Bill creates more problems than it can possibly solve. We believe strongly that it should be replaced by the concept of sufficient interest, with which the industry and the courts are already familiar.
By contrast, the amendments proposed by the noble Lord, Lord Whitty—Amendments Nos. 204, 206, and 207—give me reason to thank him very much indeed for reflecting further on the 10-day limit in the Bill and seeing fit to extend it to 15 days. We would have preferred 20 days; but we recognise that the Government have given ground in this area in a way that is sensible, and we are content with a solution that is thought to be the optimum one.
Amendment No. 205A seeks to replicate a deletion that the Government intend to make in Schedule 22 and is an amendment that the noble Lord, Lord Whitty, has made in Amendment No. 205. The Government rightly want to leave out paragraph 1(12). We agree with that. Under some of the earlier provisions of paragraph 1, an authorised member of the Competition Commission, not the commission itself, is able to decide whether to grant permission to bring an appeal, and if so, whether that permission is to be subject to conditions. Such conditions, as I understand it, can be substantive as well as procedural.
Sub-paragraph (12) would give the authorised member a third discretion entitling him to modify subsequently those conditions,
"in such a manner as he thinks fit".
It is wholly unclear why this provision is required or why it should be drafted in such wide and unfettered terms. That is presumably why the Government now seek to delete it.
However, the same formula, providing for the same third layer of discretion, is also to be found at sub-paragraph (10) of paragraph 2 of the schedule in relation to the power of an authorised member to direct that party to be added to appeals. Having given the direction that a party can be added to an appeal and attach conditions, which may be substantive or procedural, to the direction, the member can subsequently return to the matter and modify the conditions,
"in such a manner as he thinks fit".
The same objections apply to this sub-paragraph as to the sub-paragraph which the Government have so wisely sought to delete. In my submission, the Government should follow their own analysis to its logical conclusion and delete both provisions. Our amendment would achieve this. I beg to move.
Lord Whitty: My Lords, I am grateful to the noble Lord, Lord Kingsland, for not only welcoming all of our amendments in this section but also for speaking to them more clearly and more adequately than my text was likely to do. I endorse everything he said on that. Moreover, as to the point he made on Amendment No. 205A, I agree that it follows the same logic as that in Amendment No. 205 and would delete an unnecessarily wide power in rather undefined circumstances. I will therefore accept his Amendment No. 205A.
That is as far as the good news goes. I cannot accept Amendments Nos. 203C and 203D. They relate to the difference between "materially affected" and "sufficient interest". The whole point of opposing previously the dilution implicit in the change of description is that we should have appeals only from those who are materially affected by this. More than 200 code modifications are made in a year and the possibility of having a flood of appeals from people who are not very directly affected by the change is one that we would wish to avoid.
Moreover, during the consultation last year, the vast majority of correspondents were also concerned about that. Some of the major companies involved have made plain that they believe the current balance is right and that they would not wish to weaken the test. There seems no real justification for allowing appeals from people who are less than materially affected, which is the import of the noble Lord's redrafting.
As to his point about those who had sufficient interest but did not pass the materially affected hurdle and whether they would still have recourse to judicial review, the answer is that they would provided that they could satisfy the usual tests for such a claim. So there is no exclusion of those whom the noble Lord wishes to bring into the main appeals process from going for judicial review. We believe that that is a sufficient safeguard for them. To accept the noble Lord's amendment would widen the scope for others to appeal and I hope that he will not pursue it.
Lord Kingsland: My Lords, I am most grateful to the noble Lord for his endorsement of a number of our amendments. It would be churlish of me to make too much fuss about Amendments Nos. 203C and 203D, particularly as the noble Lord also accepts that those with a sufficient interest would still have recourse to judicial review.
Nevertheless, between now and Third Reading I would like to reflect on what he has said. I hope that, if I bring this amendment back at Third Reading—and it would be the only amendment in my area that I would bring back—he will not think the worse of me for doing so. I understand his point of view but my initial thinking is that my amendment would be better enshrined in the Bill. I shall go away, think about his 200 potential complainants, and make an assessment before we table our amendments in a few days' time. Meanwhile, I beg leave to withdraw Amendment No. 203C, although I think we will come to an amendment later in this group that I shall move.
Amendment, by leave, withdrawn.
[Amendment No. 203D not moved.]
Schedule 22 [Procedure for appeals under section 149]:
Lord Whitty Lord Whitty moved Amendments Nos. 204 and 205:
Page 239, line 2, leave out "ten" and insert "fifteen"
Page 239, line 30, leave out sub-paragraph (12).
On Question, amendments agreed to.
Lord Kingsland Lord Kingsland moved Amendment No. 205A:
Page 240, line 41, leave out sub-paragraph (10).
On Question, amendment agreed to.
Lord Whitty Lord Whitty moved Amendments Nos. 206 and 207:
Page 241, line 29, leave out "twenty" and insert "fifteen"
Page 241, line 33, leave out "twenty" and insert "fifteen"
On Question, amendments agreed to.
Clause 151 [Determination of appeals]:
Lord Whitty Lord Whitty moved Amendment No. 208:
Page 116, line 25, at end insert—
"( ) that GEMA failed to give the appropriate weight to one or more of those matters or purposes:"
On Question, amendment agreed to.
[Amendment No. 208ZA had been withdrawn from the Marshalled List.]
Clause 152 [Modifications of standard conditions for funding appeals]:
Lord Whitty Lord Whitty moved Amendments Nos. 208A to 208C:
Page 117, line 20, after "so" insert—
"(a)"
Page 117, line 21, leave out "he may make" and insert "or
"(b) in relation to references to the Competition Commission under section 24 of the Gas Act 1986 (c. 44) or section 12 of the 1989 Act (modification references),
he may make licence modifications falling within subsection (1A).
(1A) Those licence modifications are—"
Page 117, line 27, at end insert—
"( ) Where the standard conditions of gas or electricity licences contain provision authorising the imposition of licence charges in respect of costs incurred by the Competition Commission in connection with a reference mentioned in subsection (1)(b)—

(a) the Competition Commission shall have power, on such a reference, to give directions to GEMA about the manner in which the Competition Commission's costs in connection with that reference are to be recovered by means of such charges; and

(b) GEMA must comply with any such directions."

On Question, amendments agreed to.
[Amendment No. 208CA not moved.]
Lord Whitty Lord Whitty moved Amendment No. 208D:
Transpose Clause 152 to after Clause 153.
On Question, amendment agreed to.
Lord Davies of Oldham Lord Davies of Oldham moved Amendment No. 209:
After Clause 153, insert the following new clause—
"DUTY TO HAVE REGARD TO BEST REGULATORY PRACTICE
In each of section 4AA of the Gas Act 1986 and section 3A of the 1989 Act (principal objective and general duties), after subsection (5) insert—
"(5A) In carrying out their respective functions under this Part in accordance with the preceding provisions of this section the Secretary of State and the Authority must each have regard to—

(a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed; and

(b) any other principles appearing to him or, as the case may be, it to represent the best regulatory practice.""

The noble Lord said: On behalf of my noble friend, I beg to move Amendment No. 209 and to speak briefly to Amendment No. 209ZZA. The government amendment formalises in statute the commitment that Ofgem has already made to be guided by the principles of best regulatory practice. It follows similar provisions placed on Ofcom and Ofwat in the Communications Act 2003 and the Water Industry Act 1991 respectively, ensuring consistency among regulators.
We oppose the amendment in the name of the noble Lord, Lord Jenkin. The proposal is to use amendments to the Gas Act 1986 and the Electricity Act 1989 as a means of changing the terms of the Petroleum Act 1998. We do not think that this is the right way to proceed. The Petroleum Act covers regulation of the offshore oil and gas industry. This industry is not covered by the Gas Act or the Electricity Act and it is regulated by the Secretary of State and not by Ofgem. That is why we are pressing the government amendment. We hope that the noble Lord will feel able to withdraw his amendment.
10.30 p.m.
Lord Jenkin of Roding Lord Jenkin of Roding moved, as an amendment to Amendment No. 209, Amendment No. 209ZZA:
Line 12, at end insert—
"( ) The provisions of subsection (5A) shall apply to the functions of the Secretary of State exercised under section 3 of the Petroleum Act 1998 (c. 17) (licences to search and bore for and get petroleum).""
The noble Lord said: My Lords, that is very impertinent. I find it a very strange proceeding that the Minister should reply to my amendment before I have even said a single word about it. That may be in his brief but, even though it is half-past ten at night, I think that I am entitled to the courtesy of being able to make my case and then he can answer it if he does not like it.
The case is a very short one. When we debated the question of additional powers for Ofgem to secure information from offshore generators, we had two amendments. One was for electricity and one was for gas. The noble Lord, Lord Davies of Oldham, said that the electricity one was unnecessary because it was already in the Act and Ofgem already had that power. However, he then went on, for over two columns, to explain why it was quite impossible that Ofgem should have the power to get information about offshore gas. The reason was what he has just said: that offshore gas is regulated by the department.
We then came to the amendment, which related to principles of best regulatory practice, where all was sweetness and light. The amendment was moved and the noble Lord, Lord Triesman, said,
"it gives me particular pleasure to say that we are happy to consider this amendment".—[Official Report, 2/3/04; col. GC 204.]
Amendment No. 209 is a perfectly honourable fulfilment of that pledge. However, we are still left with the position that the Government are very happy to impose best regulatory practice on Ofgem as a regulator but, where they have proudly said that they will not have Ofgem interfering with offshore gas because that is regulated by the department, I understand that he is not prepared to have the best regulatory practice applied to the department. Why ever not? If he says, as he did in the debate about the powers of Ofgem, that the department was regulating offshore gas and therefore it was quite wrong that the powers should go to Ofgem, then why on earth is the department not subject to the best regulatory practice?
The amendment which I have put down would achieve precisely that. I hope that the Minister will give it rather more thought than he appears to have done so far. What is good enough for the goose is also good enough for the gander. If the noble Lord, Lord Davies, does not like the description of a gander, I am sure that I could find another metaphor. It is regulation that matters, not who does it. I hope that this amendment may prove in the end to be acceptable. I beg to move.
Baroness Byford: My Lords, I rise briefly to support my noble friend Lord Jenkin. It does seem very strange that a certain set of rules applies to Ofgem and a different set of rules applies to the department.

1151
The noble Lord, Lord Davies, may have slightly misunderstood and may have spoken in advance inadvertently. I am sure he meant no discourtesy, but I would like him to clarify the point that has been raised because it is clearly unfair, and would be seen to be unfair by people having to operate it outside the Chamber.
Lord Davies of Oldham: My Lords, I apologise for having presumed too much. The noble Lord, Lord Jenkin, has quite rightly deployed his case, which deserves an answer. We were seeking to be positive with our amendment, and I thought that it would be to the benefit of the House that I indicated the likely Government position with regard to the amendment grouped with the amendment that I was moving. I quite understand that the noble Lord thought that I was pre-empting an argument, which he then deployed with his usual force and accuracy.
The point I sought to emphasise was that this seems to be the wrong Bill to carry the amendments that the noble Lord has identified. We would be prepared to consider such an amendment if it were in the form of an amendment to the Petroleum Act, which I think was the burden of his argument about the regulatory regime that is necessary. However, we did not and do not think that it is appropriate in the way that it is presently tabled.
I was merely seeking to identify that, while at the same time, with the Government amendment, fulfilling a commitment we had made earlier in the debate on the Bill. It is therefore on that basis that I commend the government amendment.
Lord Jenkin of Roding: My Lords, I heard what the Minister said. As he said that he is prepared to introduce an amendment to the Petroleum Act, it would be silly of me to press this amendment to the Bill. I beg leave to withdraw the amendment.
Amendment No. 209ZZA, as an amendment to Amendment No. 209, by leave, withdrawn.
On Question, Amendment No. 209 agreed to.
Baroness Miller of Hendon Baroness Miller of Hendon moved Amendment No. 209ZA:
After Clause 154, insert the following new clause—
"COMPLIANCE WITH SECTIONS 32 TO 32C OF THE 1989 ACT
In section 25 of the 1989 Act (orders for securing compliance), in the definition of "relevant requirement" in subsection (8), for "32C" substitute "32D".
(2) After section 32C of the 1989 Act, insert—
"32D Prevention and remedying of default in compliance with sections 32 to 32C
(1) An order under section 32 may provide that an electricity supplier must pay such a sum to the Authority, corresponding to the supply of a given amount of electricity by the supplier in a particular period, as may be—

(a) estimated by the Authority as necessary to make good in aggregate any unrecovered default in the payments referred to in section 32C(1) by other suppliers in previous periods; and

(b) notified by the Authority to the supplier not less than eight months before the start of that period.

(2) Any sums received under subscription (1) shall be paid by the Authority to electricity suppliers in accordance with a system of allocation specified in the order.
(3) The system of allocation specified in the order may provide for payments to specified categories of electricity supplier only.
(4) The order may also make provision—

(a) requiring an electricity supplier periodically during a period to deposit with the Authority evidence of the kind described in section 32(3) or payments under section 32C, in either case estimated by the supplier as representing the proportion specified in the order of the amounts attributable to so much of the period as has elapsed;

(b) enabling account to be taken by the supplier, in preparing its estimate under paragraph (a), of the likely level of payments to be due to it under subsection 32C(3) in relation to any evidence deposited;

(c) requiring the supplier to comply with a request from the Authority to disclose the basis of its estimate under paragraph (a) at the time and in the manner required by the Authority and, if the Authority is not satisfied as to the reasonableness of the supplier's estimate, enabling the Authority to direct the supplier to use an estimate provided by the Authority;

(d) for the payment by the Authority of interest due to the supplier in consequence of any sums deposited by the supplier under paragraph (a); and

(e) enabling the Authority to accept such other forms of security as may be described in the order in substitution for all or part of the evidence or payment required under paragraph (a), and to determine the acceptability of any such security proposed by a supplier.

(5) Different proportions may be specified under subsection (4)(a) in relation to different stages within the period.
(6) Where the Secretary of State is satisfied that it would be proportionate and cost effective to do so, the order may also make provision—

(a) as to the form and extent of any further measures which a supplier is to take for the purpose of securing payment to the Authority of sums which may become payable for the purposes of section 32C(1); and

(b) enabling the Authority to determine the acceptability of any measures which a supplier proposes to take or has taken for that purpose.

(7) This section is without prejudice to the enforcement powers available to the Authority in relation to any provision of section 32 to 32D that is a relevant requirement within the meaning of section 25(8)."
The noble Baroness said: My Lords, this is a long and complex amendment, dealing with a very difficult but important problem. So although it is rather late at night, I shall have to move it. However, I shall try to keep my remarks to the minimum of the general principles involved and not to the itemised details.
The problem, which was in any case an incident waiting to happen, was highlighted by the financial failure of TXU UK to pay its huge renewables obligations. This default distorted the market by creating a very large shortfall in the fund. Those adversely affected had no means to control, or even to assess, the financial risk to which they were exposed. What is happening now is that the market is itself pricing a credit risk into the ROC price. This in turn means that some of the money consumers are paying for electricity is not used for that purpose. It is being used instead as insurance against future risks That is

1153
an inefficient use of the money and will undermine the objective of bringing renewables into the power equation.
One suggestion made by the Minister during our discussions was offsetting buy-out payments against ROC liabilities. Another suggestion was the surcharging of late payments. I also understood that the Government would be bringing forward a scheme to allow for reconciliation of the ROC fund more frequently than annually to reduce the credit risk. So far as they go, they are of some help, especially when it is only a case of delayed payments, but they have little or no effect on an actual insolvency, when the money is lost and gone for ever. It was very interesting to hear what the noble Lord said when speaking to Amendment No. 190B.
There are in fact two practical ways to resolve the problem. One is for there to be a form of securitisation whereby those who are liable to provide money to the fund have to be bonded or give some other form of security. Plan "B" is to create a mutual fund, rather in the form of the one operated by travel businesses or the Law Society's compensation fund. Either route will involve some cost that will, inevitably, be passed on to customers.
Different participants in the industry have differing opinions as to which of these two methods is to be preferred, and some even favour a combination of the two. As the cost of the two will, as I have already pointed out, be passed on in the end to the customer, whether the private household or industry, it is up to the Government to produce a solution to the problem caused by the existence of ROCs. It is against that background that this amendment has been drafted.
The Government often complain that amendments are "too prescriptive"—although of course I know that the Minister could not possibly say that about this one, which offers complete flexibility. It enables the Government to consult on the appropriate response to this admittedly difficult issue. It provides a number of options, the desirability of which can be assessed over the coming months. I am given to understand that the amendment has broad support within the industry, although, as I said, with differing views on whether one or both options should be adopted.
I have already mentioned the adverse effect on the renewables market caused by the TXU default. There is the possibility—indeed, I would submit the distinct likelihood—that this could occur again, more than once, in the future, and even on a bigger scale. The silver lining to the TXU default is that it occurred at a time when this Bill was on the legislative stocks, and the Government do not have to find parliamentary time to secure a remedy to a major problem. To do nothing, as is the current situation in the absence of remedial proposals from the Government, is not an option, because the loss caused by a default will inevitably find its way down the chain to the ultimate consumer.
The measures proposed in this amendment create a rational, and as I said, a truly flexible framework to underpin the Government's policy on renewables. I beg to move.
Lord Whitty: My Lords, the noble Baroness is addressing a difficult and complex situation with quite a complex and difficult amendment. I understand the motivation for it but it does not resolve the issue. It is headed "prevention and remedying", but I am not sure that prevention is possible by legislative means. The remedy here would not be an easy one to fit in with the rest of the policy. Indeed the obligation on the rest of the suppliers to meet the shortfall would eventually be paid for by the consumers. As the noble Baroness was right to acknowledge, Amendment No. 190B and other amendments indicated how we deal with the short-term shortfall. The question of insolvency being borne by the other suppliers and the way in which the noble Baroness sets out Ofgem to correct that would lead to enormous complications. For example, the amendment requires Ofgem to estimate the degree of shortfall and therefore the degree of cost on the other suppliers eight months in advance of the period—that will lead to very substantial disputes about the amounts both post-facto and pre-facto—if that is the word. Clearly estimation in these circumstances, as in the TXU case, as proven, are somewhat difficult in the early stages of the knock-on effects of the bankruptcy.
The effects of this would be therefore to increase uncertainty rather than to decrease uncertainty, certainly for the suppliers. Even if proved effective, the effect would be to require electricity suppliers to make regular payments to cover their share after renewables obligation, or to make payments in accordance with directions from Ofgem. The cost of that would inevitably fall on the consumers.
While this is a difficult area, I do not think that giving these powers to Ofgem to recover the money would make the imposition on the individual alternative suppliers fall in this way; it would not help the security nor certainty of the situation. I therefore could not accept these amendments. The amendments that we tabled earlier go some way to meeting most shortfalls, but I recognise that there is still a problem on an insolvency situation. To operate in this way would not help that situation. It certainly would not help to avoid that situation.
Baroness Miller of Hendon: My Lords, while I will consider very carefully what the Minister said—and clearly I will have to come back to it—I do say that there is a problem here that has to be solved. It is not for the Opposition to keep coming up with alternatives, it is for the Government to get a grip on this position, to consult and do what is necessary. I put forward a much firmer amendment in Committee, where I again argued two alternatives. The noble Lord, Lord Davies of Oldham, the Minister concerned, said how fair I was when I argued it both ways at once—if it is possible to do that.

1155
In this case we took more advice from the suppliers and it is my understanding that the industry would be happy with either of these, or a combination of both, but they are not absolutely confirmed in their minds as to which one they want. It is for the Government, not for us, not to simply say that it is too complicated and cannot be done. I have said that I will consider it and no doubt come back at Third Reading, but in the mean time if the Government are not happy with my doing that, then I suggest that they get a move on and do something themselves. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 209ZB not moved.]
Lord Whitty Lord Whitty moved Amendment No. 209A
After Clause 155, insert the following new clause—
"PREPAYMENT METERS
(1) In Schedule 2B to the Gas Act 1986 (c. 44) (which sets out the gas code), for paragraph 6A substitute—
"6A (1) A pre-payment meter installed by an authorised supplier through which a consumer takes his supply of gas shall not be used to recover a sum unless—

(a) the sum is owed to an authorised supplier in respect of the supply of gas to the premises on which the meter is installed or in respect of the provision of the meter; or

(b) the recovery of the sum in that manner is permitted by both—

(i) regulations made by the Authority; and

(ii) an agreement falling within subparagraph (2) below between the consumer and the person to whom the sum is owed.

(2) An agreement falls within this sub-paragraph if—

(a) the person to whom the sum is owed is a person who is authorised by regulations made by the Authority to enter into agreements falling within this sub-paragraph;

(b) the agreement permits that person to use the meter in question to recover such sums as may be specified in or determined under the agreement; and

(c) the agreement complies with the requirements specified for the purposes of this sub-paragraph by regulations made by the Authority.

(3) The sums that regulations under this paragraph may permit the recovery of through a pre-payment meter include—

(a) sums owed to a person other than an authorised supplier;

(b) sums owed in respect of premises other than the premises on which the meter is installed;

(c) sums owed in respect of matters other than the supply of gas.

(4) Before making regulations under this paragraph the Authority must consult—

(a) the Council;

(b) all authorised suppliers;

(c) such other persons as the Authority considers appropriate.

(5) The approval of the Secretary of State is required for the making of regulations under this paragraph."
(2) In paragraph 12 of Schedule 7 to the 1989 Act (use of prepayment meters), for sub-paragraph (2) substitute—
"(2) A pre-payment meter installed by an authorised supplier through which a customer of such a supplier takes his supply of electricity shall not be used to recover a sum unless—

(a) the sum is owed to an authorised supplier in respect of the supply of electricity to the premises on which the meter is installed or in respect of the provision of the meter; or

(b) the recovery of the sum in that manner is permitted by both—

(i) regulations; and

(ii) an agreement falling within subparagraph (3) below between the customer and the person to whom the sum is owed.

(3) An agreement falls within this sub-paragraph if—

(a) the person to whom the sum is owed is a person who is authorised by regulations to enter into agreements falling within this sub-paragraph;

(b) the agreement permits that person to use the meter in question to recover such sums as may be specified in or determined under the agreement; and

(c) the agreement complies with the requirements specified for the purposes of this sub-paragraph by regulations.

(4) The sums that regulations under this paragraph may permit the recovery of through a pre-payment meter include—

(a) sums owed to a person other than an authorised supplier;

(b) sums owed in respect of premises other than the premises on which the meter is installed;

(c) sums owed in respect of matters other than the supply of electricity.

(5) Before making regulations under this paragraph the Authority must consult—

(a) the Council;

(b) all authorised suppliers;

(c) such other persons as the Authority considers appropriate.""

The noble Lord said: My Lords, this amendment relates to pre-payment meters. We have indicated that we support in principle the terms of an amendment made by the noble Lord, Lord Jenkin. Although we have not entirely followed the terms of his suggestion, it meets the same issue; there are a number of safeguards built in—in particular Ofgem must consult Energywatch and the consumer must agree to any debt collection arrangement rather than it being imposed by the supplier. The amendment meets the main terms of what was suggested. Obviously, on the next amendment, I shall listen to what noble Lords suggest in terms of alternatives or elaborations, but I hope that they can accept the amendment in the mean time. I beg to move.
10.45 p.m.
Lord Jenkin of Roding Lord Jenkin of Roding moved, as an amendment to Amendment No. 209A, Amendment No. 209B:
Leave out lines 27 to 33.
The noble Lord said: My Lords, I say straightaway that the Government have of course gone a long way to meet the requests made in Grand Committee. I tabled the amendments because I am ashamed to say that I did not understand proposed new paragraph 6A(3) of Schedule 2B to the Gas Act 1986 or proposed new paragraph 12(4) of Schedule 7 to the 1989 Act. They are drafted in what one has come to recognise as the somewhat convoluted way of parliamentary counsel. I hope that the Minister might be persuaded to explain in clear and simple language what they mean.
Amendment No. 209D tries to spell out, in clear and simple language, what we were being asked by the National Consumer Council, I think, before Grand Committee; namely, that suppliers, who have both pre-payment and normal credit-meter customers, are able to offer to the pre-payment customers the same packages for their supply as are offered to the normal credit customers. I am told that the Minister's amendment achieves that. I would be grateful for a clear statement from the Minister that that is indeed the purpose of his new clause, and that what I wish can be achieved, so that in future those who go for prepayment meters will not be disadvantaged by not being able to take up offers made to those who use credit-payment meters. That is the purpose of the amendment.
If the Minister can give us those clear undertakings, I hope that there will be no need for me to press the amendment. I beg to move.
Lord Whitty: My Lords, if the first two of the noble Lord's amendments were agreed to, it would reduce the flexibility required. As I understand it, proposed new paragraph 6A(2) of Schedule 2B to the Gas Act 1986 and proposed new paragraph 12(4) of Schedule 7 to the 1989 Act, which would be deleted, allow us to enable suppliers not to apply a differential between pre-payment and standard tariff, and therefore not to disadvantage pre-payment customers, or indeed vice versa. That is part of the intention of the wording of those two provisions. If it is not clear, it may be useful for us to spell that out in writing to the noble Lord, but it was certainly the intention of my amendment.
Lord Jenkin of Roding: My Lords, in the circumstances, it would be very helpful if the Minister could write to me. Then I could pass that on to Energywatch and others who have been concerned on the point, and it will be in the public domain. In the mean time, I beg leave to withdraw the amendment.
Amendment No. 209B, as an amendment to Amendment No. 209A, by leave, withdrawn.
[Amendments Nos. 209C and 209D, as amendments to Amendment No. 209A, not moved.]
On Question, amendment agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 210:
Before Clause 156, insert the following new clause—
"CONSENTS UNDER SECTIONS 36 AND 37 OF THE 1989 ACT: PROCEDURE IN WALES
In Schedule 8 to the 1989 Act (procedure for consents under sections 36 and 37 relating to the installation of generating stations and electric lines), after the words "the Secretary of State" on each occasion where they occur, is inserted "or, in the case of Wales, the National Assembly for Wales"."
The noble Lord said: My Lords, the amendment stands in my name and those of the noble Lord, Lord Livsey of Talgarth, and the noble Viscount, Lord Tenby. It may be for the convenience of the House if I also speak to Amendments Nos. 211 to 216, all of which are consequential on Amendment No. 210.
I shall deal quickly with the "minor" amendments we discussed in Grand Committee. This is a simple planning matter—when an inspector is appointed in Wales, the National Assembly for Wales should have the power to appoint that inspector. I made that case in Grand Committee and I hope that it stands. I received some encouraging noises from my noble friend in Grand Committee, but I hope that this evening I may receive more.
Amendment No. 210 is rather more than a planning matter, although it comes under planning legislation. This has nothing to do with wind farms, as such; it is to do with large generating stations. Sections 36 and 37 of the Electricity Act 1989, to which the amendment refers, deal respectively with "a generating station … [of] 50 megawatts" or greater installation capacity and high voltage overhead lines. Although I said that my amendment had nothing to do with wind farms—and I am not trying to persuade anyone that the National Assembly for Wales should take a view on wind farms—I am concerned with devolution. If the Government want devolution to Wales they have to wish the means for that. One of the means for devolution is to allow the National Assembly to take whatever decision it feels fit, without having to refer to Whitehall, on any generating station of large capacity or with high voltage overhead lines in Wales. That would seem to be a reasonable procedure.
I shall not go through the existing position, because it is late at night. However, I shall say quickly that if a large generating station is proposed in Wales and if the local authority in question approves it and is challenged, the National Assembly for Wales has no locus whatever. Therefore, it cannot call the application in, it is not a statutory consultee and it has no position. That is wrong and is contrary to the principle of devolution.
My noble friend made some encouraging noises in Grand Committee. I hope that the noises will be rather more encouraging this evening, because it is a matter that the Government should and, I hope will, support. It is not enough just to have a tripartite meeting of

1159
officials who might report towards the end of the year or in the Greek Calends. I hope that my noble friend will assure me that the matter is urgent, sensible and should be supported. I beg to move.
Baroness Miller of Hendon: My Lords, it is clear that the noble Lord, Lord Williams of Elvel, feels strongly about these matters and he moved his amendment well, although, as he said, not in too much depth at this time of night. It is an interesting idea, but we consider that, although he says he is concerned about devolution, the matter should be considered in the light of devolution generally and not specifically, as his amendment suggests. It should not be a by-product of another Bill—in other words, one has to deal with devolution properly. I understand that the Richards report will be published in the next few days, possibly before Third Reading. The noble Lord may then wish to say something. I do not know if that is the case, but I have set out our position.
Lord Davies of Oldham: My Lords, the noble Baroness has introduced an important consideration and I shall respond to my noble friend along those lines. I congratulate him, both for the force with which he presented this issue in Committee and the eloquent way with which he has moved the amendment. It is an important issue and he gave us plenty of warning about the depth of feeling, not only in Wales, but also that he has on the matter. He deserves a proper response from this Bench and I hope that he will consider it to be constructive.
The call from Wales on the issue has been heard. We are looking into the matter, but it is not something that we can decide overnight. The issue has to be dealt with in a considered way, as the noble Baroness, Lady Miller, made clear. I make no apology that some of the points I am making are the same that I made in Grand Committee, because they retain their relevance.
My noble friend is right that the great concern about these issues in Wales followed from the Cefn Croes onshore wind farm decision, which caused such concern that a working group has been set up to consider the crucial question of the handling of consent for power stations in Wales. I am at one with him when we emphasise that this is not just about wind farms but about power stations of a certain size in Wales. A working group of officials from the Wales Office, the National Assembly and the Department of Trade and Industry has completed much of the fact finding, including a visit to the Scottish Executive earlier this year to draw on their experience in exercising such powers.
I mentioned in Grand Committee that there is much to be learned from the Scottish experience because they have had to address themselves to these matters. There is already a perfectly valid vehicle to consider
1160
the case for change. The Assembly staff in the working group have asked about other powers the DTI exercises in respect of energy and infrastructure in Wales; for instance, gas infrastructure functions. The DTI is joint determiner of electricity and gas industry planning appeals.
I therefore do not think it makes sense to put forward piecemeal amendments to a problem that requires a package to be constructed to address these significant and wide-ranging issues. If legislative change is decided on, the Bill should not be the vehicle. A respectable mechanism exists for the transfer of functions under the Government of Wales Act, which is the proper way in which we would effect such a change. If for some reason that was not felt to be the appropriate vehicle—I am sure that it is—the working group could produce another recommendation.
The National Assembly is an important expression of Welsh concern about these issues. We respect its role. But it is not the only stakeholder with an interest. Other departments in Whitehall are concerned about the matter. The industry has great concerns and local planning authorities also have an interest. We cannot produce a piecemeal solution to a general problem.
I am grateful to my noble friend for having highlighted the issue. It needed to be aired against a background where we all recognised the concern in Wales on those issues. I want to reassure him that we have a mechanism for addressing those points. They are inevitably being pressed by all those in Wales concerned about the matter. I hope that he recognises that the Bill is not the vehicle for dealing with it, but having highlighted the matter he has advanced the cause that he has expressed in such an articulate fashion. I hope he will feel that he has made sufficient progress to withdraw his amendment.
Lord Williams of Elvel: My Lords, it is late at night. I do not want to press my noble friend. But it is a matter of considerable urgency, and I hope it will not be kicked into touch with a group of officials chuntering away and relying on existing legislation. It is an urgent problem in Wales. I hope that my noble friend will pass that message to my noble friend Lord Whitty and to other noble friends in different departments who may be involved in procedure.
In response to a question in the Welsh Assembly, tabled by Mr Nicholas Bourne, who happens to be the Leader of the Conservative Party in Wales and also one of my constituency Assembly Members, it was said by the person responsible that this was a matter for the UK Cabinet committee on devolution policy. I always took the view that it was a matter for Parliament and not necessarily for the Government to decide what they want to do. It is for Parliament to legislate in one form or another what happens and I hope that my noble friend will convey that message.

1161
I raise the issue in the context of this Bill because, after all, we have been talking about amendments to the 1989 Act. I see no reason why there should not be an amendment to the 1989 Act if Parliament so wishes. I do not want to press the matter because it is late at night and we all want to go home. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 156 [Additional inspectors]
[Amendments Nos. 211 to 216 not moved.]
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.

University of Manchester Bill [H.L.]
The Examiner's certificate that further Standing Orders had been complied with was ordered to lie on the Table and the Bill was committed to an Unopposed Bill Committee.

European Parliamentary and Local Elections (Pilots) Bill
Bill returned from the Commons with a Lords amendment to a Commons amendment disagreed to with a reason for such disagreement; the reason was ordered to be printed.
House adjourned at one minute past eleven o'clock.

Official Report of the Grand Committee on the Companies (Audit, Investigations and Community Enterprise) Bill [H.L.]
(Fifth Day)
Monday, 29 March 2004.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Lord Lyell) in the Chair.]
The Deputy Chairman of Committees (Lord Lyell): If there is a Division we shall adjourn the Committee for 10 minutes. At the moment, it looks good.
Clause 27 [Cap on distributions on interest]:
The Deputy Chairman of Committees: Amendment No. 116 is grouped with Amendment No. 118. If Amendment No. 116 is agreed to, I shall not be able to call Amendment No. 117; and if Amendment No. 118 were agreed to, I would not be able to call Amendment No. 119, all in this group.
Lord Glentoran Lord Glentoran moved Amendment No. 116:
Page 28, line 8, leave out subsection (2) and insert—
"(2) The regulations must make provision for a central limit to be set by the Regulator, which may be varied in respect of individual community interest companies only on application to the Regulator."
The noble Lord said: In moving Amendment No. 116, I shall speak also to Amendment No. 118. Amendments Nos. 117 and 119 were spoken to the last time the Committee met.
The limit is a very contentious issue. As the provision is currently drafted, there will be no standard limit for community interest companies to follow, but different limits can be set for different companies; that is the cap. This strikes me as being a very unlevel playing field. When we raised the point with officials, they explained that some CICs would be more risky than others and that a differential cap was needed to encourage private investment.
I am not sure that there is much substance in that argument. I do not think that it is very encouraging. Our amendment would remove subsections (2) and (3) and replace them with a provision whereby there was a standard limit. If any company wanted to deviate from that limit, it could do so only by applying to the regulator and justifying its case.
We talked at Second Reading about the fact that the dividend cap will be variable, as is made clear in Clause 27(3)(b), which states:
"The Regulator … may set different limits for different cases".
That is an undue amount of discretion. As we have mentioned before, we have no idea of the regulator's qualification or who he or she will be. I accept that as
GC 368
a result of our discussions last week, we are a little wiser, but let us leave that where it is for the moment. We do not know what criteria the regulator should use. Will he have a series of "categories" of CICs'? I cannot believe that he will individually vary the cap for each specific application. We propose a much more sensible option of having a central limit. We believe that is fair and equitable and will not disadvantage some CICs. I would also like to know why there is no mention of a varying cap in the regulations.
On looking at the draft regulations I do, however, see the need for the regulator to be able to vary the dividend cap and adjust it in response to external factors. As is made clear in the Explanatory Notes, where the cap is set by reference to,
"an index such as the Bank of England base … rate".
it is important that when the base rate changes the dividend cap changes proportionately. That is reflected in draft Regulation 17(2), which states:
"The Regulator may vary the dividend cap from time to time".
Although this is a necessary provision, the vagueness of "from time to time" is of some concern. Could that be drafted with more precision or to make it explicit that a change would occur only when the base rate changes, or to what it might be linked?
There is the same wording in draft Regulation 19. It states:
"(2) The Regulator shall from time to time set a limit on the amount of interest that may be payable on such debts or such debentures (the 'interest cap').
(3) The Regulator may vary the interest cap from time".
I am not entirely clear that the formula "from time to time" is particularly good legal terminology. It does not appear to give much guidance to the regulator. How often is he expected to change the cap?
I am also not happy with the role of the Secretary of State in this process. Clause 27(5) states:
"The regulations may include power for the Secretary of State to require the Regulator to review a limit or limits in a manner specified by the Secretary of State".
That is reflected in Regulation 20, which reads:
"The Secretary of State may from time to time require the Regulator to review the limits set under regulations 17 and 19 in such manner as shall be specified by the Secretary of State".
The explanatory notes to the regulations explain that it,
"allows the Secretary of State to require the Regulator to review the dividend and interest caps. The purpose of this draft regulation is to allow the Government to ask the Regulator to consider using his ability to set limits in particular ways, as noted in paragraph 181 of the Explanatory Notes to the Bill".
I find the concept of the Secretary of State's ability to coerce the regulator into,
"using his ability to set limits in particular ways"
quite sinister. It implies interference which I do not think is warranted. Can the Minister give us some examples of when and where that would be necessary? I beg to move.
Lord Phillips of Sudbury: I am largely supportive of the remarks made by the noble Lord, Lord Glentoran, about Clause 27 and the two amendments. It is a particularly important clause. I made considerable reference to it at Second Reading and expressed some of the concerns that have been expressed today. For example, Clause 27(3)(a) states:
"The Regulator—
(a) may set a limit".
I assume, incidentally, that the limits referred to here are confined to the limits referred to in subsection (1); namely,
"limits on the distribution of assets … limits on the payment of interest on debentures".
As I say, Clause 27(3)(a) states:
"The Regulator—
(a) may set a limit by reference to a rate determined by any other person".
I should be grateful if the Minister would explain the full purport of that. Could it be literally any other person? Could he ask the Pope to do it? What are the bounds of the measure? I do not see any at all. Will the Minister give us some help in trying to construe the measure sensibly?
Further, I was struck by the fact that subsection (5) of Clause 27 states:
"The regulations may include power for the Secretary of State to require the Regulator to review a limit or limits in a manner specified by the Secretary of State".
It would be helpful if the Minister would tell the Grand Committee what is meant by the words,
"in a manner specified by the Secretary of State".
For example, could the Secretary of State, being dissatisfied with the way in which the regulator set the limits or perhaps failed to set the limits, require the regulator to say that he was totally dissatisfied with the way in which limits were being set by a CIC—he might actually name the CIC—and that in future the regulator was required to set limits on the distribution of assets in the following manner—say, not more than 8 per cent, not less than 6 per cent and confined to different types of assets? The wording is obscure. I do not think that any of us is trying to do more than get to the bottom of it.
Lord Evans of Temple Guiting: We have already debated several amendments to Clause 27, which would have the effect of reducing the flexibility with which that clause can be made to work. Amendments Nos. 116 and 118 are rather different, in that they seek to change the way in which Clause 27 permits that flexibility.
The Bill allows the regulator to set different limits for different cases; that is, to impose a higher or lower limit for some CICs than for others. As my noble friend Lord Sainsbury said at Second Reading, our consultation on the CIC proposals confirmed the need for that flexibility. It is intended that Clause 27(3)(b) might be used, for instance, to raise the usual limit for CICs carrying out activities in a certain sector or area where there is a greater than usual need to encourage investment by third parties. Such a variation to the
GC 370
limit could be made only in accordance with subsection (4) of Clause 27, which requires the regulator to consult appropriately and to have regard to the impact of the limits that are set.
The amendments would have the effect of encouraging individual CICs to seek to negotiate variations to the limit with the regulator. That would be less fair and transparent than the system that the Government are proposing, as it would be likely to create a proliferation of separate limits and could easily lead to inequitable differences between the rates applying to different CICs in the same line of business.
Of course, subsection (3) already allows the regulator to set individual limits, but the amendment involves a change of emphasis. As currently envisaged, the regulator would set caps by reference to sectors, areas or other criteria so that caps would usually apply to many different CICs depending on which category they fell into. If necessary, the Secretary of State, whose name has been mentioned, would use her power under subsection (5) to encourage the regulator to review and set caps in that way. The amendments would change that, with the result that the variations on the normal limit would be negotiated on an individual basis and would apply to individual CICs. It is likely that almost every community interest company would seek to negotiate its own limit so that, in reality, there would be no central or normal limit.
When talking about the regulator, the noble Lord, Lord Glentoran, suggested that he or she had too much discretion. How will he or she know when, where and how to set the limits? The limits should be set with regard to their likely impact on community interest companies. Subsection (4) imposes such a requirement on the regulator. That should involve striking a balance between encouraging investments in CICs, on the one hand, and preserving confidence in the asset lock, on the other. The regulator will usually be the best person to strike that balance, as he is being created precisely in order to be the regulator of community interest groups. He will be independent of government and will be specifically required by Clause 27(4) to consult before setting limits and to consider the impact that limits will have on CICs. Finally, he will be in frequent contact with CICs and those with relevant experience of the sector and thus will be well placed to understand the issues and strike the right balance. Clause 24(4) requires him to have regard to the outcome of consultations with CICs and others with relevant experience.
One unfortunate effect of Amendment No. 118 is that it would remove the regulator's ability to set a limit by reference to a rate set by a third party, such as the Bank of England base rate. Our consultation confirmed that the ability to link the limits on CIC dividend payments to such a rate would be a useful additional flexibility.
A number of other issues were raised in our short debate. One is that there is no reference in the regulations to a varying cap. The regulations leave it to the regulator to pick a varying cap if he wants to do so.

GC 371
From time to time, there will be indications that the regulator can change the limit where he or she considers it appropriate.
The noble Lord, Lord Glentoran, argues that it is sinister that the Secretary of State can coerce the regulator into changing the limits. However, the power allows the Secretary of State only to ask for a review of limits. It could be used if the Secretary of State thought that a review was needed because of a lack of investment in a certain type of CIC.
The noble Lord, Lord Phillips of Sudbury, raised the question of the rate being set by reference to any other person, and he used the Pope as an example. The provision is intended to allow reference to a preexisting rate, such as the Bank of England base rate. I hope that, with that explanation, the noble Lord, Lord Glentoran, will be happy to withdraw the amendment.
3.45 p.m.
Lord Glentoran: I thank the Minister for that explanation. It has been a useful debate, as far as it has gone. While there are some points in here about which we feel strongly, the amendment is very much a probing amendment to see where the Government are coming from.
One or two interesting things have emerged from what the Minister said. We are not saying that there should be one standard cap and one standard cap only, but that there should be a standard cap which should be varied. The Minister said there would be different sectors. I do not think we would argue with the Government setting out clear sectors in which CICs would operate. I imagine they could be business sectors, types of company sectors, even geographical sectors. Within that grouping, we would start to achieve some structure in the way in which this cap might or should work.
At present, I still feel that the provision as drafted is too loose, too vague and too unspecific. I do not think it will be helpful to CICs. If CICs take off—which, of course, I hope they will—it will make the regulator's job quite impossible and the Government may be forced to legislate again on this matter because it will be so untidy. In general, my view is that the Government should rewrite the Bill regarding caps by Report stage so that it is clearer, more constructive, more comprehensible and much more transparent. I hear what the Minister said about having a standard cap—each CIC would do private deals. I do not believe that that will be so; I believe that it will be more transparent. If one does not have a standard, every CIC in the country will be trying to negotiate something, somewhere, from a different basis. I think it is one of the biggest weaknesses in the Bill as it stands.
Lord Phillips of Sudbury: If I could add my twopenn'orth, I wholly agree with the suggestion of the noble Lord, Lord Glentoran, that some rewording of the clause should be contemplated. For example, there is the reference to setting,
"different limits for different cases".
GC 372
Given what the Minister said and what was said on Second Reading, I should have thought that it would be better to substitute categories for cases. "Different cases" could mean an individual CIC. From everything that has been said today, that is not the intention—indeed, I hope it is not the intention. It would be invidious for a regulator to be able to pick a particular CIC and say, "You'll be allowed a 20 per cent dividend, while everybody else can have 7 or 4 per cent".
There is another point which could be reviewed if that were to happen. In response to one of my queries on subsection (5), the Minister said that the Secretary of State could "encourage" the regulator to review the caps. That is not how subsection (5) is worded. It says:
"The regulations may include power for the Secretary of State to require the Regulator to review … in a manner specified by the Secretary of State".
That seems a far tighter and more dirigiste power on the part of the Secretary of State than the Minister indicated in his reply. On review, we might want to drop the words,
"in a manner specified by the Secretary of State",
or change them. We must not forget that we will be dealing with a group of companies which will be heavily peopled by voluntary sector elements, who will not want to resort to expensive lawyers at every turn. Clause 27, which is crucial, could be and should be improved.
Lord Glentoran: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 117 to 119 not moved.]
Clause 27 agreed to.
Clause 28 [Distribution of assets on winding up]:
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville) moved Amendment No. 120 The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville) moved Amendment No. 120:
Page 28, line 22, leave out from "distribution" to "may" in line 23 and insert ", on the winding up of a community interest company, of any assets of the company which remain after satisfaction of the company's liabilities.
( ) The regulations"
The noble Lord said: The Government have tabled this amendment to fulfil an undertaking that I gave to the noble the noble Lord, Lord Dahrendorf, on 29 January, in response to the report of the Delegated Powers and Regulatory Reform Committee. The purpose of Clause 28 is to ensure that when a CIC is wound up, any assets remaining after its creditors are satisfied will continue to be used for the benefit of the community.
On a winding-up of a company, the surplus or residual assets would normally be distributed to the members of the company, or otherwise as the articles of the company provide. However, if the CIC asset lock is to be preserved, there must be restrictions on the distribution of assets on a winding-up. The draft regulations which the Government published in February show how the power contained in Clause 28 is intended to be used to implement that aspect of the

GC 373
asset lock. The intention is only to change the way in which residual assets are treated in a winding-up. The creditors of a CIC that is being wound up should continue to have the same rights as the creditors of any other company.
The Delegated Powers Committee observed in its report that, as drafted, Clause 28 allowed regulations to do things which went beyond the Government's stated policy intentions. For instance, it could be used to affect the rights of creditors. The Government agree with the Committee's analysis, and are concerned to ensure that the power could not be used to modify the normal rules about the application of assets between creditors.
Any suggestion that the rights of the creditors on the winding-up of CICs could be undermined might reduce the willingness of people to invest in, and trade with, community interest companies. We had no intention of using the power in this way. The amendment is therefore intended to cut back the power provided by Clause 28, so that it can be used only to affect what happens to those assets remaining after all the creditors of the company have been paid. I beg to move.
Lord Phillips of Sudbury: I may be exceedingly thick in asking this question, but what is meant of the final hit of Amendment No. 120 when it says, after the brackets, "the regulations"? It seems to me that the amendment was comprehensible up to the words, "the company's liabilities".
Lord Sainsbury of Turville: I totally agree that it is necessary to explain why the amendment comes out this way. It means that the regulations,
"may make provision for and in connection with the distribution, on the winding up of a community interest company, of any assets of the company which remain after satisfaction of the company's liabilities".
Then one moves down to the word "regulations", after which come the words,
"may, in particular, amend or modify the operation of any enactment or instrument".
The second part of the original clause follows the word "regulations".
Lord Phillips of Sudbury: It is a wonderful world. Thank you very much.
Lord Glentoran: I thank the noble Lord, Lord Phillips, for the clarification that he got from the noble Lord, Lord Sainsbury. When we read Hansard, I am sure the matter will be clearer. The Government's amendment goes some way to meeting our concerns on the issue, but it does not go the whole way. We have touched on the issue before, when talking about the official property holder.
Clause 28 is extremely short. I gave notice of my intention to oppose the clause standing part early on in proceedings, when we had not yet seen the regulations. I was concerned in particular about whether the provision for transferral of assets on
GC 374
winding-up would take priority over satisfying creditors. We have now had a look at the regulations in draft form and my fears have been partially allayed.
Regulation 21 and also, to some extent, Regulations 7 and 8 and Schedules 1 to 3, give details of the asset lock in the case of winding up. Regulation 21 states:
"(1) Where a community interest company is wound up under the Insolvency Act 1986(a), so much of the property of the company as remains after satisfaction of the company's liabilities shall be distributed—

(a) to those members of the community interest company (if any) who are entitled to share in any distribution of assets on the winding-up of the company, provided that no amount may be distributed in respect of any share in the company which exceeds the amount by which the share has been paid up

(b) subject to the entitlement of those members (if any), to such community interest companies or charities and in such proportions or amounts as the Regulator may direct".

That does not give us much detail.
I am pleased to see that the company must first use its assets to settle any liabilities—presumably the paying-off of creditors, debts et cetera—but I have some reservations about the second arm of the regulation. Paragraph (1)(b) states that any residual assets will be transferred to,
"such community interest companies or charities and in such proportions or amounts as the Regulator may direct".
That is a large amount of discretion for the regulator. As the regulations are drafted, it sounds as if the regulator can choose the CICs or charities to benefit from the distribution of assets. He can certainly decide the amounts to be doled out. Why cannot the directors of the company just decide for themselves how to distribute their remaining assets or, at least, have some form of consensus with the regulator?
It is not the light-touch regulation that we were promised. Can the Minister clarify for me how, he envisages, the distribution will work?
Lord Sainsbury of Turville: The purpose of Clause 28 is to ensure that, where a CIC is wound up, any residual assets remaining after its creditors are satisfied will continue to serve the community. Like Clause 27, this clause is another part of the asset lock, which is a key feature of the CIC.
When a non-charitable company is wound up, its assets are normally dealt with according to the laws of insolvency. The first priority is to satisfy the demands of the company's creditors. Any assets remaining after that are usually shared between the members of the company, unless the memorandum or articles of the company provide otherwise.
It is a principle of the CIC that the company's assets should not be used for the private gain of the company's members. Clause 28 therefore provides for regulations to make special provisions for the treatment of assets on winding-up. We have published dummy regulations that show how the power is intended to be used. First, assets will be used to meet the claims of creditors and any other liabilities of the company, in the usual way. It is important to stress that, on a winding-up, the creditors of a CIC, including investor shareholders to whom dividends are owed,

GC 375
will have the same rights as the creditors of companies that are not CICs. Secondly, if the CIC has shareholders who are entitled to have their original investment returned on winding-up, those shareholders will be paid. Any assets remaining after those steps will be used for a community benefit purpose. They will be distributed as directed by the regulator. The intention is that assets should go to another CIC or charity approved or nominated by the regulator.
The noble Lord, Lord Glentoran, asked on what basis the regulator would make the decision. He thought that that was giving the regulator rather too much power. If the memorandum or articles of a CIC specify any recipient, the regulator is likely to follow that, unless he has good reasons not to. A CIC may identify in its constitution the CIC or charity beneficiaries that it would like to receive any residual assets in the event of winding-up. However, the regulator will have the final say in deciding where such assets go. That is because CICs will be able to change the nature of their activities relatively easily in comparison to charities, so that, over time, a CIC may become a less suitable beneficiary for a particular purpose. Otherwise, the regulator will be likely to consult the CIC, and the regulations propose a right of appeal, if the members of the CIC disagree with the decision.
It should also be emphasised that the assets will not pass to any other type of organisation because at present only CICs and charities provide the twin assurance of a community interest purpose and a lock on assets. However, the Government intend to consult later this year on the introduction of an asset lock for certain industrial and provident societies. If a suitable lock is introduced, we intend that regulations should also allow the assets of a wound-up CIC to pass to such organisations. This clause represents an important part of the asset lock that we propose to apply to community interest companies.
4 p.m.
Lord Phillips of Sudbury: The Minister mentioned putting, ab initio, into the articles that in the event of a winding-up, a surplus should go to X, Y, Z CIC or X, Y, Z charity. The Minister makes a fair point that times move on and that such organisations may become unsuitable. Surely, the suggestion of the noble Lord, Lord Glentoran, is a good one and is likely to be favoured—certainly by me as a lawyer—that in the winding-up clause the destination of any surplus assets would be a CIC or a charity as selected by either the members or the directors at the time, subject to the approval of the regulator. I hope that the Minister will be able to say that that sounds like a good idea.
Lord Sainsbury of Turville: I assumed that the noble Lord wanted to ask that question. I feel that I am on shaky ground as regards what happens in that situation and on why the members of a CIC are simply not asked. It could be a winding-up of a company which happened for reasons that did not reflect well on the members of the CIC. It seems to me that the
GC 376
regulator should protect the public interest. As I have said, in normal circumstances he will consult the members of a CIC on where a surplus should go.
Lord Phillips of Sudbury: I understand the Minister's point where there is a deficit, but there is not likely to be any adverse or disreputable consideration where there is a surplus. That means that all creditors will have been satisfied. In charity law, the norm in a winding-up provision is precisely that: to say that on a winding-up if there is a surplus the members and/or the directors should decide on the destination, provided it is within one or other category. I believe that that would be a much better way and a much less bureaucratically heavy way than rushing off to the regulator and saying, "Mr Regulator, what do you suggest?"
Lord Sainsbury of Turville: One of the bases of this matter is that there is a public interest in such companies. In those circumstances, that should be exercised by the regulator. Of course, there are other reasons why there may be a surplus, such as the CIC is not using assets for the community benefit, but is storing them up for itself. Again, it seems to me to be essential that there is some kind of public interest imposed before it simply hands it over to a cause of its own.
Lord Phillips of Sudbury: I do not want to make a meal of this point, but there is no such provision vis-a-vis winding up a charity. The Charity Commissioners do not have to be consulted; they do not have a power to say where the net assets of a charity should go. A charity is more of a public interest vehicle than a CIC. Perhaps the Minister should contemplate the point. It seems to me that if there is a surplus and provided that it goes to another CIC or a charity, the regulator should not have to worry his or her head about it.
Lord Sainsbury of Turville: I shall consider that point. The comparison with a charity is one that we should bear in mind.
Lord Glentoran: I thank the Minister for those comments. The Government have gone a long way to satisfy our concerns on this issue. I think that the Minister is clear that the noble Lord, Lord Phillips, and I are thinking down the same route for Clause 28. We shall return to the matter on Report.
On Question, amendment agreed to.
Clause 28, as amended, agreed to.
Clause 29 [Memorandum and articles]:
The Deputy Chairman of Committees: If Amendment No. 120A were to be agreed to, I should not be able to call Amendments Nos. 121 and 122.
Lord Glentoran Lord Glentoran moved Amendment No. 120A:
Page 28, line 31, leave out subsection (3).
The noble Lord said: In moving Amendment No. 120A, I shall speak also to Amendments Nos. 121 and 122 and on the Question of whether Clause 29

GC 377
shall stand part. We feel that there is a certain superfluity to some of the amendments. Clause 29 makes clear the memorandum and articles that a CIC must provide. Each CIC will be required to register a memorandum and articles of association, which together will form its constitution. The majority of the detail is confined in draft Regulations 7, 8 and 10 and Schedules 1 to 3 which relate to them. These are intended to provide the basis for the comprehensive asset lock, in conjunction with Clause 27 and its relevant regulations.
Clause 29(3) provides for regulations to set out provisions, which must be included in the constitution of each CIC. Subsection (4) gives more detail on the sort of things to be required. These include provisions about the transfer and distribution of assets. I appreciate that the Minister will argue that it is proper for regulations to set out the nitty-gritty of the constitution, and that this sort of technical detail would be out of place on the face of the Bill. We, however, are not entirely convinced of that.
Amendment No. 120A probes leaving out subsection (3). I tabled the amendment because I took offence to the fact that all the details of the memorandum and articles would be contained in regulations rather than being on the face of the Bill. Now that we have the regulations in draft which give effect to subsection (3), why can we not have these on the face of the Bill as a schedule? The relevant draft regulations, which relate to this subsection—Regulations 7 and 8 and Schedules 1, 2 and 3—are complicated, but have been drafted. Why can they not be on the face of the Bill rather than confined to secondary legislation, particularly when it relates to regulations and schedules to regulations?
Amendments Nos. 121 and 122 are aimed at a slightly different issue. However, paragraph (b) of Clause 29(3) states that memorandum and articles of a CIC,
"must not include such provisions as regulations require not to be so included".
We find that paragraph—dare I say it?—superfluous. If the content of the regulations spells out how the memorandum and articles of a CIC are to be drawn up, what is the need for paragraph (b) to state that the memorandum should not include such provisions as regulations require not to be included? Perhaps the drafting could merely be simplified to say that,
"regulations will make provision for how the memorandum and articles of a CIC are to be drawn up".
On a further note, I should like to say that I find the technical detail contained in the regulations confusing. Legislation is difficult to get to grips with when one has to turn to regulations to find out the detail of a provision. However, in the case of draft Regulations 7 and 8, we are simply referred again to Schedules 1, 2 and 3. They make clear that there are actually three different types of constitution that a CIC can choose from, depending on whether it wants to be a CIC limited by guarantee without share capital—Schedule 1—a CIC limited by shares or a CIC limited
GC 378
by guarantee with a share capital—Schedule 2—or a CIC with share capital which wants to make payments of dividends to shareholders—Schedule 3.
Apparently Schedules 1 and 2 contain the same provisions in respect of distribution and treatment of assets on winding up and the same provisions in respect of voting but differ in respect of membership because Schedule 2 has shareholders. Schedule 3 is different from the former two because it contains different provisions on membership and voting, distinguishes between investor and non-profit shares and has different rules on the distribution of assets and payments to shareholders. Perhaps the Minister could also shed some light on the provision in paragraph 6(1) of Schedule 3 which reads:
"The total number of votes that may be cast by the holders of investor shares in respect of such shares at a general meeting of the company shall not exceed [24%] of the total number of votes that may be cast at the meeting".
I notice that the figure of 24 per cent is in square brackets in the draft regulations. Can the Minister tell us on what basis he arrived at that figure and whether, as it appears likely, he is open to changing the figure if there is appropriate demand?
CICs are either one thing or the other. The Government have talked about an "off the shelf" model for a company which wants to have an asset lock and to benefit the community. This, they have argued, is highly preferable to leaving it to individual companies to be formed normally under the Companies Act but which have to write such provisions into each individual constitution. But such is the need to allow CICs to be "flexible" that we have three different models as set out under Schedules 1 to 3 from which a CIC has to choose. Furthermore, Regulation 9 gives another possibility that allows a CIC to amend the provisions inserted in its memorandum and articles in terms of the distribution of assets only to charities and not to other CICs.
I suggest to any new social enterprise wishing to set itself up that the multitude of options contained in the schedules to regulations to the Bill itself will be confusing. I am concerned that such a company will need to seek legal advice which will be costly, which will take up time and which in certain parts of the country may not even be available. Moreover, it has been claimed that currently there is a real lack of provision of good sound legal advice on the less well known models for organisations. For example, according to the government document which reviews charities and the not-for-profit sector, Private Action, Public Benefit:
"The social enterprise business model in general is poorly understood. In particular, the Industrial & Provident Society is not well recognised, and I&PS law is not as well developed as company law. This lack of knowledge impedes the creation of new social enterprises".
Can we be sure that legal advice will be readily available to help CICs to pick the best of these multifarious options to suit their needs? Faced with so many different prescriptive models of constitution, a company looking to have an asset lock might be

GC 379
tempted to write its own asset lock into a constitution as set up under the simple, more familiar formula provided by the Companies Bill.
I believe that these rather lengthy comments of mine show the variety, complexity and difficulty of finding a way through this maze. The purpose of the amendment is to try to encourage the Government to improve the situation and create further clarity. I beg to move.
[The Sitting was suspended for a Division in the House from 4.14 to 4.24 p.m.]
Lord Phillips of Sudbury: Will the Minister confirm that, given the way in which Clause 29 is drafted, particularly subsection (3), there is no limit to what could be insisted upon by any government by way of regulations in respect of the memorandum and articles of a CIC? There is no constraint whatever on what they could provide. The only constraint could be having to get an affirmative resolution of both Houses before it would come into effect, but, as we all know, defeating such resolutions is as rare as white sea eagles, and I am anxious that there is no framework for regulations prescribed by the clause. I have a certain sympathy, therefore, with the amendment.
Lord Evans of Temple Guiting: The amendments relate to powers contained in Clause 29 to make regulations about what must and must not be in the constitution of CICs. Since the earlier amendments were tabled, the Government have published draft regulations showing how that power and other powers contained in Part 2 of the Bill are intended to be used. While the draft regulations are simply indicative and will be considered further before they are finalised, they reflect the Government's policy intentions. I will therefore refer to them when explaining why the Government are resisting the amendments.
May I make one point about consultation on the draft regulations? They were published in order to assist Parliament's consideration of the Bill and will be discussed with interested parties before any final version is laid before both Houses for approval. I say that because Members of the Committee have talked about how the regulations do not go far enough and are not clear. They will have an opportunity, as will any other interested party, to work on the regulations before they are laid before both Houses.
The amendments would remove the powers to make regulations to require or prevent particular provisions being included in a CIC's constitution. The powers are a significant element of CIC structure. The draft regulations give a number of examples of why we believe they are needed and how we intend that they should be used.
The power in subsection (3)(a) is the means by which important provisions on the distribution of assets and on company membership and voting rights are included in the constitution of each CIC. Draft Regulations 7 to 9, together with the schedules in the draft regulations, show the sort of provisions we have in mind. The key advantage of putting these things into the constitution of each CIC, rather than simply
GC 380
stating them in legislation, is that it will enable the CIC to demonstrate clearly to all its stakeholders the key provisions that apply to it simply by referring to its constitution.
As an example of the use of the power in subsection (3)(b)—and as an answer to one of the points raised by the noble Lord, Lord Glentoran—-draft Regulation 10(1) provides that, except as provided in the remainder of the regulation, a CIC must not include in its memorandum the independent object of disposing of assets for less than full consideration. CICs must not set themselves up with the purpose of giving away assets for less than full value, as an end in itself, except where the purpose is to give the assets to another CIC or charity. Of course, this does not affect the power of a CIC to dispose of assets for less than full value in pursuit of the community benefit. This provision is a central part of the asset lock. Without the power contained in subsection (3)(b) of Clause 29, it could not be included in the regulations.
The noble Lord, Lord Glentoran, asked why the provisions were not set out in the Bill. As with other delegated powers in this part of the Bill, it is vital to ensure that legislation is flexible enough to deal with the developments in the sectors where CICs are expected to be used. For example, it would be possible to introduce or amend provisions under the clause if that were judged necessary to deal with attempts to avoid the requirements of CIC status. The noble Lord, Lord Glentoran, also asked what was magical about the 24 per cent of votes in Schedule 3 to the regulations. That provision comes as a result of our consultations, during which there were very strong indications that investor shareholders should have less than 25 per cent of the total voting rights, so that they could not block special resolutions at a meeting of the company.
The noble Lord, Lord Glentoran, also argues that CICs can have only what the regulations let them have in their memorandum. However, CICs are free to add other things to their memorandum and articles, as long as they also include what the regulations require. The noble Lord talked about the absolute importance of legal advice. That important issue was covered in the paper, Private Action, Public Benefit. The CIC is intended to help to bring clarity to the legal forms for social enterprises. We have already discussed the need for good quality advice in this Committee, and I do not believe that I can add to what we have said.
The noble Lord, Lord Phillips, asked whether there was a limit to the regulations that could be imposed on the memorandum and articles of each CIC. Subsection (3) must be read with the list in subsection (4), which may have a limiting effect on the width of the power. With that answer, I hope that the noble Lord will withdraw his amendment.
4.30 p.m.
Lord Phillips of Sudbury: Perhaps I may take up the final point very quickly. The Minister said that subsection (4) might have a constricting effect on the construction of subsection (3). I should be grateful if he would consider that after this sitting, because I do

GC 381
not see it. Subsection (4) simply says that the regulations required under subsection (3) "may … include". It does not use the word "must".
In addition, the noble Lord, Lord Glentoran, raised the issue of the limit of 24 per cent on investor shareholders. That in itself will be wholly ineffectual in the terms that the Minister described as justifying the limit. It will be the norm, as it is in business, for investor shareholders to have simply as a matter of contract a prohibition on the passage of resolutions that they do not like. I point that out because I do not believe that the provision will work.
Lord Glentoran: I thank the Minister for his, again, detailed response. We have again moved forward quite a long way. I shall certainly take advice, having been prompted to by what the noble Lord, Lord Phillips, has just said about the limit of 24 per cent. Perhaps we shall return to that.
The clause states:
"The memorandum and articles of a community interest company … must not include such provisions as regulations require not to be so included".
Do we really need that in the Bill? Is there a specific reason? Having said what should be there, must we say what should not? It seems to be an extra bit of gobbledegook. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 121 and 122 not moved.]
Lord Glentoran Lord Glentoran moved Amendment No. 123:
Page 29, line 4, after first "the" insert "holding of meetings and"
The noble Lord said: In moving Amendment No. 123, I shall speak also to Amendment No. 125. Again, they cover a fairly small but, I believe, important point. As I mentioned previously, subsection (4) gives details of provisions that regulations may specify must be included in the memorandum and articles of all CICs. They include provisions about the transfer and distribution of assets; the payment of interest on debentures and debts; the membership and voting rights of members; and the appointment, removal and voting at meetings of directors. That is merely a sketch of some of the most relevant details to be included in the regulations.
However, I believe that some important features which would normally be included in the constitution of a company have been left off the list. Paragraph (d) states that there should be,
"provisions about the voting rights of members of the [CIC]",
but there is no mention of the need to hold meetings. When I first looked at the Bill without the benefit of the draft regulations which we now have, I was a little surprised by that omission. Should the memorandum and articles of a CIC include details of the payment of interest on debentures but have nothing to say about the CIC having an obligation to hold meetings both of its members and directors? How could members under paragraph (d), or directors under paragraph (f), vote on anything without having a meeting?
I was glad to see that the Law Society shared my concerns. It commented:
"We suggest that the (admittedly non-exhaustive) list of provisions which regulations made under clause 29(4) may require to be included in the memorandum and articles of a CIC should include a reference to the calling of meetings of members of the CIC as well as the voting rights of members".
The draft regulations—for example, at paragraph 5(1) of Schedule 1—mention the rights of members,
"to vote at a general meeting of the company",
but there is still no explicit reference to having to hold meetings.
It is an old ruse of small organisations—for example, clubs, charities and so on—never to hold a meeting, so that one cannot be voted out and things cannot be changed. Those of us who have been involved in that world know that, unless one is forced to hold a meeting, often people will find good reasons not to do so. I beg to move.
Lord Evans of Temple Guiting: Once again, the draft regulations which the Government published in February, after these amendments were tabled, are relevant to a discussion on the amendments. The amendments would add to the list in Clause 29(4) of what regulations made under subsection (3)(a) may include. I stress that that list is not exhaustive. It would be possible for regulations made under the clause to deal with other things as well as, or instead of, those listed in subsection (4).
Although subsection (4) is intended to be merely an illustrative list, the Government are resisting the amendments for three reasons. First, we do not believe that the provisions that they cover are necessary in this clause, and I shall explain why in a moment. Secondly, and consequently, we are a little concerned that including them would lengthen an already long list. Thirdly, it could create false expectations of what will be covered by regulations made under the clause.
The new references are to the holding of meetings. We do not believe that they are necessary as CICs will have to meet the same company law requirements about the holding of meetings as other companies. Our public consultation on the CIC proposals in 2003 did not suggest that additional provisions on meetings were necessary.
In contrast, subsection (4) indicates that regulations under this clause may contain provisions about voting rights. We intend that CICs will include special provisions about voting rights in their constitution, so that the majority of votes will belong to shares which carry no rights to dividends or a return of capital on the winding-up of the company. That is to ensure that shares that provide a right to private gain from the activities of the company will not carry sufficient votes to control the company to the detriment of its pursuit of community interest. That proposal was supported in our consultation, and draft provisions on those lines are contained in the draft regulations.
Before I sit down, perhaps I may simply say to the noble Lord, Lord Glentoran, that each CIC can put into its memorandum and articles any matter that it wishes, and one could certainly be provisions relating

GC 383
to the number of meetings of directors, senior staff or the management team. There is no bar to that. I hope that the noble Lord is satisfied with my explanation and will withdraw the amendment.
Lord Glentoran: I thank the noble Lord for that. In principle, the answer is "Yes". I have one question: can the regulator require a meeting to be held, if he hears or fears that a company has not called the requisite meeting? Can he insist that it happen?
Lord Evans of Temple Guiting: I am informed that the regulator cannot. However, like any other company, a CIC will have to hold an AGM, unless, in the case of a CIC that is a private company, the members have unanimously passed an elective resolution to dispense with the holding of an AGM. Even in that case, any member can still insist that an AGM be held. Members with 10 per cent or more of the paid-up capital of the company with voting rights—or, if the company does not have share capital, members with 10 per cent or more of the voting rights—may requisition an extraordinary general meeting of the company. The answer to the noble Lord's question is that the regulator cannot enforce it, but members of the company can.
Lord Glentoran: I thank the noble Lord for that explanation, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 124 and 125 not moved.]
Lord Glentoran Lord Glentoran moved Amendment No. 126:
Page 29, line 7, at end insert ", and
(g) provisions about how the company will benefit the community"
The noble Lord said: The amendment relates to Clause 29 and to Regulation 24. We are considering how we might state in the Bill what regulations should require to be contained in the memorandum and articles of a CIC. I tabled the amendment before the draft regulations were published.
The Explanatory Notes make it clear that,
"Each CIC will be required to register a memorandum and articles of association, which together form its constitution".
Our amendment would make sure that regulations required the memorandum and articles of each CIC to include provisions about how the company benefited the community. That should go without saying. It must be right for the memorandum and articles of a CIC to give some detail about how the company intends to benefit the community. If it has had to fulfil a community interest test—whatever that is—it should be no problem to give a brief outline of how the company benefits the community.
We have already heard that the stakeholders of a CIC are to be the eyes and ears of the regulator and will report to him instances where, they think, there has been mismanagement of a CIC. That includes not fulfilling the community interest test, I suggest. The regulator is then meant to react to the reports and kick into action appropriately. If the system is to the best of
GC 384
its ability, the CIC should state clearly in its memorandum how, it believes, it achieves its community benefit role.
I see from draft Regulation 24 that a justification of the community interest aspect of a CIC must be included in the annual report, as provided for by Clause 31(3). Again, the inclusion in the annual report of a statement of how the CIC's activities have benefited the community is a new development since the consultation process and a fundamental one. However, I ask the Minister again why it must appear in the annual report of a CIC, rather than in its memorandum and articles, which effectively draw up its constitution and the foundation principles on which the CIC is based.
The consultation paper, Private Action, Public Benefit, mentioned,
"a clause in the constitution"—
of a CIC—
"setting out the objects of the company".
For that reason, it would be more suitable to include a statement of community interest that would set out the objects of the company in the memorandum and articles. I beg to move.
4.45 p.m.
Lord Evans of Temple Guiting: This amendment, like Amendments Nos. 123 and 125, which we have just discussed, adds further provisions to the list of what regulations made under subsection (3)(a) may include. As we have already discussed, the list is not exhaustive. Therefore, it would be possible for regulations made under this clause to deal with other things as well as, or instead of, those listed in subsection (4). As with Amendments Nos. 123 and 125, the Government are resisting this amendment because it is unnecessary and may be confusing.
The amendment would insert a reference in subsection (4) to provisions concerning how the CIC will benefit the community. The Government expect that some CICs will wish to set out their activities in their constitution, but they do not intend to make that compulsory. The results of our consultation last year highlighted the importance of giving CICs the freedom to change their purposes over time, to benefit their communities in different ways and to meet changing needs. The Bill therefore provides for a flexible approach to that in the constitution of the company. It is not our intention to tell community interest companies how they should benefit the community, provided that whatever activities they carry on are for the benefit of the community.
Where a CIC chooses to commit itself to specific objects in its constitution and the statement of objects is so precise that a reasonable person might consider that the carrying on of activities in furtherance of that object is for the benefit of the community, the regulator will be able to take supervisory action if the CIC fails to carry on any activities in furtherance of those objects. Clause 32 of the Bill calls these

GC 385
"community interest objects". An example might be where a CIC sets itself up with the object of providing care and shelter for the homeless.
However, a CIC will also be able to establish itself with wider objects in its constitution, such as general trading objects. In such cases, the CIC will be able to pursue whatever activities it wishes for the benefit of the community. The regulator will still be able to take action if he concludes that such a CIC is not satisfying the community interest test. This flexible approach means that a provision such as that contained in the amendment is not needed.
The noble Lord, Lord Glentoran, asked about the possibility of a reporting requirement and whether that should be included in the memorandum and articles. The aim is to ensure that CICs can adapt their activities to serve the community in new ways over time. It is more appropriate to require a report each year on what has been done than to enshrine what the CIC intends to do in its memorandum and articles. The provision in the Bill for very direct annual reporting is, in our view, of more significance than a statement on what a CIC plans to do as it is set up. It is a question of practice against theory. With that explanation, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Glentoran: Once again, I thank the noble Lord for the explanation. I certainly agree with what he said; namely, that the reporting process is a high priority. However, I find it strange that the Government resist putting the community interest objective within the constitution of the company. I shall certainly think about that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 127 not moved.]
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 128:
Page 29, line 8, leave out subsection (5).
The noble Lord said: I had forgotten about Amendment No. 128. I tabled the amendment because it struck me that subsection (5) was superfluous. I suggest to the Government that it is superfluous. I beg to move.
Lord Glentoran: I was all prepared to agree with the argument of the noble Lord, Lord Phillips. We feel that the drafting is extraordinary. Not only is it confusing, but it almost ties down CICs into a straitjacket in terms of what can and cannot be included in their memorandum and articles, which will form their constitution. It is hardly flexible. It says that anything included in the memorandum, which is not obligatory as required by regulations under subsection (3)(a), has no effect. This seems restrictive and unnecessary. I support the amendment.
Lord Evans of Temple Guiting: The amendment would remove subsection (5) of Clause 29, which
GC 386
makes it clear that the regulations under this clause override any inconsistent or conflicting provisions in the constitution of the CIC.
The constitution of a CIC should comply with the regulations made under this clause. But if it does not, the amendment would lead to confusion as to whether the provisions of the constitution apply or the regulations. If, as a consequence of this amendment, the constitution of a CIC can override the regulations, then it would become possible for CICs to evade the asset lock simply by changing their constitution.
We thought the point of the noble Lord, Lord Phillips, was going to be whether there was any precedent for subsection (5). He did not mention that, but he may be interested in the reply. The answer is in paragraph 2(4) of Part 1 of Schedule 3 to the Commonhold and Leasehold Reform Act 2002, concerning the memorandum and articles of commonhold associations.
The regulator has no powers to prevent such changes to a CIC's constitution, apart from changes in the memorandum to the objects clause under subsection (6) of Clause 29. We feel that it would be inappropriately restrictive and bureaucratic to give the regulator such powers. In short, the amendment would open the way for CICs to avoid the fundamental requirements of CIC status. The Government cannot accept that.
The noble Lord, Lord Glentoran, raised a point about subsection (5) meaning that anything not required by the Bill is therefore of no effect. The answer is: no, it does not. Things are of no effect only if they conflict with one of the terms required under this clause.
Lord Phillips of Sudbury: I am grateful for the Minister's response to arguments that I never advanced. However, it seems to me to be belt and braces of the most blatant kind because Clause 29(3) states that one shall not include these regulations, but those regulations you must have. So if one does have regulations in conflict with subsection (3), they must be unlawful and of no effect. I am not going to press the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 29 agreed to.
Clause 30 [Names]:
Lord Glentoran Lord Glentoran moved Amendment No. 129:
Page 29, line 31, leave out ""community interest" and insert
The noble Lord said: This is a small idea perhaps rather than an amendment. I shall try to be brief. It is probably a mistake on my part, but never mind. I think that there may be a discrepancy in Clause 30, which deals with names and their abbreviations. Subsection (1) states:
"The name of a community interest company which is not a public company must end with—…`community interest company', or … `c.i.'".
Subsection (3) states that a community interest company which is a public company, must end its name with "community interest public limited

GC 387
company" or "community interest plc". Why is the abbreviated ending for a community interest company which is a public limited company not simply "CIPLC'? That would be in line with the abbreviation under subsection (1). Is such an acronym thought to be too cumbersome to handle? Our amendment would provide for the ending of a CIC that is a plc to be "CI PLC". I beg to move.
Lord Phillips of Sudbury: Perhaps I can use this amendment as a hook on which to make the point that, as the Bill is drafted and in particular Clause 30, on the notepaper or on anything else of a CIC that is not a public company there will be no indication that it is of limited liability status. If I am right in that conjecture, I suggest that that is not in the public interest, particularly as this will be a new legal animal. I remember the arguments that we had at the time of the Limited Liability Partnerships Act which provided for a similar arrangement. After I had raised the matter, the Government agreed that if one were to use the abbreviation "LLP", the fact that a company had limited liability should appear on the notepaper. It would be wrong for members of the public not to have the right to see on all notepaper that a CIC has limited liability. I do not mind how that is achieved. It may need to be a provision under part of the Companies Act.
Lord Evans of Temple Guiting: The intention that underlies the amendment—to abbreviate still further one of the abbreviated names for a CIC which the clause permits—is very welcome. We agree that the abbreviation proposed in the Bill for a "community interest plc", is rather unwieldy. However, on balance I think that the longer form set out in the Bill is preferable.
That is partly because, in practice, we do not expect that many CICs will be public limited companies, at least in the early days. For those that are, the abbreviation "CIC" will not of course be appropriate, as it will not convey—the point made by the noble Lord, Lord Phillips—that the company is a public company. That is why Clause 30 provides another formula. But, I fear that the abbreviation resulting from this amendment, "c.i.p.l.c.", will be something of a mystery to those dealing with the company. Unlike "CIC", it is unlikely to be used frequently enough to be associated in the public mind with the context of community interest. It is for that reason that we think it is necessary to maintain the words "community interest" even in the abbreviated form.
In answer to the question posed by the noble Lord, Lord Phillips, Section 351 of the Companies Act is amended by paragraph 7 of Schedule 6 so that CICs must say that they are limited if indeed they are to be limited. I hope that with that explanation of how many angels dance on the head of a pin, the amendment will be withdrawn.
5 p.m.
Lord Glentoran: I thank the noble Lord for that explanation. I thought that the recommendation was a thoroughly good one. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 30 agreed to.
Schedule 6 agreed to.
Lord Glentoran Lord Glentoran moved Amendment No. 129A:
After Schedule 6, insert the following new schedule—
"SCHEDULE
COMMUNITY INTEREST COMPANY REPORTS
1 (1) The community interest company report shall contain—

(a) a statement describing the manner in which the company's activities during the financial year have benefited the community;

(b) a statement describing the steps, if any, which the company has taken during the financial year to consult persons affected by the company's activities. and the outcome of any such consultation;

(c) where the company has at any time during the financial year declared a dividend on any of its shares—

(i) the amount of dividend so declared on each share, as a percentage of the amount paid up on each share; and

(ii) the applicable dividend cap applying to each share (set in accordance with regulations).

(d) where the company has at any time during the financial year a debt outstanding on which it has agreed to pay interest at a performance related rate, or a debenture in issue on which such a rate is payable—

(i) the rate of interest payable on debt or debenture as calculated over a 12 month period ending with the most recent date on which interest became payable in respect of that debt or debenture during the financial year; and

(ii) the applicable interest cap applying to that debt or debenture (set in accordance with regulations).

(e) the information specified in paragraphs 1 to 14 of Part 1 of Schedule 6 to the 1985 Act (chairman's and director's emoluments, pensions and compensation for loss of office) save that the information specified in paragraphs 2 to 14 shall be given only in the case of a company which is not a quoted company.

(2) Where a community interest company has provided the information required by sub-paragraph (1)(e) in its copy of the annual accounts for the year delivered to the registrar under section 242(1) of the 1985 Act, the community interest company report need not contain the information required by subparagraph (1)(e) provided that the community interest company report contains instead a statement that details of the remuneration of the directors of the company during the financial year may be found in the notes to the annual accounts of the company.
2 (1) The following provisions of the 1985 Act shall apply to the community interest company report as they apply to the directors' report.
(2) The provisions of the 1985 Act which so apply are—

section 234A(b) (approval and signing of direct ors' report);

section 238(c) (persons entitled to receive copies of accounts and reports);

section 239(d) (right to demand copies of accounts and reports);

GC 389

section 241(e) (accounts and reports to be laid before company in general meeting);

section 244(f) (period allowed for laying and delivering accounts and reports); and

section 245(1) and (2)(g) (voluntary revision of accounts or directors' reports)."

The noble Lord said: I rise to speak to Amendments Nos. 129A and 129B. These amendments seek to alter subsection (3) of Clause 31 which makes provision for community interest company reports. At the moment it reads:
"Regulations may—

(a) make provision as to the form of, and the information to be included in, a community interest company report, and

(b) apply provisions of the Companies Act 1985 relating to directors' reports to community interest company reports (with any appropriate modifications)".

We have now had the benefit of seeing these regulations which appear as draft regulations 24 and 25. Believe it or not—it is true—having read them in detail I see no reason why they cannot be transferred to become a schedule on the face of the Bill. It is not unusual to give statutory force to the report that directors should prepare every year. There is ample precedent for that. Our Amendment No. 129A would fully transfer the detail of draft regulations 24 and 25 into a schedule. This includes statements about how the CIC's activities have benefited the community, what consultation has taken place and detailed statements about how the asset lock has operated. We are happy with the criteria for the CIC report as set out in the draft regulations. Why not give it more prominence, therefore, by putting it in the Bill as a schedule?
At any rate, the amendments I have tabled today give us an opportunity to discuss the format and content of the annual report for CICs. These are a different and specific class of company and we agree with the Government that they should therefore have some prescription in regard to the report which they produce. If nothing else, this will aid the regulator in making sure that all CICs comply with the provisions in the Bill. I feel strongly about this, particularly having gone through the regulations and so on. They are exactly as we would like to see them but I am constantly looking for simplicity of presentation of the Bill. If the regulations were included as a schedule to the Bill, it would make life easier and clearer. I beg to move.
Lord Sainsbury of Turville: When the Government published draft regulations as though made under the powers contained in Part 2 of the Bill in February, we did so to assist debate on the provisions in the Bill. It was a pleasant surprise to see that two of the draft regulations have now materialised in these amendments as a proposed new schedule to the Bill.
The noble Lord, Lord Glentoran, asked, why not give the measure more force by including it on the face of the Bill? I shall try to explain why we think that the measures are better contained in the regulations. Perhaps I may quote from the memorandum which the
GC 390
department provided to the Select Committee of this House on Delegated Powers and Regulatory Reform in December last year. That document said:
"The use of delegated powers will allow both the contents of the report and the procedures applying to it to be changed relatively quickly, either to expand reporting requirements if this is judged to be appropriate, or to reduce or amend them in order to reduce the regulatory burden. For instance, as the social enterprise sector grows more sophisticated, it may be appropriate for the minimum reporting requirement to be increased, e.g. to create links to the practice of social audit. At the same time, it will be important to ensure that the reporting obligation does not impose an unnecessary burden on CICs.
The regulations are subject to the affirmative procedure, since any change to the requirements would impact on a significant number of people—both CICs and their stakeholders".
The amendments also fix in primary legislation the various Companies Act provisions relating to the directors' report which are also applied to the community interest company report. In my view, this is a level of technical detail better left to regulations. This power should not be contentious because it is strictly limited to applying the same provisions, which already apply to directors' reports, to CIC reports. The flexibility provided by leaving this to regulations is important, because not all the procedures and rules applying to directors' reports need to apply to the CIC report, and views as to the appropriate level of formality and process to be applied to the CIC report may change over time.
The amendments would remove the flexibility I have described. It would mean that if any of the provisions that we intend to include in regulations turn out to be unnecessary or overly burdensome, primary legislation would be needed to deal with the problem. It would also be needed to shore up the reporting requirements if we conclude in the light of experience that they are inadequate. That is why the Government are unwilling to accept the amendment and why I ask the noble Lord to withdraw it.
Lord Glentoran: I thank the Minister for that explanation; I can see where the Government are coming from. My strength of feeling about it was, as we moved through the Bill, that it was still a framework Bill. I am still trying to persuade the Government to consolidate and clarify it more. I felt that by getting rid of two sizeable chunks of regulations and putting them in the Bill as schedules would tidy it up. But I take the point that this is a new form of company which may need modifying to go through the affirmative procedure and primary legislation. To change them would not be a sensible approach. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 31 [Community interest company reports]:
[Amendment No. 129B not moved.]
Clause 31 agreed to.
Clause 32 [Community interest test and excluded companies]:
Lord Glentoran Lord Glentoran moved Amendment No. 130:
Page 30, line 19, leave out from "if to end of line 20 and insert "it meets the requirements of the regulations as provided for in subsection (5A)"
The noble Lord said: In moving Amendment No. 130, I should also like to speak to Amendments Nos. 130A and 132 to Clause 32, which deals with the community interest test.
As we all know, companies are not to be eligible as CICs unless they can satisfy the community interest test. The whole point of the CIC as a company model is to lock in assets in businesses which fulfil some kind of public benefit. We know this is not the same as the public benefit test for charities—we have had that debate already. How, then, are we to ascertain what is meant by this "community interest test"?
Clause 32(2) states:
"A company satisfies the community interest test if a reasonable person might consider that its activities are being carried on for the benefit of the community".
I am concerned about this "reasonable person" test. As far as I can see, what one person considers is an activity which is being carried on to benefit the community may be very different from what someone else thinks. This rather vague definition is augmented by subsection (4), which reads:
"Regulations may provide that activities of a description prescribed by the regulations are to be treated as being, or as not being, activities which a reasonable person might consider are activities carried on for the benefit of the community".
Amendment No. 131A proposes to leave out this subsection. The simple reason is that the drafting of the subsection has made it sound, to some extent, like nonsense. If one looks only at the second arm of the subsection, it says that regulations may provide that specific activities are to be treated as not being activities,
"which a reasonable person might consider are activities carried on for the benefit of the community".
Is this gobbledegook? Is there no better way in which this could be drafted?
On another point, subsection (4) says that regulations will set out what activities should and should not be thought by a reasonable person to be activities carried on for the benefit of the community. However, when one turns to the regulations, draft regulation 4 simply deals with the second arm of subsection (4)—that is, a description of the activities which are treated as not being activities which a reasonable person might consider to be carried on for the benefit of the community. They include activities in connection with a political party, elections, campaigning against the government or activities purely for private gain. We shall probe this issue further when we speak to the next group of amendments on "excluded companies". But my concern in relation to our amendments in this group is that the regulations give no further guidance at all about what a reasonable person should consider to be,
"activities …carried on for the benefit of the community".
Subsection (5) and regulation 3 expand on the definition of "community". According to subsection (5), this can include,
"a section of the community".
Regulation 3 picks up on this, explaining that.
"a section of the community includes a section of the community consisting only of the employees of a single employer or the members of a particular body".
I suggest that that is helpful to a very limited extent. It makes it clear that social enterprises which are ultimately accountable to their users, members and staff, rather than, as is the norm with most private companies, to their providers of capital, can still satisfy the community interest test. This would include co-operatives and so on.
However, apart from that regulation, we are left none the wiser about the situation. Can the Minister tell us why the regulations go no further in giving guidelines or criteria for what a reasonable person should think are activities carried on for the benefit of the community? Can he give us some examples? We know that the Charity Commission provides guidance on the definition of "public benefit" by listing particular characteristics which it believes to be indicative of public benefit. The consultation paper, Private Action, Public Benefit, states at paragraph 5.29:
"The test of whether an organisation is in the public interest would not be as onerous as the test for charitable status—largely because CICs, unlike charities, would not have tax advantages. It would be more akin to the current test applied at the point of registration to Industrial & Provident Societies for the Benefit of the Community".
Perhaps the Minister can tell me whether that is still the case. It seems to me that, with the publication of the regulations, we are no nearer to knowing what the community interest test means beyond the fact that it introduces the notion of a "reasonable person".
According to the response to the government consultation paper on CICs, published in October 2003, it is for the regulator to apply a "reasonable person" test of community interest and to issue guidance on the test. Yet, from the responses, it appears that those concerned thought that such a test would be too onerous and would therefore be discouraged from applying for CIC status. There were queries about a possible confusion with the charitable test. Others commented that the criteria for the test would need to be transparent to ensure a consistent approach.
At this stage in our discussion of the Bill, I thought it sensible to suggest that regulations should make clear the definition of "community interest". Our amendments would remove the reasonable person test, which I believe is too subjective. Instead, they propose secondary legislation to contain a clear set of criteria which would attempt to define community interest. I expect the Minister to tell me that that is far too inflexible an approach and that leaving it to the discretion of the regulator would be much more attractive. I would not agree with that wholeheartedly.
"Community interest" may be hard to define and may encompass a range of diverse characteristics, but surely we could consider trying to put our finger on what all the different possible activities which one might consider to be in the community interest have in common. For example, in the consultation paper put out to consult on CICs in March 2003, page 17 mentions a Japanese law of 1988 to promote nonprofit activities. It specified the following categories:promotion of health and medical care or welfare; promotion of social education; promotion of community development; promotion of culture, the arts or sport; activities to protect the environment; disaster relief; ensuring community safety; protecting human rights and promoting peace; international cooperation; promotion of the creation of a gender-equal society; and advice and support relating to any of the activities listed.
I am not saying that we should adopt those criteria, but it seems possible to put forward some criteria for identifying what is or is not considered to be in the community interest, for the purposes of the Bill. It is certainly a worthwhile debate for Grand Committee, otherwise we will find ourselves hoping that a lot of companies will take up the CIC model, even though they have no clear idea whether their company would satisfy the community interest test. There has been no attempt yet to define the test or even to give examples. I beg to move.
5.15 p.m.
The Deputy Chairman of Committees (Lord Hogg of Cumbernauld): I must advise the Committee that, if Amendment No. 130 is agreed to, I cannot call Amendments Nos. 131 and 131ZA, owing to preemption.
Lord Phillips of Sudbury: I have two amendments in the next group that relate closely to these amendments. It would be appropriate for me to comment, if I may, on some of the underlying unease identified by the noble Lord, Lord Glentoran.
I must confess that it was only today, when I listened to an earlier response from the noble Lord, Lord Evans of Temple Guiting, that I became aware of what seems, if I am correct, to be a wholly unsatisfactory framework for the legislation. The Charity Law Association has not picked up what, I think, I now detect: first, the so-called community interest test relates to activities, not objects. Clause 38(3)(d) says:
"if the company has community interest objects".
I now realise that a CIC will not be required to have community interest objects. If that is so, we are in a deep and bottomless hole.
Judging the nature of a CIC solely by reference to activities, not objects, could lead us into all sorts of problems. I suspect that, in the early days, most CICs will be formed as CICs de novo, and we will not have an objects test because the company will not have to have what are described in Clause 32(3) as community interest objects. When the company presents its
GC 394
paperwork to the regulator for registration as a CIC, it will not have to have community interest objects, and it will not have any activities—the test by which CICs will be judged—to look to, because it will not yet have been formed.
Clause 33(5)(b) says that, on presentation of the document, a company will be considered eligible if,
"the Regulator … considers that the company will satisfy the community interest test".
The community interest test is solely about activities, as set out in Clause 32(2). That must be an extraordinary state of affairs. The regulator will have to look into a crystal ball and decide, in advance, whether the activities of the enterprise will or will not comply with the test, the test being that a reasonable person would consider the activities being carried on to be for the benefit of the community. I hope deeply that I have got this wrong, but I rather fear that I have got it right. If I have, the noble Lord, Lord Glentoran, has, if not isolated the fact, used his twelve-bore, and a few of the slugs have hit the target. I shall say no more at this stage, until we have moved on to my own set of amendments, but the Minister might like to enlighten us.
Lord Sainsbury of Turville: Perhaps I should enlighten the noble Lord, Lord Phillips, right away on that point, because it is rather fundamental. When we reach a later group of amendments, we shall address how activities can be judged. In putting forward a CIC, one presents what the activities will be, and it is on that basis that the regulator must make a judgment. As Members of the Committee can see from the Bill, it refers to the activities that a company will do. I believe that that covers the point that a company does not have to be doing the activities before the regulator can judge them. Therefore, the test can be done on the basis of activities without there having to be objects in the memorandum and articles.
I also make a general point for the noble Lord, Lord Glentoran. Some 69 per cent of those who commented supported the test; only 6 per cent were opposed to it. The concerns raised in the consultation have been taken into account in drafting the Bill, by ensuring that the test is wide and not overly bureaucratic. That is what people were concerned about.
Lord Glentoran: Among those consulted, was there a group of people who might be regulators, as opposed to simply those from the social enterprise sector?
Lord Sainsbury of Turville: I believe that the consultation was very wide. Obviously, the number of people who could consider themselves to be regulators are rather few. The important thing is that, in this context, the people who might be running the social enterprises or involved in the social enterprise movement, said that they did not want the provision to be overly bureaucratic. That is something I believe we would all wish to support. I know it is close to the noble Lord's heart that we should not make the provision too bureaucratic.

GC 395
We cannot accept the amendments. They relate to the community interest test, which is one of the key provisions of Part 2 of the Bill. Clause 32 gives a definition of the test in subsection (2), and then provides various powers to further define and clarify aspects of the test in regulations. The draft regulations published in February show how we intend the powers to be used. We have provided for regulations to do that, since we think it is important to preserve a degree of flexibility in respect of the detailed application of the test. The use of regulations will allow the test to reflect changing views of what is in the community interest. It will also allow future governments to deal with any attempt to get round the test, and to use the CIC form as a "flag of convenience". Our consultation last year highlighted the importance of that flexibility.
Amendments Nos. 130 and 132 would provide even more flexibility. They would have the effect of removing the definition of the test from the Bill and leaving it to regulations to define what the community interest is. I believed that that was something that the noble Lord, Lord Glentoran, was against in principle. In this particular case, he is arguing for removing from the Bill one of the key tests of a CIC and putting it into regulations, whereas previously he has argued for taking things out of regulations and putting them in the Bill. In the short term, the change might have little effect on the substance of the test, since the present Clause 32(2) could simply be transposed into regulations. However, it would leave it open to this or a future government to alter quite fundamentally the way in which the community interest test works for the purposes of CICs, through secondary legislation.
Noble Lords may be surprised to hear me say this, after our debates on other amendments to this part of the Bill, but I believe that this is a flexibility too far. For the CIC to develop into a well recognised and meaningful form, as we hope it will, it is important that all community interest companies should have a fixed and clear defining characteristic. That is provided by the community interest test. All companies must pass that test before they can become CICs, and all CICs must continue to satisfy the test or risk supervisory action by the regulator. As I said, the Government want to build a measure of flexibility into the definition. However, it seems sensible to have the definition itself on the face of the Bill, although the details are left to regulations.
Alternatively, perhaps the purpose of the amendments is to define a narrower test in regulations on the basis that the current test is too wide. However, subsections (4) and (5) already allow regulations to narrow or broaden the test by describing activities which may or may not pass the test and by defining what does or does not count as a section of the community for the purposes of the test. Our aim here is to ensure sufficient flexibility to respond to changes in the social enterprise sector and to attempts to misuse the CIC form. The current structure of Clause 32 provides the necessary flexibility while setting out the essential meaning of the test on the face of the Bill. It seems to me that that is how it should be. I agree that the Bill expresses the test in very wide and general
GC 396
terms. That is deliberate as we would like to make it as easy as possible for companies to pass the test if they want to and if they could reasonably be considered to benefit the community.
Amendment No. 13I A, of course, would remove a measure of the flexibility that is built into the structure of the test by deleting the power to make regulations specifying activities that do and do not satisfy the test. The draft regulations that were published in February show how we intend that power to be used.
Draft regulation 4 provides that various political activities do not satisfy the test. It also rules out activities that benefit only the employees of a single employer or the members of a particular body, unless the activities in question are not being conducted solely for private gain. These provisions are important. When they published the draft regulations, the Government emphasised that they would want to consult the social enterprise sector before finalising the regulations to ensure that the exclusions were appropriately framed. With that explanation of the balance that we are trying to create by putting the community interest in the main part of the Bill, but having regulations to broaden or to narrow it, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Glentoran: I thank the noble Lord for that explanation. As he and I have said, it is a crux of ensuring that the Bill is right. I heard what the noble Lord said about consultation, as I did his quip that I am trying to get more on to the face of the Bill but that this time I am suggesting that something should not be on the face of the Bill. That was not my intention. Amendment No. 132 proposes that page 30, line 31, should read:
"(5A) 'Community interest' is to be defined in regulations made by the Secretary of State".
The fact that that is to be defined by the Secretary of State was to be put on to the face of the Bill, whereas it would be entirely appropriate for the regulations to be in a schedule. I accept the previous argument made by the noble Lord. At this stage of the Bill, where community interest companies are brought into being, I have some sympathy with the Government's argument about using regulations in various parts, and therefore I can use that in my argument as well.
I am still concerned about the community interest test. I shall read what has been said carefully. I am particularly interested in the point made by the noble Lord, Lord Phillips, about the regulator having to make the decision without any evidence of whether a company will or will not fulfil the community interest test. In some ways—perhaps it is my nature—I like the formality of the Japanese example that I quoted. I am sure that it is not beyond the wit of man and the brains of those in Committee to put something together that will give a little more guidance than we have at the moment. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.30 p.m.
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 131:
Page 30, line 20, after "activities" insert "(if any)"
The noble Lord said: I wonder if it would be acceptable to the Committee to group Amendment No. 131ZA with Amendment No. 131. As they are both amendments to Clause 32(2), it might save a little time.
The amendments are self-explanatory. I now realise, to my shock and horror, that activities are to be looked at futuristically by the regulator when a CIC is coming for registration newborn. On any basis, subsection (2) needs altering because it says that the activities,
"are being carried on for".
It has to be either "are being" or "will be" carried on. That would be an alternative to my suggestion of "if any". It is a simple issue of clarification.
The "wholly or mainly" suggestion in Amendment No. 131ZA is designed to cover the fact that, as has been identified by the Charity Law Association, social enterprises of one kind or other quite often have marginal activities that are not within the mainstream of the social activity. For example, it might run a cafe in association with a communal garden. However, I now realise—which I did not when preparing the amendments—that a CIC does not have to have community interest objects. That seems bizarre to me, but that is how it now appears. Therefore, I accept that it is unnecessary to worry about whether the activities are "wholly or mainly" for the benefit of the community.
I am slightly thrown by my latter-day realisation. I would at least like the Minister to assure me that if the amendment is superfluous, the formulation will not penalise a CIC that has some activities that one might say are not being carried on for the benefit of the community at large because there is a café for the benefit of the people working on a communal garden, for example. On the other hand, he may tell me that the amendments are helpful additions to the subsection. I beg to move.
Lord Sainsbury of Turville: I shall speak to Amendments Nos. 131 and 131ZA. I appreciate the helpful intention behind Amendment No. 131, but I do not think that it is necessary and I believe that it might even have some unintended and unhelpful consequences.
The amendment appears to address the concern that Clause 32(2) of the Bill will not work in the case of an organisation applying to become a CIC. The question is, if the organisation has not yet incorporated, and so is not yet active, how will the regulator be able to decide whether its activities,
"are being carried on for the benefit of the community"?
The answer lies in Clauses 33 and 35 of the Bill, which set out the way in which the test is to be applied to organisations that are applying to incorporate as a CIC, or to convert from another type of company to a CIC. For instance, Clause 33(5)(b) provides that a
GC 398
body seeking to be formed as a CIC is eligible to do so if, among other things, the regulator considers that the company "will satisfy" the test.
The future tense in that provision means that the regulator must take a decision based on what he knows about the applicant's intentions, as set out in the "prescribed formation documents". Those documents are to be specified in regulations. The draft regulations published in February provide for the formation documents to include a "community interest statement", which must contain a declaration that the company will pursue activities for the benefit of the community.
We have used this approach precisely because at the point of incorporation the applicant will not be carrying out any activities so a declaration is the simplest way of applying the test at that point. Subsequently, of course, the test will be applied to the activities that the CIC actually carries on. In other words, on an application to become a CIC, it is not necessary for the company to be already satisfying the test at the time of the application, just that the regulator considers that it will satisfy the test.
For completeness, I should add that a similar approach applies to conversion from an existing company to a CIC, under Clause 35. Again, the regulator must decide if the company "will satisfy" the test if it becomes a CIC.
For those reasons, we do not think that the amendment is necessary to make the test work. We are also concerned that it would allow a completely dormant CIC, whose directors had no intention of doing anything to benefit the community, to continue in that state of inactivity indefinitely and to satisfy the community interest test while doing so. That does not seem likely to help to build the credibility of the CIC form.
It is one of the defining characteristics of CICs that they are companies carrying on their activities for the benefit of the community and that their assets are to be used for the benefit of the community. We would not expect the regulator to take action in cases of temporary or short-term inactivity, but where a CIC is completely inactive for a long period of time, this may be of legitimate concern for the regulator because the CIC will not be carrying on any activity for the benefit of the community or using its assets for the benefit of the community.
On Amendment No. 131 ZA, once again I appreciate the evident intention behind the amendment of improving the drafting of the community interest test. The Government are resisting the amendment because, in our view, it is not necessary, and I will attempt to explain why.
In short, the amendment seeks to address a perceived failing in Clause 32(2)—namely, that all of a CIC's activities must benefit the community. That is not in fact the case. Instead, the test applies to the purpose for which those activities are being carried on. If a reasonable person can conclude that they are being carried on for the benefit of the community, then they will pass the test.

GC 399
Let me give an example. It was, in fact, suggested by the Charity Law Association, which has raised this concern. The association suggested that if a vegetable-growing co-operative was set up to help the residents of a particular estate, but happened to run a bar as well, then the activity of running the bar might not pass the test. The association queried whether this meant that such an organisation, if it became a CIC, would have to set up a subsidiary which was not a CIC to run the bar. It suggested—and I have every sympathy with this—that such an arrangement would not encourage enterprise.
However, I can assure Members of the Committee that this is not how Clause 32 will work. In a case such as the example which I have borrowed, the regulator will apply the community interest test by asking whether a reasonable person could regard the organisation's activities as being for the benefit of the community. This does not mean that every single activity of the organisation must, in itself, provide direct benefit to the community. That would not make sense. In many cases, CICs will carry on activities, such as trading, that may have no intrinsic community benefit but will allow the CIC to achieve its overall aim of helping the community.
In this case, of course, the vegetable growing would be very likely to satisfy the test. But the activity of running a bar would also be expected to satisfy the test, provided that it is one of the things that the organisation does in order to achieve its purposes as an organisation. If the bar is helping to raise funds which are then used to benefit the community, or is simply providing a means of bringing the community together, that should not pose a problem in terms of satisfying the test.
Let me give another example. If an organisation exists to provide childcare facilities and, in the course of that activity, it provides refreshments to its staff or to the children's parents, or both, that would not be a problem in terms of satisfying the test. It might do so at a subsidy, or at cost, or even to make a surplus, providing the surplus is then used to benefit the community. The supply of refreshments in that way may or may not in itself be of benefit to the community, but the activity would be conducted in pursuit of benefit to the community.
To put it another way, when the regulator considers any activity that a CIC carries on or that an organisation that wishes to become a CIC intends to carry on, the key question that he must ask himself is not. "What does this activity in itself do to benefit the community?" but, "Why is the activity being carried on? Is it for the benefit of the community?". It is a matter of "Why?" and not simply "What?". If a reasonable person can conclude that things are being done for the benefit of the community, those things will satisfy the test. The exception is if activities are specifically defined, under powers elsewhere in the clause, as not satisfying the test. We will discuss the working of that provision separately during this stage.
The amendment, although welcome in its intention, might have unintended consequences. I have explained that the test will require the regulator to consider why
GC 400
the organisation is carrying on the activities that it carries on across the piece. The amendment would leave it open to an organisation to seek and win CIC status, even if some of the activities that it carried on were inconsistent with the benefit of the community. The organisation would have to show only that its activities were mainly for the benefit of the community. There is a risk of companies obtaining CIC status that might bring that status into disrepute. We would not welcome that.
I hope that I have given the noble Lord the reassurance that he is looking for. The Bill will not hinder the activities of CICs that give benefit to the community. On that basis, the amendment can be withdrawn.
Lord Phillips of Sudbury: That was an extremely clear answer to both amendments. The first of my amendments is misconceived, given that illumination of the day about the framework. A lot of people outside the Committee will be interested to hear what has been said in the past hour and will want to take stock of it.
I think that I am satisfied with the Minister's careful explanation of the phrase "wholly or mainly". I shall consider carefully what he said, and, if I feel that I need to come back to the matter, I might be in touch with him before the next stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 131ZA to 132 not moved.]
5.45 p.m.
Lord Glentoran Lord Glentoran moved Amendment No. 133:
Page 30, line 32, leave out subsection (6).
The noble Lord said: Amendment No. 133 is another probing amendment. The headline in my notes says, "What on earth is an excluded company'?". That is what I wish to probe.
The principle behind the subsection is simple. Some companies are not eligible to be CICs. Such a company is, instead, what is called an "excluded company". The definition of "excluded company" is to be set out in regulations.
I have some difficulty with the way in which the provision is drafted. While speaking to the previous group of amendments, I mentioned that, with regard to CICs, Regulation 4 listed the sort of activities that were prescribed as,
"not being activities which a reasonable person might consider are activities carried on for the benefit of the community".
They include political activity such as campaigning for election for a particular party and campaigning against a law or a government policy. However, along with the description of activities that a reasonable person should not think is an activity for the benefit of the community, there is a further regulation describing what an "excluded company" is. Why do we need both regulations? Why can the former category not be amalgamated in Regulation 5 on excluded companies? The drafting seems odd.
I want to challenge two precepts about excluded companies. First, there are the political issues. Regulation 5 defines excluded companies as:
"(a) a company which is (or when formed would be) a political party; (b) a company which is (or when formed would be) a political campaigning organisation; or (c) a company which is controlled by a political party".
Regulation 6 then gives further details; in particular, under subsection, (1)(b) the definition of "political campaigning organisation".
I support, of course, the principle that no political party should satisfy the community interest test. There can, however, be a very fine line on occasion between political campaigning and community activity. It could be possible to justify some political campaigning as being for public benefit. This would, of course, not include politically subversive activity, but if we think about charities there are countless examples of organisations that serve the public good while also campaigning or lobbying the Government to change the law. These are the sort of organisations which lobby noble Lords every day of the week. Existing charity law and the Charity Commission have to determine what is a political purpose. Can the Minister tell us whether excluded companies will follow a similar process with the regulator when looking at the possible conflict between political campaigning and community interest? Has there been any further thought on this matter? As my colleagues at the Millennium Commission commented recently,
"Depending on the political issues of the day, this could vary from Greenpeace to asylum seekers rights to the Ramblers' Association. Anything can be considered political and therefore this could place the Regulator in an extremely difficult position. If he concluded that a CIC was campaigning politically, the most draconian powers such as the transfer of shares by Order or extinguishment of rights, could be invoked".
As far as I can see, the eligibility restriction on political campaigning organisations is dangerously broad.
My second issue that I want to raise deals with services which I believe should not be carried out by CICs because they are the legitimate responsibility of local government. I have had a great deal of experience in this area in the past. As noble Lords are aware, I am still on the board of the Millennium Commission. We were mandated to give money only to projects that did not absolve local authorities from services that they should be providing none the less. In other words, the original foundation of the commission was that it should not allow its funds to act as a substitution for public funds. This could often be very contentious and I see the same problems occurring here. In the consultation paper on CICs published in March 2003, on page 13, it was stated:
"The Government does not intend that CICs should deliver essential public services in core sectors such as hospitals and schools. Rather, CICs should develop to meet the needs of local communities, complementing core Government services in areas such as childcare provision, social housing, leisure and community transport".
As far as I can see, this does not satisfactorily clarify the situation. How does one differentiate between,
"essential public services in core sectors",
and,
"complementary core Government service areas"?
There are some services which it is the duty of local authorities to use their budgets to fund, whether they run the services themselves, or contract them out to other providers. This is the first political point that I have raised but, as regards the Millennium Commission and the lottery funds, since they came to power this Government have moved the objectives and the permitted usage of those funds very considerably in terms of those funds being used directly for government and local government purposes.
But with CICs, you could have entrepreneurial social enterprises taking over providing services that should be provided by local authorities. This concern was echoed by the respondents to the Government's consultation who,
"warned of the danger of public bodies viewing CICs as being a convenient way of delivering services via social enterprises".
What is to stop that happening? When I asked the officials that question, they told me, "It just won't happen". That is not good enough. I believe that if the Government do not intend CICs to provide core public services or to be a substitution for government funds, they should make any CIC which does so an excluded company under regulation 5. I beg to move.
Lord Sainsbury of Turville: The noble Lord, Lord Glentoran, made some very interesting points setting out exactly how complicated it will be to define this area. From my point of view, that clearly says, "Put it in detailed regulations and don't try to cast it in stone on the face of the Bill".
He raised a number of cases—for example, political campaigning by bodies such as Save the Children or Amnesty International. The Government fully accept that there can be a fine line between community activity and political campaigning. A number of people made that point during the consultation. That is why the dummy regulations include a specific exemption from exclusion for political activities which are incidental to the non-political activities of a CIC and why they will allow CICs to engage in campaigning where it is incidental to the furtherance of their community benefit purposes. I believe that that is an area where the CIC regulator is likely to pay close attention to the Charity Commission practice.
The amendment proposed by the noble Lord would remove subsection (6), which both defines the concept of an excluded company for this part of the Bill and allows regulations to set out what kind of companies will be excluded companies. The definition is relevant in Clauses 33 and 35, which determine eligibility to become a CIC. Excluded companies may not become CICs. The definition is also used in Clause 38, which restricts the regulator's power to order a transfer of shares and membership rights under Clause 46. That power may be used only in respect of CICs that are, or

GC 403
have become, excluded companies. That is why we need to have the concept of excluded companies in the Bill.
The draft regulations published in February this year prescribe three types of company as excluded companies. They are companies which are political parties, political campaigning organisations and companies controlled by political parties. The exclusion of those companies from CIC status reflects the outcome of last year's consultation. Subsection (6), together with the regulations to be made under it, provides a means of ensuring their exclusion.
We have opted to use regulations for this purpose rather than define excluded companies on the face of the Bill because, in the light of experience as CICs develop, it may well prove desirable to change the provisions in order to refine the community interest test. For example, the types of political activity which might be considered acceptable for CICs to carry on may change over time, and the description of "excluded company" would need to be updated to reflect that. The use of regulations also means that a significant amount of technical detail can be kept out of the Bill. Any regulations under this clause will be subject to the affirmative procedure in both Houses.
As I said at the beginning, it seems to be essential that, where these complex issues may change over time, having introduced the concept of the excluded company on to the face of the Bill, they are best kept within the regulations. I hope that the noble Lord accepts that point and feels that he can withdraw the amendment.
Lord Glentoran: I can certainly accept the point that, at this stage, there should be regulations appertaining to excluded companies. So far as I know, those regulations are not written yet.
Lord Sainsbury of Turville: I believe that they are.
Lord Glentoran: I apologise. I am sure that I should have memorised them, and I shall return to them before Report stage. I thank the noble Lord for taking this point seriously. We are clearly in agreement that this is another very difficult area that we need to define as best we can. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 32 agreed to.
Clause 33 [New companies]:
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 133ZA:
Page 31, line 8, after "decide" insert "expeditiously"
The noble Lord said: This is a simple but, I hope, practical point. It deals with the concern that the Charity Law Association has expressed rather forcefully that the whole procedure in relation to becoming a community interest company will be too bureaucratic and long-winded. The association is anxious to ensure that decisions on eligibility will be dealt with expeditiously, hence the suggested inclusion
GC 404
in Clause 33(4) of that word—that the regulator must decide expeditiously whether or not a company is eligible. I beg to move.
Lord Evans of Temple Guiting: Once again we thank the noble Lord, Lord Phillips, for suggesting a drafting improvement to this part of the Bill. Again, I am not able to accept the amendment, because we do not think it is needed, and because it may have some unintended consequences, a phrase used by my noble friend Lord Sainsbury in opposing Amendment No. 131.
It may help if I briefly say something about the administrative arrangements that we intend to make for the regulator, although they are not matters for the Bill itself. We intend that the regulator's office should have close links to Companies House, sharing systems where practicable, and will probably be located in or with Companies House in Cardiff. Indeed, the new regulator and Companies House will provide a "one-stop shop" service wherever possible, so that in most cases, including applications for registration, CICs will need to interact only with Companies House. Companies House has a well deserved reputation for providing a swift and efficient service, although it is under no statutory obligation to do things "expeditiously". We expect that CICs will also enjoy a high quality of service.
In respect of the additional decision-making process that the regulator will undertake during the registration process, I should like to refer to the draft regulations that were published in February, because they show what we intend the "prescribed formation documents" mentioned in this clause to be. Draft regulation 11 provides for two of those documents. One will be a declaration that the company will not be an excluded company under the terms of Clause 32(6). The other, the so-called "community interest statement", is to include a declaration that the company will pursue activities for the benefit of the community.
The regulator is to take those declarations into account, in Clause 33(5), in reaching his decision about eligibility to be a CIC. So at the application stage, relying heavily on declarations is the most logical way to proceed. It also has the very considerable benefit of making the decision-making process simple and quick. That is a practical reason why we do not think this amendment is needed.
I should also point out that the Bill already contains provisions that should point the regulator towards acting expeditiously, where it is appropriate for him to do so. Clause 24(4) requires the regulator to adopt an approach based on good regulatory practice, and to have regard to the impact of his approach on those who are affected by it. In general, that will guide the regulator towards providing a swift and efficient service. However, where there is a doubt about whether an application meets the criteria, the regulator must have the discretion to examine it thoroughly. That is why we oppose the amendment. With that explanation, I hope that the noble Lord will withdraw his amendment.
6 p.m.
Lord Phillips of Sudbury: I am grateful to the Minister and I am reassured that the Government are now doing everything they can to tie in this matter with the company registrar. That makes sense from all points of view. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Glentoran Lord Glentoran moved Amendment No. 133A:
Page 31, leave out line 20.
The noble Lord said: Members of the Committee will be glad to hear that I can deal very briefly with this amendment. The question is: why is the registrar not required to record his decision?
Lord Evans of Temple Guiting: I can appreciate that, on the face of it, the provision may seem rather puzzling. Its purpose is simply to ensure that the Registrar of Companies is not required to record such notices on the companies register. We do not believe that it would be sensible for him or her to register these notices and I shall briefly explain why.
The notice referred to is essentially an ephemeral working document, used by the regulator to convey his decision to the registrar. Since the two will be working together closely to ensure that registration as a CIC is a quick and seamless process, the notice will effectively be an internal document.
In the case of a decision by the regulator that an applicant under this clause is eligible to be formed as a CIC, that will lead to the company being registered as a CIC under subsection (7) of this clause. That registration, in itself, will of course be a record that the company is eligible to be a community interest company. It would be superfluous to place the notice containing the regulator's decision on the public record.
If the regulator should decide that an applicant is not eligible to be a CIC, the registrar will notify the applicant accordingly. In the case of an application under Clause 33, the applicant would not be on the companies register at the time of the application and therefore the registrar would not have a company against which to record the notice of the regulator's decision. In the case of an application under Clause 35, we do not believe that any company would want notice of its failed application to become a CIC placed on its record at Companies House.
In summary, the bracketed words in subsection (6) of the clause may seem obscure but the Government believe that they are of value. They make clear that the registrar should not record such notices and ensure that the companies register will not be cluttered with internal working documents. They will enable Companies House to deal with its part in the process with a minimum of bureaucracy.
Lord Glentoran: I thank the noble Lord for that explanation, which, so far as I am concerned, is quite understandable. I may be told differently when I take
GC 406
outside advice and therefore I reserve my position. But, in the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 33 agreed.
Clauses 34 to 37 agreed to.
Clause 38 [Conditions for exercise of supervisory powers]:
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 134:
Page 34, line 30, leave out subsection (1).
The noble Lord said: In moving Amendment No. 134, I shall speak also to Amendment No. 137. The noble Lord, Lord Glentoran, will speak to Amendments Nos. 135 and 136 in this group.
Lord Glentoran: I believe that Amendment No. 135 is in the name of the noble Lord, Lord Phillips.
Lord Phillips of Sudbury: Amendment No. 135 is mine. I got more than I bargained for.
I find Clause 38(1) singularly unsatisfactory. There are a number of clauses in the Bill which those of us on this side of the fence feel are not clear and therefore not helpful. One comes back again and again to the fact that this legislation will be particularly important for those whom one might call lay activists who will not want to be running to lawyers the whole time. It has developed into what I think will become a legal nightmare.
I tabled the amendment because this seems an unnecessary provision. In so far as I can make much practical sense of it, I am anxious because it says that the regulator should act only with regard to the powers that he is voluminously given by Clauses 39 to 48. It says that the regulator should use those powers only to the extent necessary to maintain confidence in community interest companies. There is an extraordinary piece of psychology wrapped up in that. Where else in our statutory library, so to speak, does one find a comparable test?
Secondly, it appears to require the regulator, in a specific case, not simply to say that there is serious malfunctioning in a CIC and one must contemplate appointing a manager or removing a director. That is not the test he applies at all—it is not whether there is malfeasance in a particular CIC. The test is, "If I do nothing, will it undermine confidence in community interest companies at large?". I do not know how the poor old regulator will separate the one from the other. The Government may say that they are one and the same. In that case, I suggest that they abandon the subsection which I believe does nothing but confuse. It is nebulous; it will be a shackle to the good governance of the CIC sector, not a help. I beg to move.
Lord Glentoran: I have some fairly lengthy arguments on the three amendments in the name of the noble Lord, Lord Phillips, and on my Amendment No. 136, I am afraid. My noble friend Lord Hodgson of Astley Abbotts and I added our name to Amendment No. 134 because we share the noble Lord's concerns

GC 407
about the conditions for the circumstances within which the regulator can exercise his power under Clauses 39 to 48.
As I have said before, we have some apprehension about how "light touch" the powers of the regulator will actually be. First, I would like to question the subjective nature of the condition in Clause 38(1) which says that the regulator must exercise his powers under Clauses 39 to 48 only to the extent necessary—the point already made by the noble Lord—to maintain confidence in community interest companies. I could not tell you what precisely this means. I look forward to some clarification from the Minister on this point, because unless he can spell this out more clearly, we will not be happy with the drafting in the subsection.
However, our Amendment No. 136 probes on a more specific matter. Subsection (2) states that the regulator can exercise power under Clauses 42 to 45 only if the company default condition is satisfied. Subsection (3) goes further in defining what the default condition is. It states that the default condition is satisfied if,
"(a) there has been misconduct or mismanagement in the administration of the company".
Again, I am concerned about what this means in practice. The powers which a regulator has under Clauses 42 to 45 are as follows: Clause 42 contains the power to appoint a director; Clause 43 contains the power to remove a director; Clause 44 contains the power to appoint a manager; and Clause 45 contains the power to protect the property and assets of a CIC and, in particular, to transfer it to the official property holder or to freeze assets.
These are considerable powers. The Bill allows the regulator to appoint and remove directors and provides that a director so appointed,
"has all the powers of the directors appointed by the company".
This kicks into play only where paragraphs (a) to (d) apply. We have several problems with the looseness of the definition of paragraph (a). What constitutes,
"misconduct or mismanagement in the administration of the company"?
It is one thing to say that a director could be removed if the company, under paragraph (c), was not satisfying its community interest test. However, in the context of the personal misconduct of an individual, the regulator will not be able to check up on every director. He will have to react to reports relayed back to him from relevant bodies. I have grave misapprehensions that this provision could be used in cases where directors fall out and, to satisfy personal grievances, report their fellow director for "misconduct" in the hope that the regulator will remove him; that is, mischievous reporting.
The situation is particularly serious for another reason. Any director appointed by the regulator,
"will be capable of influencing the direction of the CIC",
and will not be able to be "blocked". This implies to me that a director appointed under Clause 42 will override the powers of all the other directors of the CIC. I do not agree with that provision. It appears that the
GC 408
situation would be the same for a manager as appointed under Clause 44. How would he relate to the directors of the CIC in terms of hierarchy? Whose views would predominate? According to the explanatory notes,
"the Regulator is able to specify the manager's functions and powers and to prevent the directors of a CIC from carrying out such functions".
These powers are, as I said before, draconian. I cannot think of a worse situation than one where, if someone accuses me, a director, of misconduct, I might be removed from my position or have a manager imposed above me who could fetter my ability to exercise my proper duties. Is there a facility for directors to appeal against the imposition of a director or manager? If not, I believe there certainly should be otherwise I would not be able to understand why any company would want to sign up as a CIC. How does this fit in with Section 303 of the Companies Act 1985 that provides for a resolution for a company to remove a director? Perhaps we need to think about having some strings attached to allow the board of a CIC to retain partial control rather than being steam-rollered by an imposed director.
I should like to finish by lending my support to the final amendment in this group of the noble Lord, Lord Phillips, Amendment No. 137. We have had representations from the Law Society on this issue and agree with its opinion that paragraph (3)(d) is problematic. It queried whether it was appropriate for the regulator to be able to appoint a director or manager or remove a director of a CIC or divest a CIC of its property simply because it is dormant. I am not convinced that this is justifiable especially given the broad remit provided by the imprecise wording of subsection (1).
Lord Phillips of Sudbury: I realise that I did not speak to Amendments Nos. 135 and 137 which stand in my name. I wish to do so briefly.
Amendment No. 135 would add a fifth category of cases regarding the regulator using the power to transfer shares under Clause 46. That is a very important power akin to his right to deal with property under Clause 45. I believe that transfer of shares is no less important an act than the other matters dealt with in subsection (2) of Clause 38, and that the "company default condition", as it is called in subsection (3) of Clause 38, should also be applicable to an exercise by the regulator under Clause 46 when transferring shares.
Amendment No. 137 is the last amendment in the group. I realise now that, for the reasons explained earlier, a company does not need to have community interest objects. I find that perverse. There is therefore an argument for leaving subsection (3)(d) in place. If a company has community interest objects, there is an ultra vires prospect. Quite apart from whether it satisfies the community interest test, there should be power on the part of the regulator to intervene if the company involved is not carrying on activities in pursuit of those community interest objects.
6.15 p.m.
Lord Sainsbury of Turville: In various ways, the amendments seek to change the limits which Clause 38 places on the regulator's ability to use his supervisory powers. Our public consultation last year demonstrated that to succeed, the regulation of CICs would have to be credible, but carried out with a genuinely light touch. The clause provides the framework for achieving that, and these various changes need to be seen in this context. The amendments have the potential to weaken the framework quite significantly.
Amendment No. 134 goes to the heart of this issue, by removing subsection (1). We do not believe that the provision is unnecessary, nor that it is an "extraordinary bit of psychology". It is an important over-arching provision that is intended to stop the regulator using his powers to a greater degree than is necessary. It is the single most important means of ensuring a proportionate approach to the use of the regulator's supervisory powers. In fact, it is a light-touch regulation. The Government attach great importance to ensuring that the regulation of CICs is done in a proportionate way. That is not just because it is the right approach in principle. It is also vital in practice because, if the regulatory regime is seen as being too onerous, that will be bound to deter the use of this new type of company.
Without subsection (1), the regulator would be able to use his powers wherever the rest of Clause 38 permitted him to do so, even if it was not necessary to do so in order to maintain confidence in CICs. For instance, a relatively modest breach of the company default condition set out in subsection (3) might not be sufficiently material to affect confidence in the CIC form, but could be enough to justify the use of a wide range of supervisory powers if subsection (1) were deleted.
Lord Phillips of Sudbury: I am most grateful to the Minister for giving way. It may help if I ask him my question at this stage, at the end of his explanation of why he does not accept Amendment No. 134. Can he conceive of a situation in which there is a significant breach of the running of the affairs of a CIC when it would be proper for a regulator to take no action because he considered that the CIC involved was low-profile and tucked away in some part of the country where it carried no influence anywhere else? The regulator might feel himself constrained by the fact that he first had to be satisfied that he could act only if necessary to maintain confidence in the CIC sector as a whole. Can the Minister think of such an example? Is that a danger?
Lord Sainsbury of Turville: No, I cannot. Simply because a company is in the wilds of Scotland does not make it irrelevant. The provision relates to minor infringements in the case of which we believe that the regulator should not use his power because they do not affect the confidence of people in CICs. Simply the fact that the company was in an obscure part of the country does not mean that its infringements would not affect
GC 410
confidence in CICs. Presumably the word would spread, even from the remotest parts of Scotland, to the community, and people would cite it as an example of a serious infringement about which the regulator did nothing.
Amendment No. 135 would add the power in Clause 46 to order a transfer of the shares or membership rights in a CIC to the list of powers which can be used only if the company default condition is satisfied. In practice, the amendment would be likely to make the power conferred by Clause 46 virtually redundant. As subsection (4) of Clause 38 makes clear, Clause 46 is available to the regulator only in respect of excluded companies, as defined in Clause 32.
The Government intend that any company that falls into the category of excluded companies should not be able to be a CIC. The draft regulations that were published in February show that political parties, political campaigning organisations and companies owned by political parties are all intended to be prescribed as excluded companies, and that policy was supported in our consultation last year.
Clause 46 is intended to address that specific risk—the perhaps very rare risk that a CIC may come under the control of a political party, and thus find itself becoming an excluded company. The power in Clause 46 will allow the regulator to arrange for the control of an excluded company to change hands in those circumstances. Its use will provide an alternative to the regulator using the power in Clause 47 to petition for such a CIC to be wound up. The use of Clause 46 will be appropriate when the CIC itself is functioning well and providing benefit to the community, and where it would be preferable to keep it going under new ownership rather than to apply to have it wound up. If the power can be used only when the company default condition has been satisfied, it will not be available to meet the very situation for which it has been designed.
Amendment No. 136 would prevent the regulator using a range of powers when there is evidence of,
"misconduct or mismanagement in the administration of a company"
unless one of the other conditions listed in subsection (3) of the clause was also satisfied. It may be helpful if I describe what we mean by misconduct or mismanagement in this context, and show what effect the amendment would therefore have on the regulator's ability to act to maintain confidence in CICs.
One example of mismanagement or misconduct would be directors who knowingly persevere in acting in breach of the terms of the company's memorandum and articles, or this legislation. Other examples of mismanagement include acts which may result in significant company resources being misused; in a CIC's reputation being seriously undermined; or in the people who benefit from the CIC's activities being put at risk. Another example where misconduct might be demonstrated would be a director of a CIC that was set up to help animals being convicted of cruelty to the animals in the care of the CIC.

GC 411
The Bill does not define "misconduct" or mismanagement. The Charities Act 1993 similarly empowers the charity commissioners to exercise certain of their supervisory powers when there is misconduct or mismanagement. Those terms are also left undefined. Put simply, by "misconduct" we mean when a person is unfit, by his or her conduct, in relation to his or her duties, to act as such. By "mismanagement" we mean bad, wrong or improper management or administration. If the regulator was unable to exercise his supervisory powers in those circumstances, there is a strong chance that public and stakeholder confidence in CICs would be shaken.
The question was raised of the duties of a director appointed by a regulator. Any such director, under Clause 42, would have the same powers and duties as all the other directors of a CIC, including powers exercisable only by some of the existing directors and not others. The existing directors retain all their powers and duties. The director who ceased to be a director would have the right of appeal to the CIC appeal officer on matters of fact, and also judicial review on matters of law. As with all the regulator's supervisory powers, the ability to act to deal with misconduct and mismanagement has to be seen in the context of subsection (1) of this clause. That provision is intended to ensure that the regulator will act only to the extent that is necessary to maintain confidence in CICs.
Finally, Amendment No. 137 would remove another limb of subsection (3), by preventing the use of various powers when a CIC that has community interest objects is not carrying on activities in pursuit of those objects. It might help if I explained briefly the significance of community interest objects. The concept is defined in Clause 32(3). An object in a company's memorandum is a community interest object if activities in furtherance of that object can reasonably be considered as for the benefit of the community.
It is important to stress that CICs will not be required to have specific objects of that kind. If they wish, they will be able to have general trading objects that will not be caught by Clause 38(3). However, we think that it is helpful to CICs to have the choice. A CIC may wish to adopt a community interest object, for example, to demonstrate to potential investors or others that it is dedicated to particular objects. Clause 38(3) makes such a decision meaningful, because the regulator will be able to act if a CIC does nothing to pursue those objects. The amendment would remove what we see as a useful option for some CICs. On that basis, I ask the noble Lord to withdraw the amendment.
Lord Phillips of Sudbury: I am grateful to the Minister for what he has said. I shall read carefully his justification for Clause 38(1). At first hearing, I am not convinced, but it may bear some study.
The other matter that I would put to the Minister is this: are we not in a strange position on this Bill, where community interest objects are not required; where, as he put it, it will be sufficient for a CIC to have general
GC 412
trading objects; and where there will be nothing at all, as far as I can see, in terms of the objects and activities of the CIC concerned to demonstrate and to put at the heart of its constitution the fact that it is not any old trading company, but a trading company for community interest? As I understand the Minister, it does not even have to say that. It seems to me that that is quite bizarre. He may want to say whether he believes that it should say at least that the general trading purposes of a company are to be pursued for a community interest under the relevant legislation.
Lord Sainsbury of Turville: I believe we have covered that under a previous situation where we made it clear that a company would have to make such a declaration when it applied to become a CIC and the regulator would look at it on that basis.
Lord Phillips of Sudbury: It is not in the constitution. It will be the first time in English legal history when at no place in the constitution of an entity of such a particular character will it be required to assert that it is, and must be, of that character. I ask the Minister to ponder that point. It seems to me to be counterintuitive. I believe that an amendment could easily be made to the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 135 to 137 not moved.]
Clause 38 agreed to.
Clause 39 agreed to.
Schedule 7 [Community interest companies. Investigations]:
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 137A:
Page 68, line 14, leave out sub-paragraph (1)
The noble Lord said: I can move this amendment briefly. I inserted the amendment at the wish of the Charity Law Association. The association says that the subsection purports to bestow legal professional privilege although that is not in Parliament's gift. In common law one has legal professional privilege unless Parliament expressly removes it. We are concerned that paragraph 2(1) sets a dangerous drafting precedent. I beg to move.
6.30 p.m.
Lord Sainsbury of Turville: We believe the amendment would unnecessarily muddy the waters as to whether legal professional privilege is preserved in relation to the powers set out in paragraph 1 of Schedule 7. To make our position clear, our intention in drafting the schedule is to ensure legal professional privilege is preserved in relation to those powers. We have no desire for an investigator of a CIC to be able to demand legally privileged information or documents.
I am aware of the concern referred to by the noble Lord, which I take to underlie this amendment, that one has legal professional privilege in common law unless it is expressly removed by Parliament. If that

GC 413
were the case, it might be argued that Schedule 7 would create a dangerous precedent as drafted. I think that was the point of the noble Lord's amendment.
However, we are aware of numerous precedents in legislation where privileged material is explicitly protected from compulsory disclosure. Notably this occurs in respect of the company investigation powers in Part 14 of the Companies Act 1985, which are being amended by this Bill. I refer to subsections (1) and (2) of Section 452 of the Companies Act 1985, which are being re-enacted with minor and consequential changes by Schedule 2 to this Bill. Other examples appear in Section 83(5) of the Companies Act 1989—in the context of investigation powers of the Secretary of State—and in Section 30 of the Housing Act 1996 concerning the powers of the Housing Corporation to obtain information from registered social landlords.
The powers in this schedule are based on the powers in new Section 447 of the Companies Act 1985, which is in Clause 18 of the Bill. Given the similarity between the drafting of these two sets of powers, the amendment would create an inconsistency, which would lead to potential doubt as to whether legal professional privilege was protected in respect of the powers of an investigator of a community interest company under this schedule. That situation would not be acceptable to the Government, or, indeed, I suspect to Members of the Committee. Therefore, it is important to include subparagraph (1) of Schedule 7(2) to avoid any confusion on the intention of the Bill.
Lord Phillips of Sudbury: I am most grateful to the Minister. I shall be happy to throw back his comprehensive reply at the Charity Law Association. I am sure it will be as satisfied as he is, and that is the end of that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 7 agreed to.
Clause 40 agreed to.
Clause 41 [Civil proceedings]:
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 138:
Page 35, line 42, at end insert ", and
( ) the remedy sought"
The noble Lord said: The amendment seeks to make the process of civil proceedings under Clause 41 a fairer one. As it stands, the regulator before instituting proceedings must give written notice to the company against which they are to be brought, stating the cause of action and a summary of the relevant facts. I am suggesting that he should also say what he has in mind as regards the proposed remedy. Given that this Bill contains a panoply of the most fearsome powers, I think they have a right to know. I recommend the amendment to the Committee. I beg to move.
Lord Glentoran: We support the amendment because we believe that it is essential and sensible.
Lord Sainsbury of Turville: I am absolutely delighted. I thought I would be able to make one noble Lord happy today: I can obviously make two Peers happy. We are very grateful to the noble Lord for the amendment.
In practice, we think that the remedy, which the regulator is seeking, when bringing proceedings will often be evident from the other information that the Bill requires to be included in the notice given to the CIC. However, where it is not, it will certainly be helpful to the CIC concerned if the remedy sought is made clear. We therefore agree to consider the amendment.
Lord Phillips of Sudbury: I am grateful to the Minister. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 41 agreed to.
Clause 42 agreed to.
Lord Glentoran Lord Glentoran moved Amendment No. 139:
After Clause 42, insert the following new clause—
"DUTIES OF DIRECTORS
Where the appointment or the duties of a director of a community interest company under this Act conflict with his duties as a director as provided for in the Companies Act 1985 (c. 6) and the Companies Act 1989 (c. 40), the latter will prevail."
The noble Lord said: I rise to speak to our Amendment No. 139. We tabled it originally in order to ask what the position would be when the duties of a director to his shareholders or creditors, particularly in the case of a company being wound up, came into conflict with the duties of the director under the Bill in terms of distributing assets and the asset lock for community interest purposes. We want to make certain that nothing in the Bill impedes the duties of a director under the 1985 and 1989 Acts to satisfy shareholders and creditors first before transferring any residual assets to another CIC or charity. I believe that we have come a long way.
To some extent, the amendment is also an attempt to challenge the situation where an imposed manager or director hinders a current director of a CIC in doing what he sees as his statutory duty as a director under the Companies Acts 1985 and 1989. Surely there could be some conflict or contention in the case of an outside director or manager who was drafted in and constrained the actions of a regular director.
The problem with the Bill is that it never expressly states that a CIC will be subject to all the statutory and other rules of law applicable to a non-CIC company. However, that is the implication and, in any event, it appears that a CIC, whether or not originally incorporated as such, will be a company incorporated under the Companies Act 1985. Therefore, presumably all the normal statutory and common law rules on directors' duties, and so on, will apply to a CIC director. My point is that, in cases where there is a clash, surely the directors' duties under the Companies Acts 1985 and 1989 will, and should, prevail.
The situation here is complicated. The Law Society was helpful in picking up some of these issues. It commented:
"Clause 42(6) says that a director appointed to a CIC by the Regulator has all the powers of a director appointed by the company. Are those powers to the exclusion of the powers of the other directors? It should also make clear how the law applicable to directors will otherwise apply to him—for example, will such a director be subject to [a particular] Part of the Companies Act 1985 and to all the common law directors' duties? Assuming he should be, that should be made clear in the Bill.
Clause 44 allows the Regulator to appoint a manager to take over specified functions of a CIC's directors. It states that such a manager will act as the company's agent in carrying out those functions. As such, he will presumably not owe the full range of duties to the company that would be owed by a director. This should be made clear. Also, while a manager has taken over particular functions, the directors are expressly prevented from exercising those functions. It should be made clear that directors will not be liable for bread of duty in relation to actionns of the manager in carrying out those functions. In addition, the manager is treated as the company's agent—but, given that it will have no control over either his appointment or, presumably, the way he carries out his functions, should it too be exempt from any liability it might otherwise incur for his actions?"
I consider those last two points to be particularly important. Can a CIC be liable for the actions of a manager imposed under the regulator? Does such a manager owe the same duty to the CIC as a normal director, even if he has assumed only certain of the director's functions? These are all very important questions and I apologise for dwelling on them all in one debate. I have left the Minister with many questions to answer and with what I see as a complicated legal mess to sort out. I beg to move.
Lord Sainsbury of Turville: The amendment seeks to deal with a perceived conflict between the legal and fiduciary duties of directors under the existing body of company law on the one hand, and the new requirements introduced by Part 2 of the Bill on the other. The Government do not believe that the amendment is necessary, because while these various duties and requirements will coexist, they do not in fact conflict. Nor do we believe that the amendment would do anything to clarify the situation. These are important points, and I shall try to explain fully the position as we see it.
At Second Reading, the noble Lord, Lord Glentoran, suggested that the directors of CICs could find that their ability to carry out their duties in accordance with company law could be compromised by the powers which the regulator will have to take supervisory action if the community interest test is not being met. For instance, he argued that if a CIC can balance its books only by compromising its pursuit of the community interest, the regulator might prevent the directors from fulfilling their duties. That is a helpful example of the perceived problem with which I shall attempt to deal.
The directors of a CIC would be expected to balance the books and ensure that the company meets its obligations to its creditors in the same way as those of any other company. In some cases clearly that will have an impact on what the CIC is doing to pursue the community interest. For instance, a CIC that is
GC 416
seeking to provide a service to a large community may find that it has to scale down its operations in order to be able to balance the books, and thus remain in business.
It is important to emphasise that such a course of action would not entitle the regulator to take supervisory action against a CIC under Clause 38 of the Bill. It would not be possible to argue in those circumstances that the company was failing to satisfy the community interest test since no reasonable person could argue that it would be for the benefit of the community for the CIC to operate in such a way that it could not balance its books. Similarly, it could not be said that there was misconduct or mismanagement of the company in such a situation—rather, the management of the company would be doing the only responsible thing in the circumstances.
This is, of course, a relatively simple example and in reality things may be less black and white. In all such cases the directors of the company will need to balance the various factors before making decisions. However, this is not a new issue, or indeed a challenge that faces only the directors of CICs. Any company which is subject to a regulatory regime needs to operate in accordance with that regime. If a director is hound to ensure that the company complies with a regulatory requirement, he will not be in breach of his fiduciary duties to the company if he does so. I hope that that helps to explain why the Government do not think that provisions along the lines of this amendment are needed. I should also say briefly why I do not think that this amendment would clarify the situation.
It is not clear what particular "duties" in the Companies Acts referred to in the amendment are intended to override the obligations on directors under the Bill. Directors' general duties to the company are not set out in the Companies Acts. Instead, they have been developed in case law over many years. The amendment as drafted would not therefore prioritise directors' general duties over those in the Bill. The effect would be very limited and, I fear, confusing. Nothing in the Bill detracts from directors' specific obligations under the Companies Act 1985. Accordingly it is difficult to see what this amendment would add.
I should remind noble Lords at this point that the Government have said that they will implement the recommendation by the independent Company Law Review that there should be a statutory statement of directors' general duties. This is being addressed as part of the department's major project to reform company law through the implementation of the Company Law Review's recommendations.
Lord Hodgson of Astley Abbotts: When?
Lord Sainsbury of Turville: I can assure your Lordships that the position of directors of CICs will be taken into account as that work develops. I believe that we have already dealt in suitable terms with the question of the noble Lord, Lord Hodgson.
A number of other points were raised that related to directors and more specifically to their responsibilities in the circumstances that we are discussing. First, it

GC 417
was asked how directors could fulfil their duties if the regulator appointed a manager to carry out their functions. Where a manager is appointed to a CIC by the regulator under Clause 44, and a company director is prevented by an order of the regulator from exercising any function, any duties associated with those functions will no longer apply to those directors until such time as the regulator's order is discharged. We do not consider that it could be successfully argued that the directors were in dereliction of duty where they did not exercise a function because they were prevented from doing so by an order of the regulator. Where managers share functions with the directors, the duties will be shared accordingly.
A second point on the same issue concerns the duties of the manager and the duties of a director appointed by the regulator. Any manager appointed by the regulator under Clause 44 will have such duties as attach to those functions conferred on him by the regulator's order. Where the manager is to exercise a function to the exclusion of the directors, any duty relating to that function transfers to the manager. If necessary, the regulator's order can make that clear.
Finally, on the third point—the duties of the director appointed by the regulator—I have already said that the director appointed by the regulator under Clause 42 will have the same powers and duties as all the other directors of the CIC, including powers exercisable only by some of the existing directors and not others. The existing directors will retain all their powers and duties.
I hope that that makes the position, if not crystal clear, at least clearer, and that the noble Lord will withdraw the amendment.
6.45 p.m.
Lord Glentoran: I thank the Minister for that careful and detailed explanation. I debated this issue with officials when we had an opportunity to talk to them and it is clear that the explanation has been well thought through. I do not mean that in any patronising way. I shall read the explanation carefully to see whether we need to come forward with any further amendment on Report if we still feel that there is a lack of clarity. I was concerned about the lack of clarity between the two roles of the imposed director and the director. I was also concerned about the potential charge of an imposed manager or director being accused of being a shadow director without due responsibilities. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 43 agreed to.
Clause 44 [Appointment of manager]:
Lord Evans of Temple Guiting Lord Evans of Temple Guiting moved Amendment No. 140:
Page 38, line 43, leave out from "may" to end of line 5 on page 39 and insert "authorise the Regulator—

(a) to require a manager to make reports,

GC 418

(b) to require a manager to give security (or in Scotland, to find caution) for the due exercise of the manager's functions, and

(c) to remove a manager in circumstances prescribed by the regulations.

( ) Regulations may—

(a) provide for a manager's remuneration to be payable from the property of the company, and

(b) authorise the Regulator to determine the amount of a manager's remuneration and to disallow any amount of remuneration in circumstances prescribed by the regulations."

The noble Lord said: In February, my noble friend Lord Sainsbury wrote to the noble Lord, Lord Dahrendorf, as chairman of the Delegated Powers and Regulatory Reform Committee, to explain the reasons for this amendment. He copied that letter to the noble Lords, Lord Hodgson and Lord Razzall.
To recap, the amendment increases the scope of the delegated power in Clause 44 for regulations to make provisions about managers appointed by the regulator. The amendment is intended to ensure that the regulations which the Government intend to make using this power can follow those in the Charities (Receiver and Manager) Regulations 1992, which serve as the model for much of what we intend to do in respect of managers appointed by the regulator of community interest companies.
The need for this amendment was identified in the course of work on the draft regulations, which were published in February. The amendment would make it clear that the regulations can authorise the regulator to remove the manager in particular circumstances, to set the amount of remuneration for the managers he appoints and to disallow all or part of that remuneration in particular circumstances. Following the amendment, regulations may also allow the regulator to specify what reports the managers he appoints should provide to him. The amendment also inserts appropriate terminology for Scotland into the clause.
I should add that the Government are considering further amendments to this clause in order to clarify the relationship between the power to appoint a manager to a CIC and the company insolvency process. We are most grateful to the Charity Law Association for drawing this issue to our attention. We intend to table amendments well before Report providing for the avoidance of doubt that the appointment of a manager under this clause does not affect any right a third person may have to appoint a receiver or manager.
We also intend to provide that the regulator must discharge any order made under this clause on the appointment of an administrative receiver, administrator or liquidator of the CIC concerned. This reflects our policy that the requirements of CIC status should not affect the rights of creditors in insolvency proceedings. I beg to move.
On Question, amendment agreed to.
Clause 44 agreed to.
Clauses 45 to 53 agreed to.
Clause 54 [Fees]:
Lord Glentoran Lord Glentoran moved Amendment No. 141:
Page 44, line 20, leave out subsection (3).
The noble Lord said: The amendment moves on to a new topic: fees. Clause 54 has three subsections that all state that regulations will make provision for the payment of fees. There are three different types of payments listed here which it may be useful for me to state: subsection (1) allows regulations to require the payment of fees in connection with the regulator's functions; subsection (2) allows regulations to provide for fees to be paid to the registrar of companies; and subsection (3) allows for the regulator to charge a fee for,
"any service which is provided otherwise than in pursuance of an obligation imposed by law".
I felt rather disappointed that the draft regulations, which I received a few weeks ago to peruse, did not include any regulations relating to payment of any kind. Am I wrong again and are they now in existence? Perhaps the Minister will tell me. The accompanying notes to the draft regulations claimed, in the introduction, that powers to make regulations covering fees will be drafted at a later stage, again in discussion with the social enterprise sector. I hope that the Minister has progressed further on this issue and will be able to provide us with some details about what the regulations on fees and payments will look like.
The issue of fees is very important. The Government expect there to be a fee payable to the Registrar of Companies as normal of no more than £20. The Explanatory Notes make it clear that the annual running costs of the regulator will be approximately £310,000 plus exposure to legal liability estimated at £50,000. The one-off set-up costs are, apparently, likely to range between £250,000 and £500,000. That will include setting up IT systems, recruiting staff and so on. It would be interesting to know how the Minister arrived at those sums. Currently, we have no idea how large the take-up will be and surely that will affect the annual running costs.
I hope I am correct in thinking that the annual costs will be met by funds from central government. I had some doubts about that because of the comments on page 34 of the consultation document, which states:
"Fees for CIC registration will be used to offset the costs of the regulator, although it is not expected that fees will fully cover the costs of the regulator, at least in the early years of operation".
That is a very open statement. We by no means have the £20 registration fee guaranteed at that low level, and I would like an assurance from the Minister on the record that there is no intention to raise that amount if the regulator proves to be more costly than envisaged.
However, let us assume that there is merely a £20 charge. It does not necessarily follow that CICs will not be burdened by a big cost in setting up. I have some reservations about the indirect cost that companies will have to budget for in terms of legal advice before setting up. There has been much talk about that in the past two days in Committee. This concern is founded to some extent on subsection (3). For that reason I tabled a probing amendment to leave it out.
GC 420
Subsection (3) states that the regulator can charge individual CICs for any service which is provided otherwise than in pursuance of an obligation imposed by law. There are no regulations to spell out what other services these might be.
I have mentioned previously my belief that there should be an obligation for the regulator to have to provide advice to CICs about the permissibility of their actions. We shall return to that on Report. This is not currently explicit in the Bill. Since that is the case, can the Minister tell me whether the provision of advice as to the permissibility of an action when requested by a company will be available to the company only for a fee? What are these additional services? How much can the regulator charge? At the moment there is no guidance or limit. I feel that this is an unduly dangerous situation.
I apologise to the Committee if I sound cynical but I will mention again the likelihood that the regulator runs over its estimated budget and therefore starts charging CICs for providing "services" which he had no official obligation to do according to statute. I beg to move.
Lord Phillips of Sudbury: I support in the most general terms the amendment moved by the noble Lord, Lord Glentoran. I wonder whether the Government are not killing their own goose if they really expect to recover the costs of the regulator and his office from fees generated by CICs. Given the universal wish to see this new breed of social enterprise entity thrive, I would urge the Government to review that policy—if it still is the policy.
Lord Evans of Temple Guiting: Amendment No. 141, which the noble Lord, Lord Glentoran. told us is a probing amendment, would prevent the regulator from charging for any services he provides, not because the law obliges him to do so, but because he has chosen to do so. We believe that the regulator should be encouraged to provide additional services where that will be of benefit to CICs or to others. Where the regulator provides a service at his discretion, we consider that the regulator should be able to charge a fee, if he wishes to do so, to go towards the cost of providing that service. It is reasonable that those who benefit from a service should contribute towards it, and that the regulator should be able to meet demands for additional services, including those for which people are willing to pay a fee.
The Registrar of Companies, for example, sells bulk information to certain bodies, which use it to provide statistical analyses and other added-value services. We should not preclude the regulator from doing something similar if the demand should arise.
Subsection (3) allows the regulator to charge only for those services he is not actually obliged to provide. If the regulator could not charge a fee, he would either have to cover the costs of the service from elsewhere, which in this case would mean from the resources provided by the Secretary of State, or not provide the service at all. This subsection provides an additional option of charging a fee for the service. The

GC 421
amendment would remove this option, and would almost certainly mean that the regulator would provide fewer services as a result. The Government believe that allowing the regulator to charge fees for additional services, beyond those required by the Bill, may be of benefit to CICs, and to others in the social enterprise sector and beyond.
It may be helpful if I briefly set out how the regulator is to be funded. The Government intend that over time the regulator will move towards covering its costs through the fees it charges. This is of course the basis on which Companies House operates. However, the costs of the CIC regulator will initially be subsidised by the DTI as to begin with the fee income from its operations will of course not be sufficient to cover its costs.
Subsection (3) gives the regulator an appropriate mechanism for providing assistance, which goes beyond his statutory obligations, on the basis that he may, if he wishes, charge for doing so. This will enable him both to cover the costs of these additional services, and to manage demand, by deterring frivolous or excessive requests for assistance.
The noble Lord, Lord Glentoran, raised the issue of the inadequacy of the regulations on this matter, in his view. I remind him of something that I said an hour or so ago. He and others will have many opportunities to be consulted and work on the regulations before they are laid before Parliament.
The noble Lord also asked what fees the regulator is expected to charge, and for what services. The fee structure will be finalised in the light of further work on the budget and costs of the regulator and will be set out in regulations. The draft regulations published in February this year do not include provisions made under Clause 54, which will be developed later this year.
We expect that the regulator will charge a fee for the process of registering a company as a CIC, under Clauses 33 and 35. That fee will be payable in addition to the normal Companies House fee for registration as a company. As we have heard, that is currently £20. As the regulatory impact assessment published with the Bill explained, the Government intend that the additional costs of setting up a CIC should be comparable with that fee. There may be a fee also with respect to filing the annual community interest company report required by Clause 31. Again, if such a fee is charged, we expect it to be comparable to the current fees charged with respect of company annual returns—that is, £15. We have not yet determined whether the regulator should charge fees in respect of any of his other statutory functions.
The noble Lord, Lord Glentoran, asked whether running costs would not be affected by the take-up—the number of organisations that wish to become CICs. We are budgeting for a small operation in the first place of around eight staff. If take-up in the early years is far higher than anticipated, the regulator will be able to scale up its operation at a marginal cost. As
GC 422
the noble Lord, Lord Sainsbury, said at Second Reading, it is hard to estimate what the take-up will be at this stage.
The noble Lord, Lord Phillips, suggested that the Government should review the policy of the regulator moving towards covering its costs over time. As I said, the regulator is not expected to cover his costs in the short term because, initially, he will not benefit from economies of scale. The Government are well aware that charging disproportionate fees would have a serious negative effect on the take-up of CICs.
The noble Lord, Lord Glentoran, asked about the ability of the regulator to give advice on the permissibility of actions. In our debate on Thursday we discussed what we expected the regulator to provide in the way of guidance in some detail. I do not propose to revisit that debate. Given the hugely wide range of decisions that this could involve, it would be unwise to make a commitment on whether that advice could be available and at what fee.
With that explanation, I hope that the noble Lord is prepared to withdraw his amendment.
7 p.m.
Lord Hodgson of Astley Abbotts: Can the Minister explain one thing? I believe that he referred to Clause 31 and fees payable in connection with that clause and the community interest company report. As I read the Bill, they would not be able to be chargeable, because they are,
"in pursuance of an obligation imposed by law".
Clause 31 is a requirement on CICs to provide reports, so I am not sure that they could charge a fee for it. But it may be that I did not hear the Minister right.
Lord Evans of Temple Guiting: That is something that would have to be done by regulations.
Lord Hodgson of Astley Abbotts: As I understand the matter, Clause 54(3) says that the regulator,
"may charge a fee for any service … otherwise than in pursuance of an obligation imposed by law".
If the regulation imposes an obligation, as it does under Clause 31(3), which says that regulations "may … make provision", surely at that point fees are excluded by the very wording of Clause 54(3)—or have I got this completely wrong?
Lord Evans of Temple Guiting: Even if I thought that the noble Lord had got it completely wrong, I would not dare say so. I am advised that we are talking about a fee payable under regulations under Clause 54(1).
Lord Glentoran: It is clear that my noble friend will wish to read Hansard on that point and will perhaps return to it at the next stage. On the plus side, I was delighted to hear the Minister say that the Government did not expect the regulator to cover his costs. For clarification purposes, by that I understood that the Government would be doing so for a period of time. I have certainly had it in mind to say that, in order to get the organisation up and running, some pump-priming should be made available to the

GC 423
regulator, and that should be apparent to those who wish to form CICs. If the noble Lord does not wish to respond on that point, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Phillips of Sudbury Lord Phillips of Sudbury had given notice of his intention to move Amendment No. 141A:
Page 44, line 22, at end insert
"(5) A community interest company which is also a charity shall not be charged under this section."
The noble Lord said: The amendment speaks for itself. The Government will say that, under the Bill as it stands, it is not possible for a CIC to be a charity. I am looking forward in hopefulness, as will the regulator when receiving papers for registration, because we shall surely be tabling an amendment at the next stage. I do not know what the protocol is on these matters but, given that at present the Bill does not allow the prospect which the amendment anticipates, I believe it is probably right that I do not move the amendment.
[Amendment No. 141A not moved.]
Clause 54 agreed to.
Clauses 55 and 56 agreed to.
Clause 57 [Offences]:
Lord Glentoran Lord Glentoran moved Amendment No. 142:
Page 46, line 2, leave out paragraph (a).
The noble Lord said: This amendment focuses on Clause 57 but, in some ways, it refers back to my Amendment No. 139. Clause 57 provides that, where a company commits an offence, the directors or other officers of the corporate body who are to blame for the offence can be penalised, as well as the corporate body itself.
At subsection (3)(a) we are told that "director" includes a shadow director. In my opinion, this is a complicated issue because shadow directors often stand in for directors in some respects but do not take on the full responsibilities of directors. Liability in those circumstances is often contentious.
However, the real problem which I specifically had in mind when tabling the amendment was the liability of the regulator when he, or his appointee, steps in to make a decision in the role of a director or, alternatively, as we discussed earlier, when he puts in place another person as a temporary director or manager. Will they be committing an offence under Clause 57? If the CIC must take on the liability for a mistake made due to the actions or advice of the regulator, that would seem extremely unfair.
When we raised this issue with members of the Bill team, they were not sure of the position and were unable to help us at that stage. However, I am sure that, by now, they will have answers ready and waiting. I look forward to hearing from the Minister what further conclusions they have come to. I beg to move.
Lord Phillips of Sudbury: I oppose the amendment. I believe it is very important to have this provision in the Bill in order to safeguard the integrity of the CIC
GC 424
regime. I am afraid that there are naughty people in the world who do not take on formal directorships but operate as real directors or shadow directors in Companies Act terms. I believe that this is a desirable provision to have in the Bill.
Lord Evans of Temple Guiting: I am grateful to the noble Lord, Lord Phillips of Sudbury, for his support.
In relation to a CIC, as for a company, the phrase "shadow director" means a person in accordance with whose directions or instructions the directors of the company are accustomed to act. A person is not deemed a shadow director by reason only that the directors act on advice given by him in a professional capacity. Shadow directors are generally subject only to statutory provisions that are expressly stated to apply to them.
The amendment would allow a shadow director to escape punishment for offences committed by his company under this part of the Bill, even if the person concerned was responsible for the commission of the offence through their neglect, consent or connivance. To me and, I am sure, the whole Committee, that does not seem desirable. If there is a person in the background and the directors of the company habitually do what that person says, it seems reasonable that that person should be liable to be punished, if he is the real reason why the company committed the offence.
The noble Lord, Lord Glentoran, asked about the role of the regulator. In order to be a shadow director, the regulator will have to be a person in accordance with whose directions or instructions the directors of the CIC are accustomed to act. It is most unlikely that that would ever apply to the regulator. Other than the specific supervisory powers in the Bill, the regulator has no general power to require CICs to follow his directions or instructions.
The exercise of the specific supervisory powers in the Bill is unlikely to be frequent or wide-ranging enough with regard to any individual CIC for the regulator to be regarded as a shadow director. Few of the powers allow the regulator to tell the directors of a CIC what to do, other than in a very targeted way. For example, the regulator can order a CIC to submit to an audit, to answer questions or provide documents or to transfer property to the Official Property Holder.
I hope that that explanation will reassure the noble Lord, Lord Glentoran. There are another two pages of speaking notes on the regulator and the board. I would be happy to send the full speaking note to the noble Lord.
Lord Glentoran: I thank the noble Lord for that explanation. Not being considered right on this occasion, I shall consider the matter again. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 57 agreed to.
Clause 58 agreed to.
Clause 59 [Regulations]
Lord Evans of Temple Guiting Lord Evans of Temple Guiting moved Amendment No. 143:
Page 47, line 2, leave out subsection (6).
The noble Lord said: In moving Amendment No. 143, I shall speak also to Amendment No. 144.
The amendments are a response to the report on the Bill by the Select Committee on Delegated Powers and Regulatory Reform, for which we are grateful. My noble friend Lord Sainsbury of Turville wrote to the noble Lord, Lord Dahrendorf, on 29 January to thank him for the report and to confirm that the Government accepted its recommendations.
The amendments will provide that regulations requiring the payment of fees in connection with the regulator's functions made under Clause 54 will be subject to annulment in pursuance of a resolution of either House of Parliament. The Government have accepted that regulations setting fees should be subject to the scrutiny of both Houses. We were persuaded by the fact that regulations setting the fees for Companies House were also subject to the scrutiny of both Houses and felt that that was a logical precedent to follow. I beg to move.
On Question, amendment agreed to.
Lord Evans of Temple Guiting Lord Evans of Temple Guiting moved Amendment No. 144:
Page 47, line 5, leave out "or subsection (6) applies to it"
On Question, amendment agreed to.
Clause 59, as amended, agreed to.
Clauses 60 and 61 agreed to.
Schedule 8 [Repeals]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 145:
Page 70, line 13, leave out "69(4)" and insert "69(2) and (4)"
The noble Lord said: We realised that, because paragraph 20(a) of Schedule 2 replaces Section 452(1) of the Companies Act 1985, we should have included in Schedule 8 a repeal of Section 69(2) of the Companies Act 1989, which amended existing Section 452(1). The amendment will rectify that omission. I beg to move.
On Question, amendment agreed to.
Schedule 8, as amended, agreed to.
Remaining clauses agreed to.
Bill reported with amendments.
The Committee adjourned at sixteen minutes past seven o'clock.

  Ulster-Scots Agency: Budget 2004
  Ulster-Scots Agency: Budget 2004
  Dependent Territories: Human Rights
  Dependent Territories: Human Rights
  Russian Election
  Russian Election
  Krishna Maharaj
  Krishna Maharaj
  Anti-terrorism, Crime and Security Act 2001: Privy Counsellor Review Committee Report
  Anti-terrorism, Crime and Security Act 2001: Privy Counsellor Review Committee Report
  Police Officers
  Police Officers
  Home Office: Spending on Alcohol-related Programmes
  Home Office: Spending on Alcohol-related Programmes
  Anabolic Steroids: Possession and Supply Offence Statistics
  Anabolic Steroids: Possession and Supply Offence Statistics
  Asylum Appeals against Fast-tracking
  Asylum Appeals against Fast-tracking
  Apprenticeships
  Apprenticeships
  Common Agricultural Policy
  Common Agricultural Policy
  Information Technology Projects: Government Procurement
  Information Technology Projects: Government Procurement
  Smoking: Labelling and Warnings
  Smoking: Labelling and Warnings
  Agrochemicals: Human Exposure Testing and Risk Assessments
  Agrochemicals: Human Exposure Testing and Risk Assessments
  Physical Activity: Pilot Schemes
  Physical Activity: Pilot Schemes
  Haemophilia Patients: Macfarlane Trust Payments
  Haemophilia Patients: Macfarlane Trust Payments
  Sports Programmes: Department of Health
  Sports Programmes: Department of Health
  Cognitive Behaviour Therapy
  Cognitive Behaviour Therapy
  Thiomersal
  Thiomersal
  Simvastatin
  Simvastatin
  Abortion
  Abortion
  Obesity
  Obesity
  Mink
  Mink
  Swill
  Swill

  Falkland Islands: "Almirante Irizar"
  The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean)
  On 15 and 16 March 2004 the Argentine naval Icebreaker, "Almirante Irizar" sailed through the Falklands Outer Conservation Zone and the Falklands Interim Conservation Zone. These are areas for which the Falkland Islands Government issue fishing licences. During the time that it was inside these zones, the Argentine vessel was challenging other vessels to identify themselves. While transit of the conservation zones is permissible, the policing of the zones by a foreign vessel contravenes the Falkland Islands exclusive jurisdiction.

  We asked the Argentine Government for an explanation of the vessel's actions. Their response was not satisfactory. We have therefore made a formal protest to the Argentine Government concerning the actions of the "Almirante Irizar", underlining the need to ensure that this type of incident does not happen again. This note also reiterated that Her Majesty's Government have no doubts about UK sovereignty over the Falkland Islands.

  My right honourable friend the Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr Bill Rammell) has spoken to Falkland Island councillors about this incident. He shares their concerns and has briefed them on our response. He assured them of our continued firm support.

  Nuclear Weapons: Safety
  The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach)
  My right honourable friend the Minister of State for Defence (Mr Adam Ingram) has made the following Written Ministerial Statement.

  In 1992, the then Chief Scientific Adviser to the Ministry of Defence, Sir Ronald Oxburgh, conducted a review of the safety of nuclear weapons. It was reported to Parliament (Commons Hansard, 13 July 1992: col. 520) that he had recommended the inauguration of a safety "champion". A position entitled nuclear weapon safety adviser was subsequently created, and this has had two incumbents. More recently, further work has been done on safety management arrangements in the department in general, and in the nuclear programmes in particular, to reflect policy and organisational developments. As a result, we have appointed a nuclear weapon regulator to provide assurance about safety in the nuclear weapons programme. In so doing, it was recognised that the tasks of this official would
  WS 52
  be very similar to those of the nuclear weapon safety adviser, and it was decided that, when the regulator was ready to conduct business, the safety adviser post should close. This has recently occurred.

  Ministry of Defence: Regional Prime Contract South-West
  Lord Bach
  My honourable friend the Parliamentary Under-Secretary of State for Defence (Mr Ivor Caplin) has made the following Written Ministerial Statement.

  Debut Services (South West) Limited, a joint venture between Babcock International Group and Bovis Lend Lease, has been awarded the regional prime contract for the Ministry of Defence's estate in the south-west. This follows successful completion of the clarification phase.

  The seven-year contract, worth in the order of £480 million, is the second in a series of five such arrangements covering the estate and will provide for capital works, property maintenance and facilities management services throughout the south-west of England.

  The MoD has undertaken to make significant improvements in the overall condition of its estate by changing its organisational structures and introducing prime contracting methods. Encouraging innovation and efficiency, regional prime contracting is a key initiative that aims to provide a better quality of service and greater value for money through suitably incentivised contracts conforming to the principles of smart acquisition.

  Bowman Tactical Communication System
  The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach)
  My right honourable friend the Minister of State for Defence (Mr Adam Ingram) has made the following Written Ministerial Statement.

  On 19 July 2001 I informed the House that, after years of delay and forecast cost growth, we had selected a preferred supplier to take forward the Bowman programme. Although our approved in-service date was December 2004, we set a demanding target to deliver by 30 March 2004. This target is just 30 months from the September 2001 contract awarded to General Dynamics United Kingdom Ltd, a challenge unprecedented on such a major and complex acquisition project. Our priority was to deliver a secure, reliable voice communications replacement for Clansman and I am pleased to report to the House that Bowman has achieved its in-service date on this basis, ahead of the target. This achievement and the capability it provides will enable the programme to progress to its next key milestone, the delivery of war fighting capability in 2005.
  WS 53
  Once fully implemented, Bowman will provide a secure, tactical, voice and data communications system for our land forces and selected elements of the Royal Navy and Royal Air Force, until at least 2025. As well as being man-portable, it will be an integral part of the communications fit of major equipments such as warships, main battle tanks and helicopters. The provision of secure voice communications down to section level represents a step-change in capability for the Armed Forces as they migrate from Clansman to Bowman. Other functions which Bowman is designed to deliver, such as automatic position reporting and an ability to pass digital data around the battlefield, have been demonstrated in principle on field trials and their development is on course.

  At the end of 2002, nearly a year and a half into the Bowman contract, we extended it to further develop the battle management system and to enhance integration with systems and sensors on board our key armoured platforms—a programme known as CIP. A key advantage of aligning both programmes is that time and cost are saved through converting vehicles only once. 'There has been positive progress on CIP but the performance of the battle management system in recent field trials leads us to conclude that a few more months of work will be required to develop and fully demonstrate its effectiveness.

  Bowman will provide a marked increase in operational tempo, firepower lethality and survivability across all our Armed Services and will be a key enabler for the UK's network enabled capability. There is a widespread commitment to Bowman across the Services and industry stakeholder community and it has already demonstrated greater military capability overall than Clansman. The first brigade converted to Bowman will undertake a further 15 months of unit and collective performance training. As with the programme hitherto, the brigade will be closely involved in the development and proving of Bowman.

  Achieving the Bowman in-service date is an important step on the road to the ultimate goal of delivering a robust war-fighting capability that fully meets the requirements of the user in service. It is a key milestone on the path to achieving war-fighting operational readiness in 2005 and represents a huge success for smart acquisition as well as a big step forward for the British Armed Forces.

  High Hedges
  The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)
  My honourable friend the Parliamentary Under-Secretary of State has made the following Written Ministerial Statement.

  We have today launched a public consultation on implementing Part 8 of the Anti-social Behaviour Act 2003 in England. This gives local authorities the powers to deal with complaints about high hedges which are having an adverse effect on a neighbour's amenity.
  WS 54
  We are seeking views on draft regulations covering certain procedural details such as the fees that authorities should charge for this service and how appeals against their decisions should be dealt with. We are also seeking views on the draft guidance on how local authorities should administer the complaints system. This offers advice on how authorities should assess whether a hedge is having an adverse affect on a neighbour's amenity. Copies of the consultation paper and the draft guidance have been placed in the Libraries of both Houses.

  The consultation papers have been sent to local authorities in England, specialist and other interested organisations. They have also been published on the Office of the Deputy Prime Minister's website (www.odpm.gov.uk). The closing date for responses is 30 June 2004.

  This is another step towards tackling the misery which can be caused by high hedges and we are on course to have the system fully operational towards the end of this year.

  Green Belt
  Lord Rooker
  My right honourable friend the Minister for Housing and Planning has made the following Written Ministerial Statement.

  In 2000, the Government published figures on the area of land designated as green belt in England, based on figures in plans that had been adopted by 1997. I am pleased to announce today the publication of statistics that show changes to the amount of green belt since then. In future, such figures will be published on an annual basis, and will be used to monitor the Government's target to maintain or increase the amount of green belt in each region.

  The statistics show that since 1997 there has been an increase of around 25,000 hectares in the amount of green belt identified in adopted local and unitary development plans in England. In addition, there are proposals for an additional 12,000 hectares of green belt that are currently being taken forward in plans that have not yet reached adoption. This figure does not include changes to the green belt proposed in the New Forest, where land will be redesignated from green belt to national park once the national park has been formally designated. This comprises some 46,000 hectares of land in the area covered by New Forest District Council. In view of this redesignation, the Government do not intend that these figures should be included in monitoring progress towards their target of maintaining or increasing the amount of green belt in each region.

  Copies of the statistical release are available in the Libraries of the House.

  Civil Registration
  The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
  My honourable friend the Financial Secretary to the Treasury (Ruth Kelly) has made the following Written Ministerial Statement today.

  The House will wish to be aware of developments on the Government's plans for modernising civil registration.

  On 10 July 2003 the Government published the consultation paper Civil Registration: Delivering Vital Change. This set out our proposals to reform civil registration in England and Wales using powers in the Regulatory Reform Act 2001. The proposed changes will make it easier both for citizens to deal with government at key points in their lives and in the lives of their families and for the Government to modernise this public service by exploiting improved information and communication technology. I am pleased to be able to tell the House that
  WS 56
  there were almost 3,400 responses to the consultation document. This indicates the very real interest among a wide range of stakeholders—registration practitioners and managers, the public and other interested organisations—in this area of reform.

  Our intention was to introduce a regulatory reform order in this Session of Parliament. This remains the case in respect of provisions relating to registration of births and deaths and access to birth and death records. I have however decided to postpone the presentation of provisions relating to marriage till early in the next Session. The splitting of the proposals in this way will ensure that the momentum for reform is sustained, while at the same time providing an opportunity for the second regulatory reform order to take account of Parliament's wishes on the civil partnership legislation.

  This strategy will not hinder the Government's plans for implementation that will begin in 2005 with improved information technology to forward registration information to the Registrar General and the structural reform of the local registration service.