Sitting of 13 October 2004

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

Live Music
Lord Redesdale Lord Redesdale asked Her Majesty's Government:
On what basis they have concluded that the United Kingdom has a flourishing music scene given a recent survey indicating that a majority of restaurants, hotels and public houses had had no live music in the previous 12 months.
Lord Evans of Temple Guiting: My Lords, the survey referred to by the noble Lord, Lord Redesdale, was conducted by MORI. It showed that there were around 1.7 million live music events in England and Wales in the previous 12 months. This demonstrates that we have a flourishing live music scene. Of course, the Government would like to see more live music; they are doing everything they can to encourage this, and we are working to that end. I am confident that the reforms included in the Licensing Act 2003, supplemented by the work of the Live Music Forum, chaired by Feargal Sharkey, will increase opportunities for all musicians.
Lord Redesdale: My Lords, I thank the Minister for that Answer. In the DCMS/MORI survey on the impact of the Licensing Act on live music, it was rather distressing to note—way down the list of statistics, although it seemed the most important fact—that those who knew most about the Licensing Act were the least likely to put on live music in the future and the most deterred from doing so. This seems a significant problem, considering how few pubs and clubs put on live music at present. If fewer of them put on live music in the future, that will mean even fewer venues in which aspiring musicians can perform.
Lord Evans of Temple Guiting: My Lords, I remind the noble Lord, Lord Redesdale, that the Licensing Act has not yet come into force and will not do so until November 2005. We remain absolutely confident that the acts, reforms and work of the Live Music Forum will provide real opportunities for live music to flourish. The Government started a campaign over the summer to tell everybody about the new licensing system. Two hundred pages of statutory guidance have been issued, a newsletter has gone out, there have been 12,000 hits on the DCMS website and more than 400 local authorities have begun extensive consultation on their draft licensing policy statement. So it is far too early for
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pessimism to run rampant. We are totally confident that when we have been through the consultation period and when we reach June 2005, we will see the very thing we want—a thriving and flourishing live music scene in Britain.
Lord Corbett of Castle Vale: My Lords, what financial assistance are the Government giving to enable young people, especially in our schools, to understand and appreciate live music and to encourage as many of them as possible to become participants in it, and what financial assistance is being given to schools for the provision of musical instruments?
Lord Evans of Temple Guiting: My Lords. I thank my noble friend for that question. The Government, with their commitment to live music, recognise that if we are to have live music played in the public arenas about which the noble Lord, Lord Redesdale, is so anxious, we must start with the education system. As noble Lords will know, music is a statutory subject for all pupils aged five to 14. Local education music services receive £60 million to provide specialist instrumental tuition beyond the curriculum. This grant is protected until at least 2008.
In July, we published the music manifesto which underlines the Government's commitment to live music. There is a tremendous amount of evidence that the Government's commitment to music tuition in schools that was part of the 1997 election campaign has been realised, with knobs on.
Baroness Buscombe: My Lords, the Minister has given us some statistics. I should like to refer to the survey, which was commissioned by the DCMS. Based on what respondees have heard about the Licensing Act so far, only 1 per cent of respondees polled said they would certainly consider putting on live music in their venue, 3 per cent said they were very likely to do so, 12 per cent said they were fairly likely to do so, and the rest—84 per cent of the respondees to this poll—said that they would not consider putting on live music. I believe that the noble Lord, Lord Redesdale, has every right to be despondent.
Lord Evans of Temple Guiting: My Lords, first, we must give the Government some credit for conducting the survey. It is the first time there has been a survey of the live music scene in Britain. It shows that a great amount of work needs to be done, and I have already explained what is happening to make sure that in a year's time, a great many people will apply for these licences.
We shall have another survey in a year's time so that we can compare what happens then with what is happening now. I remind noble Lords that this was the first survey of the live music scene in Britain, and until we have a second survey, we cannot start generalising about the results.
Lord Marsh: My Lords, given the ever increasing encroachment of muzak in every area of life, even when one is trying to make a telephone call and, even worse, trying to get someone to answer, will the Government and the Opposition draw a distinction between live music

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and good music? Will they both also take on board the fact that there are twisted people around who go to restaurants and pubs for a quiet drink and a meal?
Lord Evans of Temple Guiting: My Lords, I cannot make value judgments. I happen to like rock and roll—a view, I am sure, that is not shared by a considerable number of your Lordships in this House. I would hate the idea of going to a restaurant and having music played while I am eating. I return to the Government's education policy for young people in relation to music. It is absolutely clear from the music manifesto that when money is being spent on young people and their knowledge of music, we are talking about serious music and not muzak.
Lord Colwyn: My Lords—
Lord Tordoff: My Lords—
Noble Lords: Colwyn!
The Lord President of the Council (Baroness Amos): My Lords, I think that noble Lords are calling for the noble Lord, Lord Colwyn.
Lord Colwyn: My Lords, I am very grateful. There is obviously some discrepancy in the figures for live performance. It is vital that venues are increasingly available for instrumentalists and performers of all types of music. I am glad that the Minister reaffirmed that as government policy. Does he plan to be in the atrium at Portcullis House this evening, when the Live Music Forum will be highlighting the importance of live music and many musicians, including the MPs' rock hand, will be performing?
Lord Evans of Temple Guiting: My Lords, I welcome that wonderful piece of self-publicity. I will be there and I was hoping to have an opportunity to mention that as yet another example of how important live music is.
Forty-seven per cent of surveyed venues said that they had staged live music, but almost a third—29 per cent—said they were not able to do so because their venue did not have the capacity. If one takes out those venues, about 55 per cent of the remainder staged live music, which represents not a minority of venues, but a majority.

Iraq: Elections
2.45 p.m.
Lord Dykes Lord Dykes asked Her Majesty's Government:
What is their latest assessment of the prospects for properly run elections in Iraq in January 2005; and what role is anticipated for United Kingdom ground forces in providing assistance.
Baroness Crawley: My Lords, we are pleased that the Interim Government remain committed to the holding of elections in January 2005, which we see as a vital part of the political process agreed in Security Council Resolution 1546. Technical preparations by the Independent Electoral Commission of Iraq and the UN are proceeding well, as the Foreign Secretary saw during his visit of 4 to 6 October. UK troops, as part of a multinational force, continue to support Iraqi security forces and will assist with security in the runup to the elections in January.
Lord Dykes: My Lords, while thanking the Minister for that Answer and while also still awaiting a full government apology for this illegal war, is she not very concerned that the chaos in Iraq and US incompetence will ruin the January elections and further endanger the lives of our soldiers, mainly in the south-east?
Baroness Crawley: My Lords, I congratulate the noble Lord, Lord Dykes, on his first Starred Question and its timely nature.
Noble Lords: Second!
Baroness Crawley: My Lords, I look forward to being given a hard time by the noble Lord in the future.
We are confident that the elections are on course. The Iraqi people want them. Every Iraqi opinion poll has confirmed that. The UN also is confident that progress is on schedule and the Interim Iraqi Government are doing everything they can to make sure that those elections take place in January.
Baroness Rawlings: My Lords, as this is the first time that we have mentioned Iraq since the House returned, I send on behalf of these Benches our deepest condolences to Mr Bigley's family. Terrorists such as Tawhid wal Jihad cannot be appeased; they can only be fought.
In light of the recent accusations of electoral fraud in the elections in Afghanistan on 9 October, what lessons have been learned in combating electoral fraud and malpractice? Are not such accusations proof of the very real need to step up the expert electoral support provided by the UN in the Iraqi elections, especially as there are only eight election experts working in Iraq?
Baroness Crawley: My Lords, I associate myself with the condolences of the noble Baroness to the family and friends of Ken Bigley.
On the Afghanistan experience, we know that Afghanistan held its first democratic presidential elections on 9 October. That was a great achievement because, despite earlier fears, there were relatively few incidents of violence and intimidation. Of course there will be lessons to be learnt—the noble Baroness is absolutely right about that. For instance, complaints about technical issues such as the failure of the indelible ink are being investigated by an independent panel. As the noble Baroness rightly said, those and other technical issues will need to be considered in the

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context of the elections in Iraq. On the UN advisers, we hope that by the end of this month, there will be 25 in Iraq.
Lord Ahmed: My Lords, what help has been sought from the Organisation of Islamic Countries in providing security during the elections?
Baroness Crawley: My Lords, the multinational force will be providing security during the elections. The UK part of that force will do so in the south and in Basra. I do not have details about a specific request for help, but I shall write to my noble friend about that.
Lord Wallace of Saltaire: My Lords, is the Minister aware of reports in some American newspapers that the Americans are extremely unhappy that the British have not provided more support for American operations outside the British sector? Are the British forces responsible for their own sector alone or are they intended to answer requests for assistance from American forces?
Baroness Crawley: My Lords, UK troops, in the context of the multinational force, have a jurisdiction in the south and Basra. I shall write to the noble Lord if their responsibilities go beyond that with regard to multinational force 1. As for providing security for the elections, we have given the United Nations a pledge that we shall form part of the UN protection for advisers.
Lord Hurd of Westwell: My Lords, is not the noble Baroness in danger of giving a rather complacent impression of what is happening in Iraq today? Is it the Government's view that for elections to be held successfully in January, all Iraq should be under the effective jurisdiction of the present Government? Could she imagine circumstances in which elections are held, even though some cities in some parts of the country, including some parts of Baghdad, are not under the control of the Interim Government?
Baroness Crawley: My Lords, I hope that I have not given the impression that we are complacent. A great deal of work is being done to ensure that security is stepped up. I agree with the noble Lord, Lord Hurd, that security is absolutely vital.
The Government of Prime Minister Allawi has a three-fold strategy for this very question. First, there must be political outreach, particularly to leaders of the Sunni community. The area of the Sunni triangle is one of the areas that the noble Lord encompassed in his question. We must reach out to many of those leaders to bring them in from the edges of insurgency. Secondly, Iraqi military capability must be strengthened—some 200,000 Iraqis have now been trained. Thirdly, reconstruction efforts must be speeded up, especially in the Sunni areas.
Baroness Wall of New Barnet: My Lords, would my noble friend the Minister agree with me that, although the trade union movement in Iraq is still very much in
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its infancy, it is being supported by the TUC and by UK unions and has a tremendous role in delivering democracy during the elections and supporting the activity of our troops?
Baroness Crawley: My Lords, my noble friend makes an important point. The fledgling trade union movement in Iraq has a great role to play, in assisting not only in the political progress towards elections but also in the great reconstruction efforts towards improving the economy. There is some progress in assistance for trade unions in Iraq. The International Confederation of Free Trade Unions organised a highly successful fact-finding mission earlier this year, partly funded by the FCO, which looked at the state of trade unions in Iraq.
Lord Tebbit: My Lords, is the Minister aware that during her rather long reply to my noble friend Lord Hurd—
Baroness Amos: My Lords, we must move on to the next Question.

Cross Country Rail Franchise
2.53 p.m.
Lord Bradshaw Lord Bradshaw asked Her Majesty's Government:
In setting the specification for the new Cross Country Rail Franchise, what provision will be made for those travelling beyond the core of the network.
Lord Davies of Oldham: My Lords, recent negotiations surrounding Virgin Rail Group's cross country franchise are related to the financial terms on which the franchise is operated, not on the formal scope of the franchise. Those terms are currently set out in a "letter agreement" signed in July 2002. The SRA has informed Virgin that it reserves the right to terminate the franchise, but no decision has yet been taken on how to proceed.
Lord Bradshaw: My Lords, I thank the Minister for his reply, as far as it goes. However, he must be aware of the widespread talk in the specialist press that. led by the Treasury, there are going to be attempts to curtail the cross country services at York and Bristol and force people from Scotland or the west of England to change trains twice, at Bristol and Newcastle. Does that hold out any reasonable prospect of an accessible transport service for families or people heavily encumbered with luggage?
Lord Davies of Oldham: My Lords, the noble Lord has introduced an important point in consideration of the future of rail services. However, he is somewhat jumping the gun; he alludes to what appeared in the specialist press, but under no authority from the Government. We are not in a position at this stage to

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confirm or deny those comments in the press, but it is clear that services should provide for the maximum possible convenience of passengers. Therefore, the considerations mentioned by the noble Lord should be introduced into the issues—and that will certainly be done.
Lord Faulkner of Worcester: My Lords, does my noble friend agree that the improvement in the quality of the service provided by Virgin on the cross country services, after a very shaky start, is quite a strong reason for this franchise not to be broken up? Indeed, the other discussion in the specialist press at the moment is that the cross country franchise might absorb Central Trains. Would that not be a much better way in which to provide the sort of service to which the noble Lord, Lord Bradshaw, referred?
Lord Davies of Oldham: My Lords, I hear what my noble friend says, but I reiterate that the issue with regard to the Virgin franchise at present relates to the financial terms on which the franchise operates. That is the basis of discussion. Certainly, my noble friend has introduced a concept for how cross country services might be improved, but at this point no decision has been taken. At present, no new franchise exists—which is the issue referred to in the original Question.
Earl Attlee: My Lords, can the Minister explain why within less than five years the Government have set up the SRA and then abolished it?
Lord Davies of Oldham: My Lords, because the Government inherited a rail service system in this country that let the people down very badly indeed, including the taxpayer, the fare-paying public and everyone concerned with the railways. The result was that one aspect of the service which the previous Conservative government established—Railtrack—went bankrupt after the Hatfield rail disaster. So we have been faced with a crisis situation with regard to the rail. It is not an issue that could be resolved in a matter of months. It is taking us time to get in place the correct structure for the development of the railways, but we are on the brink of doing so.
Lord Hunt of Kings Heath: My Lords, is my noble friend aware that there is real concern that if Central Railways merges with the cross country franchise, many local services in the West Midlands will deteriorate and be removed to make way for the cross country services? Can he ensure that there is a balance between local services and other services, in any change in the franchise system?
Lord Davies of Oldham: My Lords, I assure the House that I had absolutely no notice of that question, but that indicates why I was so guarded in response to the question of my noble friend Lord Faulkner about
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the extension of the cross country franchise. Many issues must be considered with regard to the issue of any new franchises, and we are not in a position at present to take decisions on the matter. But I repeat that the issue with regard to the Virgin cross country franchise relates not to the provision of the services but to the actual cost and the financial arrangements. That is the only issue subject to direct discussion at present.
The Earl of Mar and Kellie: My Lords, the Minister is obviously aware that several of the Virgin cross country services start and finish at stations in Scotland—precisely, Glasgow, Edinburgh, Dundee and Aberdeen. Could the Government really be considering taking off those long-distance trains? They are used to the tune of up to 40 per cent by advanced purchase ticket holders—that is, people looking for pre-planned and seamless leisure travel. At a time when we are trying to encourage rail/air substitution, is it wise to take off the long-distance trains that would allow that rail/air substitution?
Lord Davies of Oldham: My Lords, we have no intention of taking off the long-distance trains. In fact, we take great solace from the fact that after so many years, the West Coast Main Line is subject to a new and substantial improvement with regard to its timetable, and improved services.
What remains is the question of the inter-relationship between long-distance services, serving our main cities, and the question of cross country franchises, and the local rail services as well, which my noble friend Lord Hunt introduced into the discussion. Those complex issues require a clear perspective on them. I merely indicate to the House that at present we are not in a position to make an announcement, but I can allay the noble Lord's particular anxieties.
Lord Berkeley: My Lords, notwithstanding the need for long-distance services, will my noble friend agree to consider whether there is really a need for four InterCity services every hour between York and Newcastle, three north of Preston and quite a few west of Exeter, many of them running nearly empty? Given the overcrowding in many other parts of the network, including local services, is there not a case for a bit of rebalancing of resources?
Lord Davies of Oldham: My Lords, there is always a case for analysis of the best form of service to be provided. It will be recognised that we are involved in a clear analysis of the overall position at present. My noble friend may have a case, but I reiterate the point: all these issues are subject to franchise, for which companies have bid. They are running those services on the basis of the franchises that they hold at present. We are not considering a new franchise for cross country at present. The other franchises fall into place in due course, as their term falls due. Considerations such as the one introduced by my noble friend will be taken account of at that time.

Iraq Survey Group
3.1 p.m.
Lord Wallace of Saltaire Lord Wallace of Saltaire asked Her Majesty's Government:
What is their response to the report of the Iraq Survey Group.
Baroness Amos: My Lords, my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs made a statement on Iraq in another place on 12 October, in which he made clear that the report provides chapter and verse as to why the policy of containment was not working.
Lord Wallace of Saltaire: My Lords, I am surprised, because, as I read the report, the policy of containment was clearly working. Can the Minister explain why the ISG, which, as I understand it, contained British and Australian members as well as Americans, appears to have been accountable only to the US Congress, instead of also to the British Parliament? Does she agree that, in the light of the evident failures of intelligence analysis, the role of the intelligence services and their links to their American counterparts should be a matter for fuller openness and parliamentary accountability, rather than their being answerable only to her Majesty's Government?
Baroness Amos: My Lords, on the noble Lord's second question about the reporting relationships of the intelligence services, he will know that there is a clear process and parliamentary involvement in the scrutiny of the work of the intelligence services. At this point, we see no reason to change those reporting relationships.
The noble Lord's first point has been dealt with a number of times across this Dispatch Box. I understand that the report was made to the United States, but it is of course widely available. It is on the website and open for anyone to read.
Baroness Ramsay of Cartvale: My Lords, does my noble friend agree that the ISG report reveals the frightening success of the web of corruption and bribery with which the Saddam regime tried to snare other parties, especially permanent members of the UN Security Council, into ending UN sanctions and that it also reveals the plans kept in place for restarting the chemical, biological and nuclear programmes of Saddam? Is it not interesting how little attention the media seem to be focusing on that frightening picture of the terrible threat that that regime constituted?
Baroness Amos: My Lords, my noble friend is quite right. While the report confirms that there were no WMD stockpiles in Iraq, it makes very clear Saddam's intention to resume WMD programmes once sanctions were lifted. It shows that he was in multiple breach of UN Security Council resolutions; was pursuing an aggressive
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strategy to subvert the Oil for Food programme and bring down sanctions; and was thus eroding the policy of containment.
Baroness Rawlings: My Lords, as the Minister said, the ISG report contains extensive evidence of the flouting of the UN oil sanctions by Iraq. Can the Lord President give us any further details about the investigation into the alleged corruption of the sanctions regime contained in the ISG report and, in particular, the abuse of the Oil for Food programme? I have been asking about the Oil for Food programme abuse by the UN for many years. Was there any intelligence of that at the time? What steps are the Government taking to press the UN to prevent any similar abuse recurring within its organisation?
Baroness Amos: My Lords, the noble Baroness will be aware that the Volcker commission is investigating the Oil for Food programme. I am unable to give the noble Baroness further details of those investigations today, but if there is further information, I will of course make it available to her in writing. Once the results of the commission are known, the UN will look at them very closely to see what lessons there are to be learnt for other aspects of its programme.
Lord Tomlinson: My Lords, does my noble friend agree that we would be doing the people of Iraq a much greater service if, instead of trying to analyse the genesis of what has happened, we all agreed on where we are now and what needs to be done in future, which is concentrating our efforts on trying to create a peaceful Iraq, a democratic Iraq and a prosperous Iraq? That needs to be our priority and we need to be encouraging the international community to join with us in that process to make it happen.
Baroness Amos: My Lords, although I totally agree with my noble friend, it would be wrong not to recognise the deep feelings that exist on the issue. I respect that, and the Prime Minister and other members of the Government have made it absolutely clear that they respect those differences and that some were very clearly against the war. However, I agree with my noble friend that we need to look to the future. We need to consider what we can do to support the people of Iraq in their pursuit of democracy and to bring security to that country.
The Lord Bishop of Portsmouth: My Lords, the previous supplementary question notwithstanding, do not the Government agree that the heart of the problem for this country over the Iraq war is that there has been a regrettable elision in public discussion of what is, at least for some of us, a debatable reason for going to war in the first place and the supposed beneficial consequences of having done so?
Baroness Amos: My Lords, we made absolutely clear the basis on which we were going to war, which was the failure of Iraq to comply with Security Council resolutions. I have reread the Prime Minister's Statement to Parliament in March last year; I have

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read Statements made by Ministers from the Dispatch Box; and the legal basis for going to war was made absolutely clear. I acknowledge that there are those who disagree with that, but there is a certain amount of rewriting of history here. I strongly believe that, having been a Minister in the Foreign Office at the time, having worked very hard indeed with Foreign Office colleagues to get a second Security Council resolution and remembering that, very close to the point where war was declared, Saddam Hussein and the Iraqi government were asked to comply one last time with a set of conditions to which they did not respond.

Submarine Sales
3.09 p.m.
Lord Garden Lord Garden asked Her Majesty's Government:
What was the net cost of the sale of four Upholder submarines, taking into account procurement costs, maintenance before sale and the price obtained from the Canadian Government.
Baroness Crawley: My Lords, the acquisition cost of the four Upholder submarines was some £900 million at 1992–93 prices. The value of the lease-to-buy arrangement with Canada, which includes the four submarines, training and initial spares, is some 610 million Canadian dollars.
Maintenance and refurbishment costs of the submarines are commercially sensitive, and I am withholding details in accordance with Exemption 13 of the Code of Practice on Access to Government Information.
Lord Garden: My Lords, I thank the Minister for her partial Answer to my Question. I am sure all your Lordships would like to join me in expressing sympathy to the family of the Canadian sailor who so tragically died in that fire and wish a speedy recovery to the other officers who are injured.
The Answer misses the key point about the maintenance. There were some 10 years between the purchase of brand-new submarines and their being sold on to the Canadians. Will the Minister ensure that the Ministry of Defence conducts a full review into whether the maintenance was adequate during that period?
Baroness Crawley: First, my Lords, I should like to say that the Government wish to be associated with the noble Lord's condolences to Lieutenant Saunders's family and friends.
On the issue of maintenance, the submarine met all appropriate Royal Navy standards for acceptance and was ready for the handover on 2 October. She was ready to be brought into operational service. Canada
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decided to purchase the submarines after its teams undertook extensive surveys of the vessels and had thorough negotiations with UK MoD.
Lord Berkeley: My Lords, it is a bit like buying a second-hand car—"one careful owner, very good nick, passed the MoT". I feel very sorry for the people who have been killed or injured. Is there not a case for some independent MoT test on dodgy MoD equipment that gets sold off to other people?
Baroness Crawley: My Lords, it is not at all the situation, as my noble friend puts it, that the submarines were dodgy. Canada decided to purchase the submarines after extensive surveys of the vessels and after negotiations with UK MoD. My noble friend will know that, in defence procurement, vessels are purchased and sold on all the time. For instance, we have recently sold frigates to Chile and Romania.
Lord Astor of Hever: My Lords, these Benches would also want to associate themselves with the condolences expressed by the noble Lord, Lord Garden.
Would the noble Baroness tell the House something of the investigation that is taking place with our Canadian allies on what went wrong with HMCS "Chicoutimi"?
Baroness Crawley: My Lords, a board of inquiry has been convened. I hope that the noble Lord will be interested to know that there is a UK MoD representative on that board, which is now in session. It will investigate the incident thoroughly. It would be inappropriate to speculate on the outcome.
Lord Redesdale: My Lords, have the Government made any provision for litigation or compensation to the Canadian Government? If they have no estimates, could they at least say from which budget that litigation or compensation would be paid?
Baroness Crawley: My Lords, I am afraid that it is not possible for me to speculate on these matters as a board of inquiry has been set up. That board will investigate the incident and we cannot pre-empt the outcome of that inquiry. However, as for the costs of rescue, Canada will not be charged for any efforts to prevent loss of life. But it is far too early to say what additional recovery costs there will be and where those costs will fall.
Earl Ferrers: My Lords, in her original Answer, the noble Baroness gave the purchase price in pounds and the sale price in Canadian dollars. Would she be good enough to keep to one currency and let us know what the price was in pounds?
Baroness Crawley: My Lords, I am sorry, as somebody famously said, I cannot do that in my head just now.

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Falconer of Thornton): My Lords, may I take the opportunity to inform the House that I will be undertaking a ministerial visit to Liverpool and Newcastle on Monday 18 October? Accordingly, I trust that the House will grant me leave of absence.

Housing Bill
3.15 p.m.
The Minister of State, Office of the Deputy Prime Minister (Lord Rooker): My Lords. I beg to move that the Report be now received.
Moved, That the Report be now received.—(Lord Rooker.)
Lord Hanningfield: My Lords, I beg leave of the House to protest at the amendments that we have received today at Report stage—10 pages of detailed amendments. I know that some of them are in response to issues that we raised earlier, but for us to receive them only this morning in order to discuss them this afternoon is quite unacceptable. We have been trying to do what we can about them today, but it is impossible for us to deal with them this afternoon. I hope that the Minister will reconsider his attitude to these amendments at this stage.
Baroness Maddock: My Lords, I associate myself with the comments of the noble Lord. I recognise that the Government tabled these amendments in response to discussions in Committee and to amendments we have tabled. But given that, and given the discussions that have gone on in between—between outside bodies, ourselves and the Government—it was very discourteous not to tell us yesterday that these were being tabled. I hope that the Minister can think again about whether we should discuss them today.
Lord Rooker: My Lords, can I in the most friendly and comradely spirit possible tell the House a story? The amendments have nothing to do with discussions in Committee—although in some ways they could be connected.
I set a deadline for government amendments being tabled for Report stage of 4 October. I said that nothing else would be tabled after 4 October because the Opposition are not getting enough time to consider amendments. The only amendments that were tabled after that date were minor and technical, for which I set a deadline of 6 October.
Last week I resisted blandishments from around Whitehall—from No. 10, the Cabinet Office, the Home Office and ODPM—and I flatly refused to have my name used to table any government amendments of any kind on this issue. That was it, I said—the deadline has gone; we set it in order to have a decent discussion.
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The only reason that this group of government amendments was tabled on Monday evening and published on Tuesday evening was in response to the opposition amendments tabled on the "no rent payable" issue—a shorthand term for this part of the Bill. It was in response to the fact that the Opposition had tabled amendments. If the Opposition had not tabled any amendments, I can assure the House that there would have been no government amendments. because I flatly refused to introduce new business. The only reason that the government amendments were tabled was that, following discussions between my officials and officials representing the two Opposition Front Benches, we had sight of their amendments before the Public Bill Office did. I am just telling the House a story. I am telling it as a story because I understand the annoyance, but we have to get the facts right.
It was only because we knew what was being tabled by the Opposition that I was prepared to say that the Government could table amendments only to opposition amendments. If there are no opposition amendments, I said, then we do not do anything. So it was as a result of the Opposition tabling amendments on the "no rent payable" issue and discussions between the advisers to the opposition parties and my own officials that the Government tabled these amendments. Otherwise we would not have tabled them: I can assure the House of that. That would have been the end of the matter. The Government would have had to settle for the Bill as it was. I do not know what might happen at Third Reading as that is too far ahead.
I regret that the amendments have appeared. They are starred. If we were in another place, where we have proper orders of business—sorry, they have proper orders of business: a slip of the tongue—starred amendments would not be called by the Speaker. If everybody wants to take all the "no rent payable" stuff away today—fine. But it would not make sense to debate the opposition "no rent payable" amendments, because my response to them is the government package. I am not going to debate that. It does not make sense to have that debate.
If we can achieve agreement between now and Third Reading, we are prepared to make amendments to achieve agreement. There is no difference between the Government, the Liberal Democrats and the Conservatives on this. The package is almost agreed, and that was the point of exercise. I am very grateful for that. As I said, if the Liberal Democrats and the Conservatives had not tabled their amendments, the Government would not have had the chance to table their package of amendments in lieu. I had said that there was a deadline and we were going to keep to that. I felt that too much new material had gone into the Bill at the last minute in Committee and that it was not fair on the Opposition. That is the story and where we are.
I hope we can make good progress on the Bill today. I would be quite happy if all of this was taken away as a package, but I cannot say what might happen on Third Reading. I cannot guarantee that this issue will be settled on Third Reading because I do not deal with the

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timetable. This is a big part of the Bill, but there is agreement on it. It is not as though there is disagreement between us on the substance.
I am happy to leave it there. As I said, the government amendments would not have been tabled were it not for the opposition amendments. They were tabled after discussions between officials on both sides.
Lord Hanningfield: My Lords, the Minister's comments are extraordinary. Whenever we table our amendments three days before a Bill's various stages, as we are required to do, will the Government table amendments to those amendments? Is that what he is suggesting? We tabled amendments to a Bill that the Government proposed, but the Minister said that he tabled his amendments because of our amendments.
I can say categorically that there have been no discussions at all with anyone supporting the Conservative Front Bench. Those supporting us knew nothing about these amendments until the middle of this morning. So what the Minister said about talking to us is not true.
Lord Rooker: I repeat, my Lords: my officials had sight of the amendments tabled by the Opposition parties before those amendments went to the Public Bill Office and were published. We knew what was being tabled. That is why we continued the legalistic work on preparing our amendments for tabling. That is the only reason why they were tabled; the matter was otherwise on ice. The final bits and pieces that were put together by parliamentary counsel and the lawyers were proceeded with on the basis that we knew that the two Opposition parties were tabling relevant groups of amendments. Those are the facts.
I watched what was happening last week but was concerned about only one point—that there should be no new government amendments. The only concession was that, if the Opposition were going to raise the "no rent payable" issue and we got a package that we thought was agreeable, it might make sense to bring the package forward. Let us be absolutely clear that such a package is good for the tenants and good for the landlords. I cannot be accountable on this. I am simply repeating the fact that my officials had lots of discussions in the Friday-Monday period and into the middle of last week to find out what was going to happen.
Noble Lords opposite can shake their heads. I am not saying that they were deeply involved. I was not deeply involved. I was simply on the receiving end of the possible results of discussions. The bottom line is that the government amendments on this package were not going to be tabled at all. This issue was not going to be reraised, and we would have had to live with the Bill, inadequate as it is, simply because the 4 October deadline had been missed due to various protracted discussions in Whitehall. Once the deadline had been missed, I said, "That's it. We are not doing it".
Lord Roper: My Lords, I do not want to prolong this too long. Problems sometimes occur in our first week back because we were not here the previous week when
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some of the conversations that might have taken place did not occur. However, this situation was extremely unfortunate. If this type of situation arises in future, I hope the Minister will at least inform the Opposition parties when such amendments have been tabled on the eve of their debate. It would have been possible to do that by e-mail or in other ways. If that had happened we would have a much easier situation than the rather tense one we face. I believe everyone is working towards the same objective. I hope that, today or in the future, we will find the right way to solve this. There really was an unfortunate lack of communication.
Report received.
Clause 3 [Local housing authorities to review housing conditions in their districts]:
Lord Rooker Lord Rooker moved Amendment No. 1:
Page 4, leave out line 2 and insert—
"(iv) Chapters 1 and 2 of Part 4 (management orders);"
The noble Lord said: My Lords, grouped with Amendment No. 1 is a substantial group of government amendments that were tabled by 6 October. I make no point about that because these are not major amendments. The amendments are split into about six groups. I shall briefly outline the substance of each group. It will not delay the House very long.
Amendments Nos. 1 to 37, 78, 218, 224, 226 and 237 provide that where reference is made to interim or final management orders under Part 4, that reference is amended to include all management orders under Chapters 1 and 2 of Part 4. In effect, the references are amended to include empty dwelling management orders. This group of amendments is consequential on the introduction into Part 4 of empty dwelling management orders. We introduced those in Committee.
Amendments Nos. 47, 51, 52, 80, 81, 225, 227 and 228 provide that where a reference was previously to interim or final management orders under Part 4, the reference is amended to include only management orders made under Chapter 1 of Part 4. In effect, the references are amended so as to exclude empty dwelling management orders.
Amendments Nos. 88, 94 and 139 replace the existing interpretation provisions in Clause 97(5) and (6) and Clause 105(6) with a new interpretation provision sited at the end of Part 4. The effect is that the new interpretation provision applies to the whole of Part 4.
Amendments Nos. 140, 141 and 142 update the index of expressions within Part 4.
Amendments Nos. 80, 93, 95, 114 to 148, 137, 143, 144, 108 and 104 introduce new provisions in respect of the right of third parties in connection with interim and final management orders. Almost identical provisions are already in the Bill in connection with empty dwelling management orders. The amendments provide that where a third party has an estate or interest in the property and can exercise those rights—for example, to restrict the number or types of persons who can occupy the house or, in the case of a mortgagee, prohibiting letting—those rights do not apply when an order is in force.
The amendments also provide that a person whose rights have been disapplied may make a claim for compensation to the local authority in respect of that loss. If the claim, or the amount of compensation, cannot be agreed with the local authority that person can refer the matter to a residential property tribunal for determination of the issue.
On Amendment No. 107, Clause 118 is concerned with revocation of final management orders and is drafted in the same form as Clause 108, which deals with the revocation of interim management orders. However, the word "other" that appears in subsection (4)(b) of Clause 108 is missing from the corresponding provision in Clause 118. This amendment rectifies the omission.
Amendment No. 138 is intended to address an issue raised by the noble Lord, Lord Hanningfield, during our debate in Committee on 13 September, with regard to empty dwelling management orders. The noble Lord asked whether we would give further consideration to the legal complexities that might apply where an EDMO is proposed in respect of a leasehold dwelling and whether, in fact, given those complexities, the power ought to be confined to freehold interests only. The issue is equally relevant to the operation of interim and final management orders under Chapter 1 of Part 4.
We consider that it is essential that these powers apply to dwellings that are subject to leases. Indeed, if they did not, it would provide a significant loophole for owners who wanted to be obstructive. They would simply have to enter into a sub-lease with a person who had no intention of occupying the dwelling to put the dwelling out of the scope of the Bill. The amendment provides for regulations to be made by the appropriate national authority to supplement the provisions of Chapters 1 and 2 of Part 4 where a local housing authority is treated as a long leaseholder under a management order.
3.30 p.m.
The intention of the management order is that the local housing authority takes over the management functions of the property but leaves the ownership in the hands of the original owner. That owner is still able to dispose of his interest in the property or indeed to mortgage it. In the case of a property held on a long lease, it may not always be apparent whether a particular function relates to management or ownership. Some situations might arise where there is a mixture of both.
The new provision in the amendment will permit regulations to be made by the appropriate national authority to clarify who must act or who is entitled to do what in such cases. The delegated power is limited as it permits only the making of provisions supplemental to Chapters 1 and 2 of Part 4. It does not extend to overriding any provision in the Bill or any other enactment. The new clause sets out examples of how the power may be exercised; for example, to identify the rights and liabilities of the local authority, the original leaseholder and other persons having an estate or interest in the property. I beg to move.
On Question, amendment agreed to.
Clause 4 [Inspections by local housing authorities to see whether category 1 or 2 hazards exist]:
Baroness Hanham Baroness Hanham moved Amendment No. 2:
Page 4, line 34, at end insert—
"(c) a group of not less than ten electors registered on the electoral roll within that parish or district."
The noble Baroness said: My Lords, the amendment is short, simple and clear. We hope that, unlike the last time, the Minister will have a change of mind and accept it. Unlike the previous amendment on the issue, Amendment No. 2 now specifies the number of individuals within a particular parish or district that would have to come together to register an official complaint about the condition of a local property.
I readily admit that we are never going to get the exact number perfect. However, we believe that 10 or slightly more individuals is a suitable figure to have a shared concern that should be investigated by the relevant housing authority. In specifying the number of individuals required in that context we are placing a safeguard against individuals bearing grudges who could make repeated complaints.
We should surely encourage local people to become more involved in their neighbourhoods, including involvement with the state of local housing. What better way to do that than by giving them an avenue to raise legitimate concerns, albeit that they will not be able to do so on their own but will have to obtain the support of other people who live nearby? I beg to move.
Lord Bassam of Brighton: My Lords, we debated this issue before in Committee. Our arguments against it are substantially the same, but I can of course see the point at which the noble Baroness is trying to arrive. It was one of the subjects that my noble friend Lord Rooker addressed in his follow-up letters to colleagues after the Committee sittings.
We had a thorough debate on the clause's operation in Committee and it would not be right for me to repeat all the points that were made then. To summarise, Clause 4 replaces Section 606 of the Housing Act 1985—legislation passed during the noble Baroness's party's time in government. That section places a duty on the proper officer of a local authority to make a report to the authority if he considers that a dwelling house or an HMO is unfit for human habitation or that an area should be dealt with as a clearance area.
It also requires the proper officer to inspect the property or area in response to a complaint from a justice of the peace or a parish or community council that the property is unfit or that the area should be cleared. Government amendments in another place reduced the prominence the clause appeared to give to complaints made through justices and parish and community councils, which the noble Baroness will recognise are in the minority. It gives more emphasis to the day-to-day responsibility of authorities to determine whether an inspection is necessary, both in response to complaints and as a follow-up to their reviews of housing conditions in their area.

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Subsection (1) now requires a local authority to consider whether to inspect a property in its area or to establish whether there is a category 1 or category 2 hazard. That duty can arise either from the review of housing conditions under Clause 3 or for any other reason. The designation as official in subsection (3) of complaints by a justice or a parish or community council is certainly not intended to denigrate the importance of other complaints of the kind that local authorities receive directly in the ordinary conduct of business.
We think that Clause 4 strikes a reasonable balance between the need for a tenant to have access to someone to complain to and the need for an authority to conduct its business efficiently and effectively. Amendment No. 2 would add 10 electors from the electoral roll to those who can make an official complaint. The attempt to make official complaints from other sources does not help us any more than the previous attempt to amend the clause.
I am sure that the noble Baroness will not object to my using the same arguments that we set out in our correspondence on 11 October dealing with a number of points made in Committee. One of those was that a tenant who is aggrieved by an authority's failure to act on a complaint need only find the nearest justice of the peace to ensure that the complaints are dealt with and an inspection undertaken. It may be impossible and may not be appropriate to engage 10 or any other number of registered voters that could be proposed in a complaint relating to the living conditions in an individual dwelling.
In seeking to protect local authorities from an abuse of the process the noble Baroness may inadvertently ensure that those with genuine grievances who need to have their complaint made, heard and recognised, may make things so much more complex in terms of the time and effort required that it will have a serious and perhaps adverse impact on the point of the aggrieved person. I hope that she will feel able to withdraw her amendment.
Baroness Hanham: My Lords, I thank the Minister for his reply. I am of course aware of the extensive and detailed responses we received. The amendment seeks precisely to support a tenant aggrieved by the local authority's failure to act. We are talking about a local authority that will not move and has done nothing, where there is still a requirement to give an extra oomph to what it is going to do. The amendment would not rule out a tenant being able to go to a justice of the peace, nor would it rule out the parish or community council making a complaint. It would add an extra limb, which is that if a small number of people also supported that view it would be termed an official complaint.
I do not understand the Government's obduracy. We all want to ensure that local authorities inspect properties that are deficient and causing problems. It is unfortunate that the Minister will not accept the amendment, but in the light of his obduracy I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Baroness Hanham Baroness Hanham moved Amendment No. 3:
Page 5, line 9, at end insert—
"(8) The authority must make available to any interested parties upon request, written or verbal, any report made to them under subsection (6)(b)."
The noble Baroness said: My Lords, in moving the amendment I shall speak also to Amendments Nos. 39 and 40. We are trying to bring greater transparency to the process of a local authority making a demolition order and establishing whether a category 1 or 2 hazard exists in a property. Those are serious steps that local authorities can take. Some of their decisions may be controversial. We therefore have a duty to ensure that as many people as possible are aware of what is happening within a neighbourhood and of the decisions being taken by the local authority.
In Committee the noble Lord, Lord Bassam, commented that he understood the intent behind the group of amendments and was slightly sympathetic towards them. I hope he is in as good a mood today as he was then, as I hope to convince him of the worth of including these amendments in the Bill.
The Minister asked us a number of questions, such as who was an interested party and how a local authority was to determine that. The short answer to that is anyone who has an interest. Why is there a need to define such a person? Surely if people make the effort to contact a local authority to ask for this information they could, indeed, be deemed to be interested parties.
This is specialist detailed information. It is highly unlikely that an authority would be inundated with hundreds of requests for the latest copy of the council's decisions in regard to demolition orders. The Minister's bedtime reading may well be in such areas but I assure him that that is unlikely to be the case for the rest of the community.
The Minister also thought that there was a vagueness about the oral request and the way in which such a request was logged and made clear in the local authority. However, there can be no vagueness in that regard. If you call into your local town hall and speak to someone in person, or pick up the phone to the council, give your name, details and make a complaint, there is no vagueness. Local authorities receive requests for planning applications and other material all the time and therefore it cannot be beyond them to deal with this matter.
I suspect that the Minister has not been swayed by my commonsense approach. However, he mentioned in Committee that it would be difficult to stop people obtaining this information under the Freedom of Information Act. Therefore, if he can give me a definite assurance that such decisions and information are, indeed, covered under that Act I shall be satisfied and not press the amendments further today. I beg to move.
Lord Bassam of Brighton: My Lords, the noble Baroness asked whether I was in a good mood today. I am in a good mood but if she keeps saying that I am obdurate, I am not so sure that I shall stay so happy. I am feeling very generous but I am afraid that my

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generous spirit does not necessarily extend to agreeing to these amendments. As the noble Baroness said, the amendments are identical to those tabled in Committee. I am afraid that our arguments against them are also substantially the same. We covered the matter in the detailed correspondence that was circulated. We had a thorough debate on the issue in Committee and I do not want to repeat everything that was said then.
However, the noble Baroness is right to draw our attention to the issue of freedom of information. I believe that I argued in Committee that the Freedom of Information Act 2000 ought to be the conduit for the release of information by central and local government, and I stick by that point. The Act provides a right of access to recorded information held by local authorities although, of course, it creates some exemptions from the duty to disclose information in certain cases. Obviously I cannot be specific as without the details of a particular case in front of me it would be wrong of me to say whether or not a request for a copy of a report by an inspector carried out under Clause 4 would be exempt. I do not want to speculate about that. The matter would depend very much on the circumstances although my general feeling is that in most cases the information probably would not be exempt. It certainly would not be if it conformed with the legislation and the Data Protection Act 1998. The measure will probably go some way to provide the necessary rights to access information that is held by local authorities. I believe that we can agree that local authorities have a good record of being open and sharing information with members of the public.
The other important point here is that we are talking about a relatively small number of official complaints that we expect to be made under Clause 4. The circumstances under which the terms of the amendment would be likely to be used would probably be very limited indeed. Therefore, we believe that the amendment is unnecessary. Clearance declarations must follow the very careful procedures that are set out in Section 289 of the 1985 Act, which require very careful consideration before a clearance order is confirmed. Authorities will need to be open about their intentions should they subsequently decide that they want to confirm a clearance declaration.
I do not see that there is likely to be an information deficit here. Local authorities have a good track record. The public will have access to information rights under the Freedom of Information Act 2000. I believe that in nearly all circumstances there will be little difficulty in members of the public gaining access to the kind of information that an inspector might provide. I hope that with those reassuring words, and certainly given the spirit of what we are trying to achieve through the Freedom of Information Act and the Data Protection Act, the noble Baroness will not press the amendments.
3.45 p.m.
Baroness Hanham: My Lords, I thank the Minister for his reply. We shall have to hope that the Freedom of Information Act is applicable to the circumstances that I have described. Like the Minister I do not think
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that the number of people seeking this information will be enormous. However, it is very likely that those who do seek this information will be entitled to have it.
I noticed that the Minister did not refer to an error in the previous version of the Bill which I believe has now been corrected. I believe that there was a misprint under subsection (6) of the clause. I understand that that matter is now covered in subsection (2). I am sure that the Minister will want that to be recorded in Hansard. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 5 [Category I hazards: general duty to take enforcement action]:
[Amendments Nos. 4 and 5 not moved.]
Clause 7 [Category 2 hazards: powers to take enforcement action]:
[Amendments Nos. 6 and 7 not moved.]
Clause 8 [Reasons for decision to take enforcement action]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 8:
Page 7, line 29, at end insert—
"( ) Where the enforcement action relates to a category 2 hazard the statement prepared under subsection (2) must include a statement of why the authority has decided that it considers it necessary to take any action rather than taking no action at all."
The noble Lord said: My Lords, due to the potentially different situations that could fall within the scope of category 2 hazards, it is important that environmental health officers identify why it is necessary to take some kind of action in the first place.
Currently, Clause 8 requires the authority to explain why it has decided to take a particular course of action. The purpose of the proposed new subsection would be to ensure that the authority explained why it was taking action in the first place as well as then going on to explain the course of action it considers to be most appropriate. Again, it is important that resources are not concentrated on trivial matters. The need to explain why it is necessary to take action in the first place will lead to better decision-making. It will also enable the recipient of the notice to decide whether it is appropriate to appeal. The notice should explain why the action needs to be taken. The current wording of Clause 8 has not addressed this particular aspect. I beg to move.
Lord Rooker: My Lords, I say to the noble Baroness, Lady Hanham, that I had a really interesting reply to Amendments Nos. 4 and 6.
Clause 8 was added by a government amendment in Committee. It was added in direct response to the Joint Committee on Human Rights. It requires a local authority to give reasons to a person on whom a notice is served for the choice of a particular course of action rather than another under Clauses 5 or 7.
Amendment No. 8 would require that when enforcement action relates to a category 2 hazard the statement prepared under subsection (2) of the clause must include a statement on why the authorities decided to take action rather than taking no action at all. Such an amendment is unnecessary. Clause 8 already covers

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category 2 hazards. An improvement notice must give details of the hazard. Under Clause 8, it follows that a reason for the action is an explanation of why any kind of action was necessary. Otherwise, the authority would use its discretion not to act in the first place.
That sounds a bit convoluted, but the clause, which is thoroughly justifiable, is a direct result of the work of the Joint Committee of both Houses. The amendment is not necessary to do the job that the noble Lord thinks is required, so I hope that it will not be pursued.
Lord Hanningfield: My Lords, I thank the noble Lord for that answer. Obviously, I was pleased that the amendment was added by the Government in response to the Joint Committee's report. I have to accept what the Minister said. I was only trying to improve the Government's amendment, but if the matter is covered by this latest amendment, I must accept it. I beg leave to withdraw the amendment.
Amendment, by leave. withdrawn.
Clause 9 [Guidance about inspections and enforcement action]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 9:
Page 7, line 40, at end insert—

"(e) the new qualifications and training required by Environmental Health Officers to undertake these functions,

(f) the nature and expenditure of time required so that these functions may be considered to have been properly fulfilled,

(g) the circumstances in which they may be required to compensate landlords for costs incurred in the carrying out of their functions,

(h) their functions in relation to fire safety legislation and in particular consideration he given to the installation of automatic fire sprinklers in HMOs."

The noble Lord said: My Lords, Part 1 of the Bill introduces the health and safety rating system involving an assessment of residential accommodation, and sets out the options to enforce compliance. It allows for guidance to deal with enforcement decisions, which will be issued either by the Secretary of State or the Welsh National Assembly.
The purpose of the amendments is to set out in the guidance the matters that should be considered when any decision is taken, whether in relation to setting enforcement action or appeals. It is vital to take into account the age and character of a property, as one cannot easily bring all properties up to modern standards.
There are similar problems with listed buildings, when a balance has to be drawn between historical features of the building and the cost of any work, which it is important to ensure is not unreasonable. If it is excessive, it will be passed on in higher rents. A similar amendment was tabled in Committee, when the Minister said that guidance would be an appropriate way forward. The amendment results from the Minister's comments.
Amendment No. 46 is similar to Amendment No. 10. Throughout, the Government have maintained that they want to ensure a light touch in regulation—particularly
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on licensing of houses in multiple occupation. However, that is not stated anywhere in the Bill. On the contrary, the Bill provides for what could be a very heavy-handed approach, which is unnecessary in many cases.
Implementation of the Bill is in the hands of local authorities. The Government have acknowledged throughout that the private rented sector consists mainly of very small businesses. With the buy-to-let boom, a majority of landlords own fewer than three properties. There is therefore a considerable risk of disinvestment if heavy burdens are placed on small landlords. It is vital to recognise that many HMOs provide relatively low-cost affordable housing. Those will be lost to the market if over-the-top requirements are imposed.
The amendment is intended to emphasise the matters that the authorities should consider when making decisions relating to HMO licensing under Part 2 of the Bill. It sets out the factors that should be considered when any decision is made, whether in setting standards or imposing conditions.
It is vital to take into account the age and character of a property, otherwise we shall have new wine in old bottles. We cannot easily bring Victorian and Edwardian properties up to modern standards. Similarly, there are problems in dealing with listed buildings when, as I said, a balance has to be drawn against the historical features of the building.
By accepting the amendment, the Government would go some way to reassuring landlords that light touch regulation will become a reality. I beg to move.
Lord Rooker: My Lords, I shall deal with Amendments Nos. 9, 10 and 46 in that order, and separately. Amendment No. 9 is identical to the one tabled in Committee by the noble Lord. I appreciate that his concerns continue. The arguments against the amendment are substantially the same. Fears continue about the housing health and safety rating system and how it will operate. I shall try to allay those fears again as I have obviously not succeeded in Committee.
Clause 9 enables the appropriate national authority to give guidance to local housing authorities on the exercise of their functions under Part 1. That guidance will be about how properties are to be assessed using the new rating system and how authorities may act by using the enforcement options provided under Part 1.
Amendment No. 9 would add to the topics on which guidance may be given. I understand the desire to give a high profile to fire safety. I would certainly agree to that as it should be considered one of the important matters to which authorities must have regard. It is very important, as are all the other 28 hazards, should they be present to a serious degree.
We answered many of the points raised by the noble Lord in Committee, which I shall summarise again without going into great detail. First, I refer to the qualifications for environmental health officers. The new housing health and safety rating system is a change in approach, but it is still essentially an enforcement tool. It is not the first time that there has

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been a change to this kind of checking on properties, so environmental health officers are well versed and trained in swapping from one system to another. I hope that this system will be a vastly superior tool compared with the one that it replaces.
Environmental health officers are already well trained in risk assessment methods and can cope with the rating system in principle and practice. We therefore do not see a need for a new qualification, and have no evidence that the profession is asking for one. We accept the need for training to ensure that environmental health officers are familiar with the new system. They certainly need briefing and training in far more detail than Ministers receive. I remember being taken through the new process some considerable time ago. Even my refresher was before the draft Bill was published. I fully accept that professionals on the job will need to be trained, and we shall ensure that there is adequate training and will fund the start-up of such training.
The amendment envisages that guidance can advise in every case on how long an inspection could or should take. Inspections are likely to differ considerably. A Part 1 function as regards a category 1 hazard will have been fulfilled once the authority has carried out an inspection under the regulations to be prescribed under Clause 2, and has then taken appropriate action required under Clause 5.
New subsection (1)(g), which would be inserted by the amendment, does not make it clear in what circumstances authorities may need to compensate landlords. Landlords will have the right to appeal against improvement notices and prohibition orders, and compensation may be an outcome of an appeal. But compensation should be dealt with on appeal, when the expertise of the residential property tribunal will be available. We do not believe that compensation is a matter for Clause 9 guidance.
Advice on fire safety, as well as the advice on cold and damp, full structural problems and all the other problems that can arise will appear in the technical guidance to be given under Clause 9. The rating system is a form of risk assessment, which the new technique is all about. However, it is clear that houses in multiple occupation are likely to contain higher risks in relation to fire safety. There should be adequate means of escape from fire from all parts of a house in multiple occupation. Fire precautions and fire-fighting equipment will be required. The guidance under Clause 9 will deal with that and will be as comprehensive in its treatment of fire as the other hazards. It is also worth remembering that housing authorities will need to consult the fire authority over fire safety action. We believe that the legislation already contains sufficient references to fire safety.
The purpose of Amendment No.10 is to add further topics that the appropriate national authority may—not must—include in the guidance under Clause 9. I explained that the guidance under Clause 9 will fall into two categories: guidance about the way in which properties are to be inspected; and the way in which hazards are to be assessed using the new rating system.
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I shall not try to argue that authorities should consider at least some of the topics in the amendment, but we do not think that it is necessary to provide for those separately. If some were listed, that would seem to imply that others not mentioned were unimportant, whereas of course that might not be the case.
4 p.m.
Some of the items listed in the amendment are obviously not ones that can be dealt with in detail in broad guidance. For example, the nature and extent of works carried out will depend on the hazard. The effect of an improvement notice under Clause 1 I must be to remove a category 1 hazard, although it could of course go beyond that. What will it take to remove a hazard from cold in a particular property? It will be for the authority to decide how that hazard could be mitigated and therefore the extent and nature of the cost of the works. If no one has the resources and the remedial work cannot be started, the authority will have to consider a prohibition order. All those issues can be included where there is something useful to say in the guidance.
We have consulted on the draft enforcement guidance and we shall work through that in consultation with the key stakeholders to ensure that the guidance is as helpful as possible. Clearly, for example, we need to say something about listed buildings. But we think that to write some items on the face of the Bill is to invite additions on every single topic until we end up with something that looks like an index to the guidance itself. That would be going too far, but I am confident—and I hope that the noble Lord will take it from me—that we can cover these issues in the guidance.
I turn to Amendment No. 46. I fully accept that an amendment along the same lines was tabled in Committee in relation to general functions under Parts 1, 2, 3 and 4 and, indeed, Part 7. I agree with the spirit of the amendment. It is common sense that local authorities should have regard to the matters listed in items (a) to (f) in the amendment in exercising their houses in multiple occupation functions.
During our debate on HMO licensing, we sensed that both sides of the House trusted, and indeed had to trust, the local authorities to do things properly and to exercise their discretion in an appropriate way. We have no reason to believe that a reasonable local authority will not take into consideration the matters listed, but we think that it is a step too far to put them on the face of the Bill as a statutory duty.
The primary function of a local authority under Part 2 is to ensure that a licensed house is suitable for the number of occupants for which it is licensed, although it should take account of the age of the building or the costs likely to be incurred in requiring works to be carried out. We do not think that an authority should follow sets of principles that might thwart it in carrying out its primary function. On the other hand, what can be required may already be limited by statute, such as where listed building consent may be required.
We do not think that the amendment is necessary as, in most cases, local authorities will take account of matters such as those listed in the amendment. If, in a few cases, they fail to do so, the licence holder will have recourse to appeal against that decision. Therefore, a heavy-handed, unreasonable local authority cannot come along and put onerous conditions on property owners because there will be a perfectly reasonable appeal system in which people will have confidence. The noble Lord may want to come back to this point at Third Reading, although I sincerely hope that he does not.
We are confident that these issues will be covered, but if we start filling the Bill with too much detail, we shall end up wanting to put in even more. I hear myself saying things that I used to criticise Ministers for saying years ago when I was in Opposition in relation to similar amendments. It is so true, but I can well see the damage that would be done to the Bill if we put in some things and left out others, which people would then think were not important. That would send the wrong signals.
Lord Hanningfield: My Lords, I thank the Minister for that detailed reply. As he will acknowledge, I was trying to be helpful by tabling these amendments. Local authorities have to implement most of this area of the Bill and, as I know them pretty well, I think that they will do it well.
I was pleased to hear the Minister say that there will be some finance for training. I do not know how that will be provided but it will be important as many of the measures will be implemented by very small local authorities which sometimes have very few resources. They may well need extra finance and support in order to do so.
The Minister said many times that the whole matter is relative to guidance. I hope that between now and Third Reading he will be able to help us a little by writing to us and amplifying the matter. He mentioned that we may want to return to the issue at Third Reading. If it is not clarified a little more between now and Third Reading, we may have to do that. I totally accept that one does not want to put all that detail on the face of the Bill, but we want to make the Bill work well, particularly from a local authority point of view. I heard what the Minister said and I hope that it will be possible to amplify matters for us a little more in writing between now and Third Reading.
Lord Rooker: My Lords, whatever we have available, I shall be happy to share with noble Lords and noble Baronesses opposite.
Lord Hanningfield: My Lords, I thank the Minister for that and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 10 not moved.]
Lord Hanningfield Lord Hanningfield moved Amendment No. 11:
Page 8, line 3, leave out "before" and insert "in seeking an affirmative resolution of"
The noble Lord said: My Lords, Amendment No. 11 would ensure that any guidance issued under this clause in regard to inspections or enforcement was properly scrutinised by both Houses of Parliament rather than simply published by the Government. In Committee, the Minister commented that he was willing to go away and have a look at this amendment to consider its merits. I hope that today he is able to give us a positive answer.
Given the encompassing nature of Clause 9 and the power that the appropriate national authority would have under its terms, I feel it is important that Parliament has an opportunity to consider any further guidance that is to be published. I believe that is a sensible and democratic way forward. I beg to move.
Lord Bassam of Brighton: My Lords, indeed, we did agree to think again about this matter, but I am afraid that we have come to the same conclusion that we drew previously. The guidance to which the noble Lord referred will deal essentially with technical matters and, of course, the enforcement options available. It is right that we should debate these issues energetically. We believe that we have the balance about right with the guidance being subject to the negative resolution procedure. That should not preclude Parliament giving active consideration to the issues covered by the guidance and it should ensure that those issues are dealt with properly and soundly.
We consider that the quality of the guidance is essential to the proper operation of Part 1 of the Bill, and I can give the noble Lord the assurance that we shall consult extensively on that matter because we want to ensure that we get it right. However, at this stage, we are not persuaded that it is necessary for the guidance to be subject to the affirmative resolution. I am not aware that the Delegated Powers and Regulatory Reform Committee has encouraged us to think again about this matter. By and large, we stick very largely to the committee's advice and guidance on these matters, and it did not draw out this issue for our attention. We think that we have this about right.
However—I want to make this clear to the noble Lord—we think that the consultation will be very important and we look forward to receiving comments, particularly from the Local Government Association and the professionals involved.
Lord Hanningfield: My Lords, I thank the Minister for that reply, although I am disappointed that the Government have obviously not been able to look at the matter again, as they said they would in Committee.
It is good to hear that there are to be extensive consultations. In discussing which areas of guidance it is important should be on the face of the Bill and which should not, we return to our debates on previous amendments and discussions on when things probably do not need to be on the face of the Bill or to be

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scrutinised by Parliament. Between now and Third Reading, we must assess what we consider to be the really important issues.
As I said at the previous stage, I hope that the Government will also give some thought to the matter in order that we can work together to achieve a balance before Third Reading. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 11 [Improvement notices relating to category I hazards: duty of authority to serve notice]:
Lord Rooker Lord Rooker moved Amendments Nos. 12 and 13:
Page 9, line 9, leave out "interim or final".
Page 9, line 10, after "under" insert "Chapter 1 or 2 of".
On Question, amendments agreed to.
Clause 12 [Improvement notices relating to category 2 hazards: power of authority to serve notice]:
Lord Rooker Lord Rooker moved Amendments Nos. 14 and 15:
Page 10, line 11, leave out "interim or final".
Page 10, line 12, after "under" insert "Chapter 1 or 2 of".
On Question, amendments agreed to.
Clause 14 [Suspension of improvement notices]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 16:
Page 11. line 28, at end insert—
"(6) An improvement notice shall be suspended where the occupier of the premises impedes or obstructs a landlord from complying with the notice.
(7) Such suspension shall continue until the tenant allows the necessary work to proceed unimpeded or the landlord requires vacant possession.
(8) An improvement notice shall be suspended where following the service of the notice, the landlord has put in hand measures to cause the property to revert to single household occupancy."
The noble Lord said: My Lords, Amendments Nos. 16 and 17 attempt to clarify the status of improvement notices should the property revert from multiple to single occupation. That is to ensure that if a notice were issued to complete improvement work, but the state of the property were to change in the interim—should the property change hands or, as is more specific to the amendment, should a landlord cease to rent out the property and decide to change it to single occupancy—the authority could issue a fresh notice that was applicable to the property under its new status and the status of the original improvement notice would be revised.
Amendment No. 17 is designed to clarify the position of landlords who are faced with obstructive or unco-operative tenants. Under our amendment, the landlord would not be liable for incomplete work or, being unable to undertake any of the work in the notice, if he was prevented from doing so by the tenants.
We believe that these are important amendments so we are tabling them again. The Minister commented in Committee that he had some sympathy with them, but was reluctant to commit himself in full. I would ask him: do they not highlight a genuine area of possible concern? Amendment No. 16 clearly picks out a weakness in the Government's argument where one has a hazard of an obstructive tenant, in effect, prohibiting work on a category 1 hazard to go ahead.
The Minister also commented that it was in the hands of the local authority to decide whether an improvement notice should be revoked if a property reverts back to single occupancy. I am afraid that to us that seems a little hit and miss. I am all for local discretion, but we might be faced with a differing application of this understanding from one local authority to the next. Surely, we need something on the face of the Bill that would make it clear what was required of an authority were such a scenario to arise.
I hope that the Minister can give us some more positive news on these amendments today, or at least ask his officials to have another look at them before Third Reading. I beg to move.
Lord Bassam of Brighton: My Lords, as the noble Lord said, these amendments have been debated before. Clause 14 provides for the suspension of an improvement notice made under either Clause 11 or Clause 12 at the discretion of the local authority until a time or the occurrence of an event specified in the notice. Under subsection (2), the time specified may coincide with a change of occupancy. Subsection (3) provides that a specified event may be a breach of an undertaking made by the owner or landlord. Those examples do not prevent other times or events being set out.
We certainly accept that there are some concerns and that those valid concerns fuel this amendment, but we cannot rule out that a tenant may fail to co-operate with the landlord in carrying out remedial work required under an improvement notice. That said, we remain unconvinced that we need a specific provision which relieves the person on whom an improvement notice is served of the responsibility for complying with it, even if he is obstructed in carrying out the necessary remedial works.
It cannot be in anyone's interests that enforcement action, on which the local authorities will have embarked for a very good reason, should simply be deferred because the person on whom the notice is served has run into some difficulty. While Clause 29 makes it an offence to fail to comply with an improvement notice that has come into operation, it is of course a defence in any proceedings that the person on whom the notice was served had a reasonable excuse for failing to comply with it.
In my view, this provision strikes the right balance. We need to bear in mind that the improvement notice has been served in order to deal with a hazard from which people in most cases occupying these premises need some form of protection. Normally, that would be a very serious situation indeed. We do not believe that the first of the two amendments would work very well.
Clause 16 imposes duties and powers on the local authority in relation to the revocation of an improvement notice. An improvement notice must be revoked where the local authority is satisfied that the requirements of the notice have been complied with. In the case of a notice served in response to a category 1 hazard, the authority may revoke a notice only if' it is satisfied that there are special circumstances making revocation appropriate.

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In the case of a notice served in response to a category 1 hazard in a house in multiple occupation, the local authority may come to the view that reversion of the premises to single household occupancy amounts to special circumstances. But I suggest to the noble Lord that this is a matter that the authority should be free to decide. After all, we hear much from the noble Lord about local authorities being free to make their own decisions. We believe that this is one of those circumstances. It does not follow that reversion has eliminated the hazard, of course, or made it less severe. That would depend on the hazard itself and where on the premises the hazard occurs.
I accept that in the generality of cases risks from fire are greater in HMOs than in single household premises. Therefore, the kind of fire precautions required in an HMO might no longer be appropriate, but other equally dangerous hazards may remain, irrespective of the type of property. For that reason I cannot agree that local authorities' discretion should be removed from them entirely when a property reverts. We believe that such decisions are best left closest to where they need to be made and in the hands of the local authorities. I hope that, having heard that, the noble Lord will withdraw the amendment.
4.15 p.m.
Lord Hanningfield: My Lords, I thank the Minister for that reply. It is somewhat similar to that given in Committee and not as helpful as one may have hoped for, particularly in the case of a house reverting to single occupancy, which would change the situation. There should be some clarity on that situation. I shall consider further whether to pursue the matter at the next stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 16 [Revocation and variation of improvement notices]:
[Amendment No. 17 not moved.]
Clause 20 [Prohibition orders relating to category 1 hazards: duty of authority to make order]:
Lord Rooker Lord Rooker moved Amendments Nos. 18 and 19:
Page 14, line 7, leave out "interim or final".
Page 14, line 8, after "under" insert "Chapter 1 or 2 of".
On Question, amendments agreed to.
Clause 21 [Prohibition orders relating to category 2 hazards: power of authority to make order]:
Lord Rooker Lord Rooker moved Amendments Nos. 20 and 21:
Page 14, line 44, leave out "interim or final".
Page 14, line 45, after "under" insert "Chapter 1 or 2 of".
On Question, amendments agreed to.
Clause 24 [Operation of prohibition orders]:
[Amendment No. 22 not moved.]
Clause 28 [Hazard awareness notices relating to category 1 hazards: duty of authority to serve notice]:
Lord Rooker Lord Rooker moved Amendments Nos. 23 and 24:
Page 18, line 27, leave out "interim or final".
Page 18, line 28, after "under" insert "Chapter 1 or 2 of".
On Question, amendments agreed to.
Clause 29 [Hazard awareness notices relating to category 2 hazards: power of authority to serve notice]:
Lord Rooker Lord Rooker moved Amendments Nos. 25 and 26:
Page 19, line 37, leave out "interim or final".
Page 19, line 38, after "under" insert "Chapter 1 or 2 of".
On Question, amendments agreed to.
Clause 35 [Power of court to order occupier or owner to allow action to be taken on premises]:
Baroness Hanham Baroness Hanham moved Amendment No. 27:
Page 22, line 22, after "court" insert "or county court"
The noble Baroness said: My Lords, the purpose of Amendments Nos. 27, 28 and 29 is to give the county courts consent order current jurisdiction with magistrates' courts, to make orders to allow action to be taken on the premises. Obtaining access or facilities to carry out works can cause difficulties to owners served with notices. Experience has shown that some tenants are not willing to allow work to be done.
The advantage of an application to the county court is that the county court can make an order, breach of which is punishable as an offence. It can make a mandatory order which can be enforced by a fine and/or imprisonment, so it becomes a criminal matter. Very usefully, that can include the power to suspend a committal order. The judge can allow the tenant in such a situation time to comply with the sanction of imprisonment in default. That can be a useful means of dealing with someone who is particularly recalcitrant when it comes to allowing work to be done. I beg to move.
Lord Rooker: My Lords, I may be able to satisfy the noble Baroness by pointing out to her that the magistrates' court orders can be dealt with in exactly the same way as county court orders. Section 63(3) of the Magistrates' Courts Act 1980 states:
"Where any person disobeys an order of a magistrates' court … to do anything other than the payment of money or to abstain from doing anything the court may—

(a) order him to pay a sum not exceeding £50 for every day during which he is in default or a sum not exceeding £5,000; or

(b) commit him to custody until he has remedied his default or for a period not exceeding 2 months".

Section 17 of the Contempt of Court Act 1981 allows that power to be exercised either by the court's own motion or by an order on complaint. I believe that that covers the point made by the noble Baroness.
Baroness Hanham: My Lords, I am grateful to the Minister for that reply. It is most helpful to have that on the record. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 28 and 29 not moved.]
Clause 36 [Power of court to authorise action by one owner on behalf of another]:
Baroness Hanham Baroness Hanham moved Amendment No. 30:
Page 23, line 39, at end insert—
"(7) When making an order under this section the court may make provision for the recovery of any costs reasonably incurred by the applicant in carrying out the required action."
The noble Baroness said: My Lords, I can be quite brief. Where action is required to be carried out and the applicant has to go to court, he may well incur expense which would otherwise fall upon the person who is the subject of the order.
The purpose of this amendment is to give the court power to allow the applicant to recover the reasonable costs. Otherwise, the person who is the subject of the order may be relieved of costs. Instead, in the absence of this provision, the applicant has to meet the costs without being able to recover them.
I hope that the Minister will have the same snappy and helpful reply to this amendment as he had for the last one. I beg to move.
Lord Rooker: My Lords, indeed I have to use only one sentence of the speaking notes. I do not believe that the amendment is necessary because the courts have inherent power to award costs.
Baroness Hanham: My Lords, I thank the Minister for his reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 39 [Effect of Part 4 enforcement action and redevelopment proposals]:
Lord Rooker Lord Rooker moved Amendments Nos. 31 and 32:
Page 24, line 33, leave out "an interim or final management order under" and insert "a management order under Chapter 1 or 2 of"
Page 24, line 36, leave out "interim or final"
On Question, amendments agreed to.
Clause 40 [Emergency remedial action]:
Lord Rooker Lord Rooker moved Amendment No. 33:
Page 25, line 19, leave out "interim or final management order is in force under" and insert "management order is in force under Chapter 1 or 2 of".
On Question, amendment agreed to.
Baroness Hanham Baroness Hanham moved Amendment No. 34:
Page 26, line 10, leave out from beginning to "the" in line 11 and insert "No later than the day when the authority start taking emergency remedial action (or, if that is not possible) as soon after that day as is possible"
The noble Baroness said: My Lords, the amendment brings the procedure for service of notices in relation to the emergency remedial action in line with that for emergency prohibition orders under Clause 43(3)(4).
While there is an obligation to give notice to occupiers at the moment, the duty to notify others, particularly the owner, is to do so within the period of seven days after the works start. If the occupiers are to be notified at the time the work is done, so should the owner. Otherwise, the owner will be ignorant of what is happening. Indeed, the owner may have commissioned work in the mean
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time, be faced with questions from the occupiers and, if he has not been served with the notice, may be totally ignorant of what is going on.
I believe that if at all possible the owner should be told before the work starts and, in any event, as quickly as possible after the works have started. The proposed amendment is intended to provide for this to be done. I beg to move.
Lord Rooker: My Lords, Clause 40 enables a local authority to take emergency remedial action to deal with a category 1 hazard that presents an imminent risk of serious harm to the occupiers of residential premises. Such action may be taken in these exceptional circumstances without prior notice to the owners of the property, but Clause 40(7) requires the authority to serve notice on them afterwards, within seven days from the date on which they started to take the emergency action.
The amendment would require an authority to serve such notice no later than the day on which it started to take action or, if that is not possible, as soon after that day as possible.
I recognise the rationale for the amendment is that it would bring the procedures into line with those which an authority must follow when making an emergency prohibition order under Clause 43. However, we believe that the situations are different. In the latter case, the urgency is to have the use of property prohibited in the interests of health or safety. It is therefore essential for the owner or landlord to know of the situation as a matter of urgency, in order that he can do what is necessary to put the prohibition into effect.
In the case of the emergency remedial action to which this amendment relates, the top priority is for the local authority to do the necessary work itself, for which Clause 40 provides.
Notifying the owner or the landlord is of course essential, but it is not the top priority. As I have said, the top priority is to get the job done. The authority should not be distracted from that task by the need to prepare the kinds of documents necessary to support the ordinary, non-emergency kind of remedial action. This is not shortcutting. The nature of the two emergencies is somewhat different, and that is the reason why there is a different procedure in the Bill.
Baroness Hanham: My Lords, I hear what the Minister says. I am bound to say that, if an authority is notifying one person, in this day and age—when you can duplicate, run off and print notices at will from a computer—it is very odd that they cannot notify the owner at the same time. That is probably taking the situation too far. However, I thank the Minister for his reply and, for today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 41 [Notice of emergency remedial action]:
Baroness Hanham Baroness Hanham moved Amendment No. 35:
Page 26, line 42, at end insert—

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"(f) the reason why the authority consider it necessary to take emergency remedial action"
The noble Baroness said: My Lords, we believe it is important that the local authority spells out why it is taking emergency remedial action. It needs to justify why the ordinary improvement notice procedure is not appropriate.
The authority could run up considerable costs, without the landlord having a prior right to appeal to the residential property tribunal. A statement of reasons is required to accompany an improvement notice. No such provision has been made in the case of emergency action, where surely it is more important that the landlord should be told why the authority is taking this step. I beg to move.
Lord Rooker: My Lords, I think that I can satisfy the noble Baroness that the amendment is unnecessary, for reasons which I will explain.
As I said earlier, Clause 8 was introduced into the Bill in the light of the concerns expressed by the Joint Committee on Human Rights. It requires local authorities to prepare a statement of the reasons for their decision to take one of the kinds of enforcement actions available to them. A copy of that statement must accompany every improvement notice, copy of a notice, or copy of a prohibition order which is served under the provisions of the Bill.
I can confirm that notices of emergency remedial action are regarded as improvement notices for this purpose, by virtue of Clause 8(5). For the sake of completeness, the requirement also extends to emergency prohibition orders. The matter is therefore well covered.
Baroness Hanham: My Lords, I thank the Minister for that very helpful reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 43 [Emergency prohibition orders]:
Lord Rooker Lord Rooker moved Amendment No. 36:
Page 27, line 45, leave out "interim or final management order is in force under" and insert "management order is in force under Chapter 1 or 2 of".
On Question, amendment agreed to.
Clause 46 [Demolition orders]:
Lord Rooker Lord Rooker moved Amendment No. 37:
Page 30, line 38, leave out "an interim or final management order under" and insert "a management order under Chapter 1 or 2 of".
On Question, amendment agreed to.
Baroness Hanham Baroness Hanham moved Amendment No. 38:
Page 31, line 12, leave out "in certain circumstances" and insert "as specified by the appropriate national authority"
The noble Baroness said: My Lords, the amendment would require the appropriate national authority to specify the circumstances in which compensation paid following the making of the demolition order may be repaid.
The noble Minister commented in Committee that this was an area covered by the 1985 Act and was a job for the Lands Tribunal, and consequently was loath to get involved. I can understand such a sentiment: however, I must press the Minister on this issue. Does he not see that there is a potential problem with leaving such a vague and bland assurance on what is actually quite an important matter? I beg to move.
Lord Rooker: My Lords, I believe that the amendment is unnecessary because the point is covered.
Where a local authority has a duty to take the most appropriate enforcement action under Clause 5 in relation to a category 1 hazard in residential premises, making a demolition order is one of the courses of action available to it, unless the premises are subject to a management order under Part 4.
The amendment would require the appropriate national authority to specify the circumstances in which compensation, paid following the making of a demolition order, may be repaid.
The amendment would conflict with Section 5(84)(a) of the Housing Act 1985, which was inserted by paragraph 30 of Schedule 15 to the Bill and makes detailed provision for repayments and requires disputes to be referred to the land tribunals. That is why the amendment is unnecessary—it is covered elsewhere.
4.30 p.m.
Baroness Hanham: My Lords, I am tempted to say, "of course". I thank the Minister for drawing our attention to that matter, which will be recorded in Hansard. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 39 not moved.]
Clause 47 [Clearance areas]:
[Amendment No. 40 not moved.]
Clause 49 [Power to charge for certain enforcement action]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 41:
Page 33. line 38, at end insert—

"( ) The person on whom a notice order mentioned in subsection (1) is served or who is subject to a charge under subsection (5) may appeal to a residential tribunal in respect of the amount of any such charge.

( ) An appeal under subsection (8) must be made within the period of 28 days beginning with the date of the service of the notice or order or the service of the authority's decision on a review (as the case may be).

( ) A residential property tribunal may allow an appeal after the end of that period if it is satisfied that there is good reason for the failure to appeal before the end of that period (and for any delays since then before an application is made for permission to appeal out of time).

( ) The tribunal may confirm vary or reverse the decision of the authority on any such appeal."

The noble Lord said: My Lords, Amendment No. 41 gives a free-standing right to appeal against the amount of any charge imposed by the local authority in connection with the service of an improvement notice and other orders. At the moment the residential

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property tribunal has authority to interfere with the charge only if it upholds the appeal against the notice, and so on. The recipient of a notice may consider the amount of the charge excessive. This is often a contentious matter between landlords and local authorities. Therefore, there needs to be a simple means of appealing against such charges. None is provided for at present. Although the Government have a power to prescribe maximum charges a high figure may be fixed. The amount of work undertaken by the authority may not justify the charge which it is seeking to impose, so there should be a way for the recipient to challenge that without having to challenge the underlying notice. I beg to move.
Lord Rooker: My Lords, I recognise that owners and landlords will wish to object to a local authority charge that they think is unreasonable. It is natural and I fully accept that. However, Clause 49 makes it clear that such charges must be reasonable and, as an additional safeguard, they must not exceed such an amount as the appropriate national authority may specify by order. The current order covering this matter sets a ceiling of £300. We have taken no decision on any future ceiling, but we would certainly expect to consult on any future order. We have to strike a balance. On the one hand, local authorities should not levy excessive charges; on the other hand, it is legitimate for them to seek to recover the reasonable cost of making privately rented properties healthy and safe, rather than increase the burden on council tax payers generally.
There has not been a case made for creating what would be another category of appeals to the residential property tribunal, which will already have much to do under the Bill. The proper approach to this matter is through the ordinary checks and balances that apply to local authorities. There is a limit there now and if we seek to change the limit we will certainly consult on any new regulations. The current situation is not that onerous.
Lord Hanningfield: My Lords, I thank the noble Lord for that answer. I am disappointed that he would not agree to the suggestion of a further resource for landlords to appeal. I accept that the charges may not be unreasonable at the moment, but they could be in future. I shall have to reconsider the matter, but meanwhile I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 51 [Repeal of power to improve existing enforcement procedures]:
[Amendment No. 42 not moved.]
Clause 55 [Licensing of HMOs to which this Part applies]:
Baroness Maddock Baroness Maddock moved Amendment No. 43:
Page 37, line 10, at end insert—
"( ) any HMO in the authority's district of 3 storeys or above,"
The noble Baroness said: My Lords, this somewhat contentious issue is about how wide we draw the definition of a house in multiple occupation. We noted
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the Government's intention to set the threshold for the mandatory licensing scheme in secondary legislation, so we do not expect the Government to accept the amendment. It is a probing amendment which will give us an opportunity to debate further why many of us believe that we should have a wider, more inclusive definition of which types of properties should be included in the licensing schemes.
So far Ministers have indicated their intention that the accompanying regulations will require only HMOs with three or more storeys and five or more occupants to be licensed. The Office of the Deputy Prime Minister itself estimates that this will cover only about 120,000 HMOs—about 19 per cent of the 638,000 HMOs that are estimated to be in England. A key concern of many organisations is that the proposed threshold will leave thousands of vulnerable tenants in unidentified and hazardous HMOs because they will fall outside the scope of those considered thus far by the Government. At the very least, all HMOs with three or more storeys should be licensed.
There is good evidence for that. In particular, the 1996 Entec report on fire risk identified all three-storey HMOs as high risk, regardless of occupancy levels. I discussed this in 1996 in another place in a previous Housing Bill. Local authorities have discretionary powers to extend licensing to three storey HMOs with fewer than five occupants, but that will not be sufficient to protect tenants. It will not be that easy to apply for extended areas for additional licensing of HMOs. Even if that does happen, the Minister will have to approve it and it will be limited to a five-year period.
It will be a lengthy process in which local authorities will have to consult all the interested parties on the need for additional licensing of HMOs. Landlords are likely to be the main respondents, so the process may be protracted. The tenants in such buildings are possibly one of the groups that are hardest to reach in a consultation. That process would have to be repeated once every five years and would be onerous. What if there was a future Secretary of State who was not quite as generous as the current Secretary of State? That person would be able to reject any such schemes.
I know that the Government will say that their own proposals are the answer, but it is not a simple answer and is not satisfactory. I know that the Local Government Association is keen to see the scope widened in the definition and has suggested to me a wider amendment than this.
I have put two other amendments in this group. Amendment No. 44 is designed to reduce the time period by which local authorities must have satisfied themselves that there is no Part 1 function to be exercised. Local councils need to take action against seriously unsatisfactory living conditions—category 1 hazards—as well as poor management. I have mentioned the vulnerability of the client group occupying HMOs and the LGA, which represents local authorities who will be involved, believes that the five year time frame is too long. In Committee I moved an even shorter period—one year. I am now changing

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that to three years, but five years is a long time to leave serious hazards in place. I hope that the Minister will look favourably at that.
Amendment No. 76 refers to the extension of selective licensing. It allows local authorities a third set of general conditions enabling them to apply to extend the circumstances for selective licensing. I know the Government will say that this is another way to extend their proposed category of HMOs.
Under the Local Government Act 2000, local authorities have a duty to promote the well-being of their communities. We believe the current provisions in the Bill are too limited, as they will not allow local authorities the opportunity to exercise that duty in its widest sense. We have said at the previous stage, and outside this Bill, that low demand and problems arising from anti-social behaviour are circumstances where selective licensing could prove a very useful tool for local authorities trying to ensure the private rented sector is effectively managed. If the Government were to accept a third set of conditions, we believe that such circumstances could include areas that have a large amount of seasonal holiday letting, or student accommodation.
The NUS is also concerned about the possible definition of an HMO. I mentioned in Committee that I used to represent a ward that had a lot of student accommodation. Very little of it was three-storey, but, by golly, they were houses in multiple occupation, and they certainly needed licensing. The local authority would find it difficult to do so if it had to go through this cumbersome process every five years.
We have pulled back a bit. We are now asking for all houses of three storeys to be included in the definition, and we have pulled back on other things. However, concerns on this issue have been expressed by Shelter, which has experience of vulnerable clients who live in this sort of accommodation; from the NUS; and from the Local Government Association, which represents the authorities who will have to carry out the legislation we are discussing. I hope we can hear from the Minister today that, when the regulations are brought out, the points raised by myself and many others will have been listened to. I beg to move.
4.45 p.m.
Lord Bassam of Brighton: My Lords, I am grateful to the noble Baroness for reiterating the case she has made so energetically at earlier stages of the Bill, and for saying essentially that these are probing amendments. It is important for us to go over this issue one more time, and I hope the noble Baroness will not mind if I spend a little time doing exactly that. I want to offer her some reassurance, and also ensure that the Government's position is clearly understood.
If we were to accept Amendment No. 43, it would extend the scope of licensing to include all HMOs of three storeys, rather than restricting the mandatory requirement to those occupied by five or more persons, forming at least two households. We had already debated this when the noble Baroness moved
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Amendment No. 58 in Committee. The Government are aware that the risk of injury or death from fire in a three-storey HMO is higher than that in smaller HMOs, or indeed a house of a similar size in single occupation. We have made that clear from the outset. That is why the starting point for mandatory licences has been pitched at three storeys—which includes basements and attics—in residential use. The amendment fails to recognise that the number of occupants in the house is also a factor in determining the risk of fire occurring. Conversely, the risk is diminished where a building is occupied by only two, three or four people.
The Government do not believe in undue regulation, and I said last time that we need to draw a line somewhere. We estimate that between 100,000 and 120,000 HMOs would be subject to the mandatory licensing scheme if we set the scope at those occupied by five or more people. The truth is, however, that we cannot be precise, because the data on this are, as I am sure we can all accept, rather patchy. If we were simply to say that licensing must apply to all HMOs—which is, I think, ultimately where the noble Baroness is coming from—this would have a significant impact on local authority resources. It would involve bringing in thousands of extra properties into the compulsory licensing regime unnecessarily, placing additional unwanted, unwarranted and unhelpful burdens not just on local authorities, but also on landlords. That could lead to landlords leaving the market or even being discouraged from entering it, which would be highly undesirable and not in anyone's interests.
That said, local authorities can impose licensing on three-storey houses not within the scope of the mandatory regime if they identify problems with the management of the properties. The noble Baroness referred to her time on Southampton council and her experience with students. I am familiar with exactly those sorts of problems, and I have little doubt that local authorities, when confronted with them, will address them appropriately—and, where required, outside the mandatory regime.
Our mind is not closed on the scope of mandatory licence arrangements, but we want to tread cautiously, to ensure that the regime is properly targeted in the first instance. We have undertaken to carry out a review of licensing within three years of it coming into force, and that is probably about the right timescale. If the review proves that we need to change the scope of licensing, then we have the powers to do so through regulation, which is why it is important that this matter should be reserved for secondary legislation. We need to see how the regime works before extending, or indeed reducing, its scope.
Amendment No. 44 provides that the requirement as currently drafted in Clause 55(6)(b)—that a local authority must satisfy itself that there are no Part 1 functions to be exercised by it within five years—is reduced to three years. Perhaps there has been some misunderstanding over this provision, and it should be clarified.
The provision places a statutory duty on local authorities to ensure they discharge the functions in relation to a licensed HMO as soon as reasonably

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practicable, and, in every case, within five years. This is a new and significant change in how a local authority must deal with defects in high-risk HMOs within its area. Under the existing law there is no requirement for an authority to do anything about housing conditions—it simply has a general power to act. Under this provision, the authority must act, which those of us in particular who have been involved in housing action must welcome. I certainly would have welcomed this power as a local authority chair of housing, or as a leader of an authority where there were a lot of HMOs.
Having said that, we need to be more realistic about how the authority can discharge the function, and within what time limits. For a start, the local authority need not necessarily carry out an inspection at all. The duty can be discharged if the authority is satisfied on the basis of evidence available to it, such as a report from a surveyor or previous inspector, or information supplied by a landlord in connection with the application for a licence. In those circumstances the duty could be discharged within a matter of days or even weeks.
However, I accept that many authorities will discharge their duty by means of an inspection. We expect local authorities to prioritise their inspection regimes based on the information available to them, and their knowledge—or perhaps the lack of it—of the property concerned. An authority would want to inspect the highest risk properties first and possibly leave those HMOs that have recently been inspected and given a clean bill of health until the end.
The crucial point is that the provision does not allow a local authority to wait up to five years to discharge its functions—it must do so as soon as is practicable. Five years is a maximum, not the norm. It would be perfectly possible to set a time limit of 12 months, as the original Committee amendment sought, or three years, as this amendment suggests. But there are real and practical difficulties. Local authorities with a large number of licensable HMOs would have to divert other resources to discharge the function in a shorter period, perhaps even putting people at risk. This means that they would be unable to deal with real problems relating to health and safety in other rented accommodation.
The Government think that five years, therefore, is appropriate as the latest time within which the functions can be discharged, since it relates to the normal period for the licence and ensures that within that time, all licensable HMOs in England and Wales are given a clean bill of health as well as being free from hazards which require enforcement under Part 1. Of course, in an ideal world, all properties would be free of hazards from day one, but we do not live in an ideal world—we have to deal with what is there.
If an authority is confident that with existing resources it can inspect all licensable HMOs in 12 months or three years, it will be perfectly free to do so. But for the reasons given, the Government are not persuaded that it is appropriate to require them to comply with a shorter time frame. I hope that the noble Baroness feels able to withdraw her amendments.
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Amendment No. 76 relates to Clause 78, which provides that a local housing authority may designate all or part of their district as subject to selective licensing where two conditions are met—if it is, or is likely to become, an area of low housing demand or it has a significant and persistent problem with anti-social behaviour, to which the inaction of private landlords is a contributory factor. In either case, the local housing authority must believe that the designation, together with other measures, will help lead to an improvement in the social or economic conditions of the area.
Clause 78(7) allows the appropriate national authority to specify other criteria for making a selective licensing scheme to deal with other housing challenges where licensing could bring about positive benefits. Clause 78(8) confirms that additional criteria may be related to more general protection of private rented sector tenants.
Amendment No. 76 would add a third set of grounds for a local authority to seek to designate an area for selective licensing. These additional grounds would be problems arising from ineffective management of privately rented properties in the area. Selective licensing is intended to be a targeted measure, and this amendment would effectively subvert that aim. Quite frankly, the amendment is so broad that it would allow local authorities to seek to introduce selective licensing of the whole of the private rented sector in their area, a result that is contrary to what we are trying to achieve with these provisions.
That said, it is perhaps worth reiterating that Clause 78(7) allows the appropriate national authority to add to the grounds for selective licensing in the future. Furthermore, we have made a commitment to review the operation of selective licensing within three years of its implementation. So there is a clear timetable in place for examining whether there are additional problems for which selective licensing could prove a useful tool.
I hope that those comments satisfy the noble Baroness. I do not think that the measures she suggests are right or proportionate but that they would lead to unwelcome and overbearing burdens on the local authority. For that reason, they could become unworkable and subvert what I think is generally agreed to be an appropriate way of dealing with problems in the houses in multiple occupation sector and measures which the local authorities and the Local Government Association have, in broad terms, signed up to and supported with some enthusiasm.
Baroness Maddock: My Lords, I thank the noble Lord for that full reply. It is important to say that all the measures that I have proposed are being asked for by local authorities. Not for the first time, I welcome the fact that there is a timescale for reviewing how this will proceed and that some of the points we have made here and at previous stages of the Bill will be considered.
I think that the proposed threshold for mandatory licensing of only large houses in multiple occupation—those with three or more storeys and five or more

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occupants—is over-cautious and inadequate, but the Government have put their case. I believe that there will be considerable risk to people in these properties from fire. I certainly hope that if this proves the case even before three years are up, the Government will revisit the issue.
I have already suggested periods in which it is reasonable for landlords to take action—three years, five years and one year. I am quite clear that three years is a reasonable time in which to deal with a category one hazard, and I think that local authorities are as well, so I am very disappointed that the Government have not moved on that issue. We are talking about severe hazards.
Amendment No. 76 would give local authorities the very discretion that the Government have been saying they have given them in legislation for a number of years. We have welcomed that legislation. This is what is so frustrating for local authorities. With one hand we give them discretion and powers to do things, but when we see the detail of some Bills we decide that we will not give them those powers after all. Given that the Government have been cautious in how wide the scope is for bringing in licensing of houses in multiple occupation, to draw so tightly the other areas to which local authorities can extend is not helpful. However, I welcome the fact that the Government will review this in three years' time.
These are important issues. I think that the Government realise that, and all we can hope is that as they draw up the regulations, our words ring in their ears. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 44 not moved.]
Clause 56 [Designation of areas subject to additional licensing]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 45:
Page 38, line 10, after "designation" insert "including publicising its intent both electronically, outside the relevant property or properties and in the local media"
The noble Lord said: My Lords, we discussed this matter at some length in Committee. Amendment No. 45 would place on an authority a duty to make public as wide as possible its decision to extend the licensing scheme to a certain property.
We have just had a debate about local discretion for local authorities. As the Minister knows, I am much in favour of giving local authorities additional powers. In fact, I fight the whole time for the Government to give my own authority more power. However, on this issue it is important that we put in place a specific and understood mechanism by which a local authority should be able to inform local people of its decision. As drafted, the Bill provides that local authorities should take "reasonable steps". We on these Benches do not feel that that is sufficient. What exactly is meant by "reasonable steps"? I beg to move.
Lord Bassam of Brighton: My Lords, Clause 56 permits individual local housing authorities to extend licensing beyond the scope of mandatory licensing by
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designating part or all of its areas subject to additional licensing for specified descriptions of HMOs. Before making a designation, the local authority must consider that a significant proportion of HMOs of that description is giving rise to or is likely to give rise to problems to occupants or members of the public because of poor management of that stock.
As we have said in the past, it is important that regulation is targeted at properties where the worst problems exist. Often these sorts of properties may well be concentrated in a particular area, such as areas with a high number of properties let to students. Such properties often have two storeys and are occupied by four people. They fall outside the type of property that is subject to mandatory licensing.
5 p.m.
Amendment No. 45 would require a local housing authority, in addition to consulting those likely to be affected by an additional licensing designation, to publicise the intent of the designation electronically outside the relevant properties and in the local media. We debated this proposal in Committee, for both additional HMO licensing and selective licensing. I appreciate the point that the noble Lord, Lord Hanningfield, has made—indeed, I have some expressed sympathy with it—but I am going to disappoint him by saying that I am unconvinced that amending the provision in the manner suggested would be of benefit.
I shall briefly put the case for the status quo. There is nothing to be gained by prescribing to local authorities the methods that they must use to disseminate information concerning consultations on licensing schemes. I would be rather surprised if a local authority chose not to use any of the three forms of publicity that are specified in the amendment, but I would trust that the authority in question knew its own business well enough and was able to decide how best to contact the relevant parties. After all, Clause 56(3)(a) provides that local housing authorities should take reasonable steps to consult those likely to be affected by the designation. Authorities will know that any failure to take their consultation requirements seriously could provoke a judicial review. Moreover, the appropriate national authority will need to be satisfied that effective consultation has taken place before it will confirm an additional licensing scheme.
The noble Lord, Lord Hanningfield, the noble Baronesses, Lady Hanham, Lady Hamwee, and Lady Maddock, and I have a great deal of local government experience between us. I was thinking of adding it all together and telling everybody how much experience we have, but I have declined from that act of mathematics. Suffice it to say that we have bags of local government experience and we all know how important consultation is. We know that local authorities are very imaginative in consulting with communities in different ways, by which I mean interested communities, at which the clause is aimed.
We should trust them to do exactly that. I am grateful for the amendment that the noble Lord, Lord Hanningfield, has brought forward. We have

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had some useful discussion about it. I hope that local authorities will exercise their imagination and ensure that those who need to know, know, and that they can understand with some ease and clarity the information that gets to them. The amendment does not necessarily represent the right way to go about achieving that. It is not something that one can so easily prescribe in primary legislation, but the issue remains important.
Lord Hanningfield: My Lords, I thank the Minister for his answer. He has obviously accepted our point that consultation and publicity need to be very wide. As I said earlier, a great deal of the consultation is going to be implemented by very, very small district councils, which have neither the resources nor, sometimes, the capacity to do it. Recent surveys of local government have shown that some of them lack the ability to do it. I know of one or two district councils which are unable to cope with their responsibilities at the moment. I accept that the larger authorities have the mechanisms in place, but it would have helped to make clear to those very small authorities the way forward. However, I accept what the Minister has said.
Lord Greaves: My Lords, I am not sure what the noble Lord means by "very, very small" authorities. I know that he is a county man and that he may consider many districts to be very small, but does he not accept that many small authorities are better at consulting and are closer in touch with their public than some of the very big ones?
Lord Hanningfield: My Lords, I said "very small" authorities. I am in the process of helping one or two very small authorities deal with the complexities of modern-day legislation. There are some very good small local authorities, but there are some very small ones which lack capacity and need advice and support in meeting the requirements of some modern legislation. Some advice in the Bill might help them. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 46 not moved.]
Clause 61 [Requirement for HMOs to be licensed]:
Lord Rooker Lord Rooker moved Amendment No. 47:
Page 40, line 28, at end insert "Chapter 1 of".
On Question, amendment agreed to.
Clause 62 [Temporary exemption from licensing requirement]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 48:
Page 41, line 18, at end insert—
"(2A) An owner of a property in the process of selling that property shall be entitled to a temporary exemption up to a maximum of three months, and the subsequent owner shall be entitled to a similar temporary exemption period in which to make the necessary preparations to obtain a license, if a license is required under the terms of the Act."
The noble Lord said: My Lords, in moving the amendment, I shall speak also to Amendment No. 69. An amendment that was similar to Amendment No. 48 was discussed in Committee. I am pleased to inform
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the Minister that we have returned with a slightly revised version and I know that he will be hard pressed not to accept it today.
On that note of optimism, perhaps I may take a moment to explain our important yet subtle change. We can all agree that the licensing requirement could unfairly penalise people who are in the process of selling their property and who, for one reason or another, have failed to obtain the necessary licence. The Minister said in Committee that although he had some sympathy with individuals in such circumstances, he was loath to accept our initial amendment as it opened a possible loophole; that is, an individual who claimed continuously and fraudulently to be in the process of selling the house in order to avoid the necessity of obtaining a licence. That loophole has now been closed. Amendment No. 48 would place a time-frame of three months on the process. I am aware that selling a house may take considerably longer than that and I recognise the weakness of specifying an amount of time. Such an arbitrary figure is never going to deal with all circumstances, but it represents a genuine, if imperfect, attempt to address the issue in question.
Amendment No. 69 would allow people who are in the process of selling a property to use that as a defence for not having a licence. Some people who are buying a property and who are not fully familiar with their licensing obligations may well be caught out. A suitable and reasonable period of time should be allowed for them to be made aware of the requirements placed on them. If the Minister cannot give us a positive answer today—although I hope that he can—perhaps he will consider asking his officials to have another look the matter before Third Reading. I beg to move.
Lord Rooker: My Lords, in some ways, we are divided by a point of principle. A similar amendment was proposed in Committee. This amendment proposes a time limit of three months. That is an improvement on the amendment proposed in Committee. I understand the concerns of the noble Lord, Lord Hanningfield, but we cannot support him.
Buying and selling property is not like buying a can of beans from a supermarket. If a landlord is taking steps to ensure that a house in multiple occupation ceases to be licensable under Part 2, he can apply for a temporary exemption under Clause 62, whether or not tenants are still in the house. The local authority will grant an exemption if it is satisfied that the property is genuinely no longer going to need a licence; for example, if it is going to be sold with vacant possession.
However, it is not appropriate that persons should be able to evade licensing provisions because they are in the process of selling a property with sitting tenants. If no steps are being taken to ensure that the property should cease to be licensable, and selling a property is not such a step, it must remain subject to the licensing regime. Why should the tenants, who otherwise receive licensing protection, not receive it simply because the landlord has decided to sell the property?
As to the position of a person buying a house in multiple occupation, we are not convinced that the three-month exemption period is necessary or

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desirable before he is required even to apply for a licence. If someone is buying a house in multiple occupation with sitting tenants, the buyer, as part of the buying process, should be sorting out what needs to be done; that is, the licensing arrangements. That is part of the process that any reasonable person would have to go through. It should not come as a shock to the buyer to find out on the day that he owns the property that he now owns a house in multiple occupation that requires a licence. If it gets to that stage, it is a pretty sorry state of affairs.
If he is buying a property with vacant possession, he is not in a different position from that of any other owner of a large empty property. If he intends to let it out as a house in multiple occupation, he should apply for the licence before admitting occupiers into the house. There is a straightforward case here. I appreciate that the period has come down to three months but if it were three weeks, I would probably take exactly the same view. It is not acceptable.
Amendment No. 69 would provide that an absolute defence to any offence of being in control of or managing a house in multiple occupation would be that the owner was in the process of selling the property. In response to Amendment No. 48, I said that the Government cannot support the notion that an owner ought to have an automatic exemption from licensing simply because he is selling his property. It therefore follows that the Government cannot support Amendment No. 69 either. In effect, it would remove criminal liability for operating or managing a house in multiple occupation in those circumstances.
I regret to say that this is the first time this afternoon that a point of principle lies between us. From a practical point of view, I think that it would not be right to have this type of provision in the Bill. In terms of the protecting of tenants, people who are buying and selling houses in multiple occupation ought to be aware of what they are doing.
Lord Hanningfield: My Lords, I note what the Minister has said. We certainly did not want to create any loopholes or give any opportunity for fraudulent use of this amendment. The Minister will know that I often put forward amendments setting out the concerns of the industry, which people have put forward and about which they have lobbied us, about the buying and selling of properties. As we have already discussed, at one point 4 million properties were bought and sold in this country every year. Many of those involved this type of property. Therefore, one does not want to put too many handicaps in the way of buying and selling properties. That is why these amendments have been put forward. I have heard what the Minister has said today and, if people think that it is appropriate, I may come back for a further look at this issue at Third Reading. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hanningfield Lord Hanningfield moved Amendment No. 49:
Page 41, line 43, insert at end—
"(e) the need to make an application for a licence under this part unless an appeal is made or in the event of an appeal being refused and that otherwise he could be guilty of an offence."
The noble Lord said: My Lords, if a local authority decides not to serve a temporary exemption notice, then, in the absence of an appeal, if the property continues to be occupied as an HMO, at the end of the period allowed for the appeal the landlord will immediately be guilty of a criminal offence. Therefore, the landlord needs to be warned of the necessity of making an application for an HMO licence before the period expires unless an appeal is to be made. Similarly, in the event of an appeal being refused again, the landlord needs to be aware of the need to apply for a licence.
Once an application is made, the landlord will be protected while the application is being processed but, in the absence of such an application, the landlord is laying himself open to a fine of up to £20,000 and possibly other sanctions as well. The landlord should be told of this and the amendment would ensure that this was done. I beg to move.
Lord Rooker: My Lords, I shall be brief. In effect, we do not think that what is proposed is unreasonable but we do not think that the detailed signposting should appear on the face of the Bill. It could be included in the prescribed information accompanying applications for temporary exemption notices. That would be a way round that. We do not think that what is proposed is unreasonable but the Bill is not the place to do it.
Lord Hanningfield: My Lords, I thank the Minister, who has agreed with us. We will find ways of making it certain. It is very important that this information is made available and that people are aware of what their liabilities might be. I thank the Minister for that reply and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 63 [Applications for licences]:
Baroness Hanham Baroness Hanham moved Amendment No. 50:
Page 42, line 27, leave out "maximum"
The noble Baroness said: My Lords, the appropriate national authority under the Bill will prescribe the maximum fee payable for a licence. We are concerned that this will cause confusion. We believe that the Government or the National Assembly for Wales should set out in guidance what local authorities should charge so that we do not have people paying substantially different fees in different districts. In Committee, the Minister said that he was discussing the costs of running the licensing scheme with the Local Government Association. I wonder whether he is able to give us any indication of how those discussions have progressed and whether he can tell the House the estimate that he has put on the costs of each individual licence.
I do not think that the amount of work is going to differ very much in different areas. Therefore, the cost should not vary very much in different areas. The Minister also commented that, were these two amendments to be accepted, it would mean that a national fee would have to be assessed at the upper end of what would be considered to be viable. But we do not believe that that is the situation either, bearing in mind that the costs in each local authority are going to be approximately the same. We believe that there should be some sort of national understanding and that that would be welcomed by local authorities and by the licensees who will have to apply for the licences. We believe that this would ensure stability and understanding of the costs of licensing throughout the country. I beg to move.
5.15 p.m.
Lord Rooker: My Lords, at this point I cannot give the noble Baroness any idea of the fees but I shall explain in a positive way why I cannot do that. As she said, Amendment No. 50 would enable the appropriate national authority to specify the actual fee to be charged or the way that those fees are calculated instead of simply being able to specify a maximum fee. We do not think that the change would be that great in practice. But I understand that the noble Baroness is looking for a balance between local discretion on fees and some assurance that the fees will be set fairly and will reflect the true costs of licensing, provided that it is carried out efficiently. We do not dissent from that. We want the fees to be seen to be fair to landlords and to local council tax payers.
We have taken the view that the Bill gives us the ability to achieve that. We have had discussions with the Local Government Association and others about how best to specify the appropriate level and how to calculate it. At the moment, it would be fair to say that no simple solution has emerged. However, we are shortly to consult on this formally and will make no decision until we have heard what all the key stakeholders think is practical and reasonable. There will be a consultation on this issue. Specifying a maximum fee level nationally is simple in concept but difficult in practice, if we want to reflect variations in costs and local circumstances. The consultation will give us information about whether or not there is wide variation. The noble Baroness has taken the point that in some ways there probably will not be such a wide variation.
We are uncomfortable with the possibility of all the authorities turning the maximum into the norm, irrespective of variations. Specifying a method of calculating a maximum fee level may be more promising in that it allows fees to reflect the factors that vary between areas and authorities, such as the number of houses in multiple occupation, the number of houses in poor condition, or the number of landlords that are already known to the authority through membership of an accreditation scheme, for example. Some of the issues will make it easier for one authority as opposed to another so we need to provide greater clarity regarding
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the position on fees and the way they should be determined. There is no doubt that that is required. We hope that the consultation will produce that.
Amendment No. 79 more or less enables the appropriate national authority to specify the actual fees to be charged. In the light of the fact that we have gone over this ground, I ask the noble Baroness not to press her amendment. There will be consultation and we will ensure that when it begins the noble Baroness and other parties in the House are fully informed of what is happening at the time so that they can put their five penn'orth in. Obviously, we want the views of the stakeholders. It may turn out that there is not a massive variation and therefore we would not want an excessively complicated system. It is quite clear from our early discussions with the LGA that we do not have a simple formula at the moment. I think that the best thing to do is to consult the industry.
Baroness Hanham: My Lords, the Minister's reply was about as woolly as I expected, under the circumstances. The problem about setting the maximum fee is laid out in his reply. We do not actually know what the situation is. If we have to consult now, when the legislation is printed as it is, it may well be that the answer is not that there should be the maximum fee, but that it should be laid down in guidance, which is precisely what my amendment suggests. I am surprised that the Minister has not said, "Well, that is fine, because with this consultation we accept that there is going to be a difficulty".
I hear what the Minister says. I am not sure when the consultation will take place, but clearly it is without the timescale of the Bill. I probably need to see whether we could come back with a better amendment which would be acceptable to the Government, in the light of what the Minister has said. I do not believe that we are terribly far apart on this matter, but we are in danger of perhaps leaving some considerable confusion in the minds of local authorities as to what they can charge—although presumably, after consultation, guidance would be issued.
I thank the Minister for his reply and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Rooker Lord Rooker moved Amendments Nos. 51 and 52:
Page 42, line 35, after "under" insert "Chapter 1 of".
Page 42, line 37, leave out "Part" and insert "Chapter".
On Question, amendments agreed to.
Clause 64 [Grant or refusal of licence]:
Baroness Hanham Baroness Hanham moved Amendment No. 53:
Page 42, line 40, leave out "may" and insert "shall"
The noble Baroness said: My Lords, we return to the question of provisional licensing. As the Bill is drafted, it requires local authorities to grant or refuse licences for houses in multiple occupation. When applications for houses in multiple occupation licences are made, local authorities will have five years to satisfy themselves that there are no Part l functions that ought to be exercised, although licence applications should be dealt with within

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six weeks. As a result, there appears to be a presumption that local authorities will grant licences without an inspection of the property, as they will identify health and safety hazards as the landlord's responsibility, which can be dealt with under Part 1 during the licensing period. Local authorities cannot, we believe, be satisfied that a house meets prescribed standards without inspection.
We have had quite a lot of discussion on what resources will be required to deal with all the inspections. The demands on resources will be substantial if local authorities must try to inspect every licensable house in multiple occupation before granting a licence. It is likely, therefore, that the system will grind to a halt and fall into disrepute as a result. It would not therefore achieve the goal of securing the protection of those living in the so-called higher risk properties.
The prime responsibility for ensuring that the health and safety of occupants of such properties is not put at risk as a result of housing conditions, either physical or as a result of management failures, lies with the owner or licence holder. Therefore, within the licensing system, there should be a provision that does not rely wholly on policing and inspection by local authorities or on inadequate information provided in licence applications.
A system of provisional licences could meet those concerns. They could be issued when the landlord supplies evidence not only that there are in place satisfactory management arrangements but that in all respects a house is reasonably safe, including no unacceptable hazards under Part 1. We believe that the provisional licensing arrangements would be better than leaving a situation in which some houses have no licence arrangements at all for very considerable lengths of time before they are inspected. For that reason, we strongly believe that provisional licences should be introduced on that basis. I beg to move.
Lord Rooker: My Lords, Amendment No. 53 is intended to ensure that a local authority, on receiving the application for a licence, is under a positive obligation either to grant or refuse the licence. Our view is that in practice the replacement of "may" with "shall" will have no appreciable difference in the exercise of the authority's duty, although that would not normally be the case in a Bill in which one is dealing with "may" and "shall".
If a local authority is satisfied that the requirements of Clauses 63, 64 and 65 have been met, it would be required to exercise its discretion in favour of the applicant and grant a licence. If it was not satisfied of those matters, it would have to refuse the licence. There is no other course of action for a local authority beyond receiving an application for a licence. Nor is it open to a local authority not to act by failing to determine the application. The only reasonable course of action for a local authority would be to exercise one of the prescribed options. Clause 55(5) imposes a positive duty on local authorities,
"to ensure that all applications for licences and other issues falling to be determined by them … are determined within a reasonable time".
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We acknowledge the amendment, but it would not make any difference in reality whether the wording was "may" or "shall". If I accepted it, it would result in a discrepancy between the provisions of Part 2 and the comparable provisions of Part 3. It would be unhelpful for a different formulation to be adopted in Clauses 64 and 86, when the same considerations apply.
I shall give the game away in the sense that we are happy to have another look at the matter to see whether the suggested wording would make the legislation clear. As I have said, there is no appreciable difference in using one word or the other. So why not change it? On the other hand, one might argue, why not leave it? If we did change it, however, we would have to change it in more than one place in the Bill. I shall take the matter away and consider whether we should stick with what we have or whether we can make the Bill even clearer. But that would mean amending the other clauses so that we have consistency in the Bill.
The noble Baroness did not really go into detail on the other amendments, but I am happy to do so. Amendment No. 55 would provide that a local housing authority may, subject to conditions, grant a provisional licence in circumstances where the local housing authority has not inspected the house and there is no possibility of an inspection being carried out before the granting of a licence. The amendment is intended to ensure that a local authority need not grant a full licence for a house in multiple occupation when there is the possibility that it does not comply with health and safety conditions in Part 1.
With due respect, however, the amendment confuses Parts 1 and 2 of the Bill. The mandatory licensing provisions in the Bill are intended to improve management and amenity standards in houses of multiple occupation; they are not intended to be a certification of compliance with Part 1. The licensing process does, however, facilitate better targeting of inspections by ensuring that local authorities have key pieces of information that allow them to target the highest risk houses in multiple occupation under the new housing health and safety rating system.
The licensing system requires local authorities to consider health and safety implications in high risk properties as soon as practicable and within a maximum period of five years. Local authorities know the properties in their areas and can decide how best to carry out the duty at the earliest opportunity within that five years. The licence application process provides local authorities with the tools to gather sufficient information to allow them to assess and prioritise the risks within a licensable house in multiple occupation.
The amendment is well intentioned, but it does not achieve anything that is not already possible under the Bill. It is already open to a local authority to categorise a licence as provisional, if it feels that that is appropriate. The provisions of the Bill are sufficiently flexible to enable that, and the local authority as appropriate may decide the duration of the licence. The amendment would add another level of complexity in the form of a

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new set of provisions in regulations. In that sense, what is sought can already be achieved under the Bill. I hope that after what I said on the earlier amendment, the noble Baroness will not pursue the matter.
Baroness Hanham: My Lords, I thank the Minister for his reply. I am sorry that I slightly confused him by not saying how many amendments I was speaking to. I am also grateful, but slightly puzzled, by his assurance about the provisional licences, because I have not seen anything that gives the local authority that power, but if the assurance is that it can issue a provisional licence if necessary, that seems to meet our point. So, with that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 54 and 55 not moved.]
5.30 p.m.
Clause 66 [Tests for fitness etc. and satisfactory management arrangements]:
Baroness Hanham Baroness Hanham moved Amendment No. 56:
Page 44, line 40, leave out "and funding arrangements"
The noble Baroness said: My Lords, before local authorities can grant an HMO licence, the housing authority has to be satisfied regarding the management arrangements for the property. One of the specific requirements is to take into account the landlord's funding arrangements. Presumably, that concerns the landlord's ability financially to support any work that has to be done, mortgaging and all the other financial aspects of owning a property. As we stressed in Committee, we do not believe that that is a proper thing for the local authority to be doing. The amendment would remove the specific requirement to consider the funding arrangements in each and every case.
They may be cases where a local authority has justifiable concerns about the financial arrangements of a licence holder and whether he will be able to meet his obligations, but these are likely to be relatively few. The Government do not appear to have appreciated the burden that will be placed on local authorities, as well as landlords and managers, of having to investigate the funding arrangements of a property owner.
Local authorities have limited experience of interpreting private sector accounts and probably none in relation to landlords who are small businessmen and women. Their experience is limited to one-off contracts, such as for building works. By and large, they are not accountants taking into account people's financial position. Such a provision will also work to the detriment of new entrants, because such landlords will have no financial track record.
The financial assessment for a landlord should be left to the financial institution funding the borrowing on a property. If that institution is not convinced of the landlord's financial position, no money will be forthcoming. I beg to move.
Lord Bassam of Brighton: My Lords, I continue to be rather puzzled, because the noble Baroness has bags
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of experience in local government, as has the noble Lord, Lord Hanningfield, but I find the way that they describe the expertise within local authorities to be very strange. In my recollection of my local authority, even when we were a district-level authority with district-level powers, we could understand funding arrangements and financial matters in the private sector. Indeed, the local authority worked with the private sector in many instances and had to undertake difficult financial decisions based on advice provided from within the local authority.
So I cannot accept that the local authority sector does not have the expertise with which the noble Baroness charges it with lacking. Indeed, I should be very worried if it did not have that expertise available, because it would be unable to undertake the daily judgment that it has to in a whole range of service activities. It is important that it has that capacity and that it can call up that information, because standards will deteriorate if a manager does not have the money to carry out his obligations. That is why it is essential that local authorities must be satisfied that adequate funding arrangements are in place, or available, before they grant a licence. The suggestion that they do not have such expertise is untenable. Big and complex projects are before local authorities all the time.
It is also incorrect to suggest that environmental health officers will be administering licensing schemes on their own. They will of course have a central, critical role, but other functions relating to the licensing process will be dealt with by other staff: maybe administrators, managers, people with some form of building control expertise—who knows what they will have to bring up to ensure that the licensing process works? I do not see why they cannot relate carefully and clearly to those staff at the local authority with accountancy and fiscal investigative skills, because those staff certainly exist. No doubt the authority will give the functions to those people within its staff who have the ability to understand and analyse financial matters.
So the amendment is misconceived. If the noble Baroness is trying to create a case for a new local authority burden, she is somewhat wide of the mark. Perhaps she ought to go back to her local authority to ask it whether it feels that it could carry out this sort of work. I should be very surprised if it were to say, "Oh no, we cannot. We do not have that knowledge or expertise within the authority", because I believe that it does.
Baroness Hanham: My Lords, I hear the Minister's reply and I thank him for it. I think that the essence of this is that there will be a large additional burden placed on local authorities, because I do not believe that all environmental health officers, who will be carrying out licensing, will have the expertise to deal with examination of accounts, of mortgage arrangements and of other funding arrangements for the ownership of property. Of course they can call on the local authority's finance department, which will understand them, but why should it have to scrutinise every licensee for his funding

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ability? The provision is an unnecessary addition, but, for today's purposes, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hanham Baroness Hanham moved Amendment No. 57:
After Clause 66, insert the following new clause—

FITNESS CERTIFICATES
(1) A person who proposes to apply for a licence in respect of an HMO within the area of a local housing authority or who proposes to become the manager of one or more houses within the area of a local housing authority may apply to that authority for a certificate that he is a fit and proper person for the purposes of section 65.
(2) The provisions of sections 62(2) to (7) and 65(1) to (3) shall apply in the case of an application for a certificate under this section.
(3) Local housing authorities shall grant a certificate if they are satisfied that the applicant is a fit and proper person for the purposes of section 63(3)(b)(i) and (d) and, in determining any subsequent application by the holder of the certificate in relation to an HMO licence, the holder of the certificate shall be treated as having satisfied the authority in relation to those matters unless proceedings are pending for the revocation of the certificate.
(4) Any certificate shall remain in force for the period of 5 years from the date of its grant unless revoked in the meantime but without prejudice to the right of the holder of the certificate to apply for a further certificate on the expiration of an earlier certificate.
(5) For the purposes of this section the following provisions of this Act shall apply—

(a) section 69(1) (other than paragraph (c));

(b) section 69(2) (a) and (b);

(c) section 69(7), (8) and (9) (omitting the words "or a relevant person" in subsection (9));

(d) paragraphs 22 to 25 and 29 in Part 2 of Schedule 5 (except that references to "the relevant person" shall be omitted);

(6) The provisions of Part 3 in Schedule 5 (appeals against licence decisions) shall also apply to decisions in respect of a refusal to grant a certificate or the revocation of a certificate (except that any reference to "a relevant person shall" be omitted for these purposes)."
The noble Baroness said: My Lords, this amendment comes back to the idea of fitness certificates. We spent some time on this in Committee, so I shall not detain the House for terribly long, except to say that, under the Bill, houses in multiple occupation and selected licences will be issued on an individual, house-by-house basis.
The purpose of the new clause is to improve and simplify the system. It would enable a prospective licence holder or manager of more than one property in a local authority area to apply to the authority for an individual certificate of fitness for the purposes of licensing. The authority would then need to investigate that person only once. That returns us to a previous provision, which means that every time someone put forward an application, he would have to have his funding arrangements re-examined. If found to be a fit and proper person, a certificate would be issued to that person under our amendment.
We have made considerable concessions since Committee. Under this new version of the new clause, a certificate of fitness once granted would last for
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five years, not 10, as previously suggested, unless it was revoked for good reason in the mean time. There would be a right of appeal against the refusal of a certificate. Once the five-year period was up, the person concerned could reapply and be reconsidered.
That is important in some areas where one landlord owns a large number of properties. If that person has to be scrutinised each time he applies for a licence, that is administrative bureaucracy gone mad. The amendment would ensure that that was unnecessary. I beg to move.
Baroness Maddock: My Lords, I support the purpose of the amendment, which we discussed in Committee. I, too, was concerned that we should not make extra work for local authorities. In response to amendments that I have moved this afternoon, the Government have been keen not to make extra work for authorities. Casting my mind back to Committee, I think that we had at least some reassurance from the Government that there would be some allowance for local authorities, once they had agreed that someone was a fit and proper person, not to have to go through the whole process again. I think I remember that right, but perhaps that can be reiterated today, because I understand what the noble Baroness is saying and have great sympathy for it, as I have said previously.
Lord Bassam of Brighton: My Lords, we debated this amendment in Committee and I dealt with it at that stage. In fairness, I ought to point out that the amendment does not take account of the revision of clause numbers since the time it was debated in Committee. But I will not dwell on that point. I think I also said at the time that I saw some merit in the noble Baroness's argument, but the amendment does not eliminate the need for separate licence applications on different properties.
In many cases a landlord may own a single property which is subject to licensing, and in those cases it is appropriate that his fitness should be determined as part of the consideration of the application. However, there will be cases where a landlord owns multiple properties. It would be absurd if local authorities were required to carry out separate fitness inquiries in relation to every application in those sets of circumstances.
It is our intention—and I think this gets to the point raised by the noble Baroness, Lady Maddock—that the application forms for licensing will address that scenario by asking whether the applicant already holds a licence for other property in the area, or whether such an application is outstanding. In that way, the landlord will not be required to reprovide and re-present information that they have already provided to the authority. In effect that means that an initial application approval would act as a fitness certificate.
That does not mean that the local authority cannot make further inquiries, or is bound to grant further licences, as one would expect, because circumstances may change and it may be right in the case of later applications to refuse the licence on the basis of experience. So I think that the bureaucratic nightmare conjured up by the noble Baroness is not quite such a

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horrific scenario as she envisaged when she embarked upon this worthy amendment. In the circumstances, I hope that she will feel able to withdraw it.
Baroness Hanham: My Lords, she would not have embarked upon it if it had been clear at the outset that that is what the situation would be. Half the reason for putting forward amendments is to pluck out from the Government what they have in mind. If it is right that the application form will make it clear that if one has more properties one makes that clear on the application, and therefore there will be only one examination—I fully accept that there may be occasions when it is necessary to do more than that—then I am content. But that information would not be available if we had not moved this amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 67 [Licence conditions]:
Lord Bassam of Brighton Lord Bassam of Brighton moved Amendment No. 58:
Page 45, line 10, leave out "such steps as are reasonably practicable" and insert "reasonable and practicable steps"
The noble Lord said: My Lords, Amendment No. 58 is grouped with other amendments, two of which are non-government amendments. I will deal with the amendments in turn.
Clause 67 provides that the local authority may include conditions in Part 2 licences in addition to those mandatory conditions that must be included in every licence and which are laid out in Schedule 4. Subsection (2) sets out the conditions that a local authority may decide to include in a licence if appropriate in the circumstances. The list is not intended to be exhaustive.
Government Amendment No. 58 would alter Clause 67(2)(b), which has a licence condition relating to,
"taking of such steps as are reasonably practicable to prevent or reduce anti-social behaviour by persons occupying or visiting the house".
The amendment replaces the words "reasonably practicable" with "reasonable and practicable". It is timely that the noble Baroness, Lady Hamwee, has arrived in the Chamber because this change was prompted by a debate in Committee on a point raised by the noble Baroness. I think her query was whether the words "reasonably practicable" in subsection (2)(b) necessarily implied that conditions had to be reasonable as well as practicable. She suggested that there might be steps which, although entirely practicable, would nevertheless be unreasonable for the landlord to take.
5.45 p.m.
We do not wish there to be any possibility that landlords or managing agents are required to take unjustifiable steps regarding the behaviour of their tenants. Nor do we want there to be any danger that misinterpretation of this provision leads to landlords being able to validate harassment of their tenants. Therefore, this amendment will clarify the situation that licence holders, subject to a condition of this type,
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can be expected or required only to take steps that are both reasonable and practicable when endeavouring to prevent or reduce anti-social behaviour. So, the noble Baroness has scored.
Amendment No. 61 is a non-government amendment. It would enable a local housing authority to serve a "breach of condition notice" on a licence holder who fails to comply with any of the licence conditions. The notice would require the licence holder to comply with the conditions specified in the notice within a period of not less than 28 days from the date the notice was served, but the period could be extended by the authority.
As I understand it, this amendment is aimed at ensuring that a person does not find himself or herself in an inadvertent breach of a licence condition and at risk of prosecution. It inserts a procedural step to give landlords a last chance before they face having to go to court.
It will be recalled that Clause 70 has now been amended and provides that a licence may be revoked only where there are serious or repeated breaches of licence conditions. It is hard to conceive of any situation where a prosecuting authority would consider it in the public interest to bring a prosecution for a single trivial breach of a licence condition when it could not even revoke the licence for that breach.
As has been said before in your Lordships' House, most authorities are now signed up to the enforcement concordat. I think all local authorities ought to be signed up to that, but that is another matter. That makes it quite clear that prosecution is not appropriate in the case of any and all breaches of statutory obligations.
I share noble Lords' general objectives of ensuring that prosecutions are not brought inappropriately. I hope that our words on the record today make it quite clear that local authorities are not free to bring pointless prosecutions for trivial offences. As a responsible enforcement authority, the job for a local authority policing the licensing regime will be to give advice where this will help, to give a warning where a landlord is getting close to the mark and to take serious action—such as a prosecution or a revocation of a licence—only where such action is justified.
The unfortunate effect of the proposed amendment is that it would inhibit prosecutions where there had been deliberate and serious breaches of licence conditions. Some conditions are just not capable of being remedied within 28 days of service of a notice. Some breaches might be so serious as to warrant immediate prosecution. I know that the amendment has not yet been spoken to but I hope that the noble Lords who tabled that amendment will not press it having heard what I have said.
Amendment No. 62 is a government amendment. It follows on from the contents of Schedule 4. which impose an obligation on local housing authorities to impose particular conditions on all Part 2 and 3 licences. This includes a requirement to keep smoke alarms in working order and supply a declaration as to the condition and positioning of alarms to the local housing authority on demand. The government

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amendment is a minor amendment which would clarify that this includes a requirement on landlords to install smoke alarms if smoke alarms are not already in place. The amendment removes some ambiguity from the draft. Most landlords are responsible and provide alarms in their properties. We are simply trying to plug a gap that may inadvertently exist.
Amendment No. 66 provides that a person having control of or managing an HMO—whom for convenience I shall refer to as the landlord—can be guilty of committing an offence under Clause 72(2) only if he or she knowingly permits another person to occupy the property so as to cause the house to be occupied by more persons than are permitted on the licence. An amendment was tabled to that effect in Committee by the noble Lords opposite. We agreed to take the matter away and give it further thought. We have done exactly that.
I note that the noble Baroness and the noble Lord have retabled their amendment. I should like to reassure them that government Amendment No. 66 serves the same purpose as non-government Amendment No. 67. Although the words are slightly different, we prefer our version. I therefore hope that noble Lords opposite will feel able not to press their amendment.
Non-government Amendment No. 70 seeks to reduce the penalty for the offence of managing an unlicensed property, or allowing a property to be overcrowded, to a fine not exceeding level 5 on the standard scale instead of the £20,000 fine currently provided for in Clause 72(6). We believe that running an HMO without a licence when one is required should be made a serious offence and we think that that should be reflected in the level of fine payable on conviction.
In the same vein, we believe that operating an HMO with a licence but allowing such property to be occupied by more people than the licence allows, although a breach of the conditions of the licence, breaches a fundamental term of the licence and should not be classed as a breach of other licence conditions. We therefore think it appropriate to classify this breach as running an HMO without a licence and to set the penalty of fine at the same level, at £20,000.
This amendment has been extensively debated. I can only reiterate that our intention in setting the exceptional level of maximum fine for these offences is simply to underline the seriousness with which the Government are treating the new compulsory licensing regimes and to set them apart from other housing offences which are pitched at a fine at level 5. The Government believe that the penalty for these offences should be sufficiently substantial to act as a strong deterrent to landlords who might otherwise seek to operate without a licence or may be tempted to allow a licensed property to be occupied by more people than the licence allows.
There are landlords out there—thankfully very few, and the ones who exist are notorious—who might see some merit in breaching these arrangements. I do not think that we should act in a way that offers them any encouragement at all.
I turn, finally, to government Amendment No. 83. Clause 88 provides that a local authority may include conditions in Part 3 licences in addition to those mandatory conditions that must be included in every licence and are laid out in Schedule 4. Subsection (2) sets out the sorts of conditions that a local authority may decide to include in a licence if appropriate in the circumstances. It is not intended to be an exhaustive list.
Our amendment would alter Clause 88(2)(b), which is the suggested licence condition relating to taking such steps as are reasonably practicable to prevent or reduce anti-social behaviour by persons occupying or visiting the house. The amendment replaces the words "reasonably practicable" with "reasonable and practicable", in line with the earlier amendment.
I hope that noble Lords will agree that we have responded to some of the concerns raised in Committee. We have tried to replace words that needed to be put on the face of the Bill with ones that work better. I would certainly resist amendments that weaken our approach to landlords who, unfortunately, step out of line and commit serious breaches of their conditions. I beg to move.
Lord Hanningfield: My Lords, I thank the Minister for many of those comments, many of which related to some of our amendments. It was difficult to follow how his lengthy remarks related to amendments that we will debate later today. Therefore, it still seems necessary for us to move our amendments, after which the Minister can say that the point has already been covered. The Government have, for example, tabled an amendment that is almost identical to our Amendment No. 67. I think that we will have to reiterate the point when we reach those amendments to avoid any confusion. Nevertheless, the Minister's remarks were very helpful.
Baroness Hamwee: My Lords, I thank the Minister and the Government, although I am sure they realise that they are tempting me to go on being picky about legislation. I do not promise not to be. I am grateful to them for taking up the point.
On Question, amendment agreed to.
Lord Hanningfield Lord Hanningfield moved Amendment No. 59:
Page 45, line 36, at end insert "but (except in the case of prescribed standards under section 65(3)) the authority shall not do so unless it has first carried out an inspection of the house under section 4 and has determined that a category 1 or category 2 hazard exists"
The noble Lord said: My Lords, in Committee the Minister indicated that the reference to other facilities in Clause 65(4)(b) included such things as fire alarms. Currently, Clause 67(4)(b) makes it clear that the authority can impose licence conditions relating to installations even if the same result can be achieved as a result of an HHSRS assessment under Part 1 of the Bill.
There could consequently be a mismatch, in that if the authority acted under Part 1, then it must carry out a proper hazard assessment and decide on the most appropriate course of action. As the Bill stands, that is

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not required if the local authority goes down the licence route. There should be a proper HHSRS assessment in the same way as the licence conditions operate under Part 1. Without that requirement an unnecessary facility may be required. A proper assessment under the HHSRS system would show whether that was necessary in the first place. Otherwise, landlords could face considerable costs for meeting licence conditions in respect of something that is not really necessary in the first place. I beg to move.
Lord Rooker: My Lords, as a general rule, an authority is required to address health and safety issues through Part 1 functions and not by means of the licence conditions. However, Clause 67(4)(b) provides that it may impose conditions relating to the installation or maintenance of facilities or equipment as part of that licence. Amendment No. 59 would require that licence conditions made under the clause relating to the installation or maintenance of facilities can exceed national minimum standards prescribed under Clause 65(3) only if a housing health and safety rating system assessment has been carried out on the property in question and a category 1 or 2 hazard has been discovered.
We think that the amendment proceeds on a false basis. Part 1 functions must be dealt with under Part 1. Therefore, if a category 1 or 2 hazard is discovered in a property, there will be no need for a licence condition to address the hazard because it will be dealt with via the rating system regime. So, contrary to what the amendment envisages—that licence conditions need to he restricted by combating category 1 and 2 hazards—the conditions are already more restricted than the amendment proposes.
I understand that the amendment derives from a fear that landlords will be required by licence conditions to install unnecessary equipment. We think that that fear is unfounded. Clause 67 makes it clear that authorities must be reasonable when setting licence conditions by including the wording,
"so far as appropriate in the circumstances".
Moreover, landlords may, of course, appeal to a residential property tribunal if they believe that any licence condition is unfair.
Earlier this week and following our discussions in Committee, I wrote to the noble Lord and other Peers concerning fire safety standards. As my letter made clear, we will not be using these provisions to prescribe inappropriately sophisticated fire safety equipment. Rather, we will be using the prescribed standards to ensure that all licensed houses in multiple occupation comply with basic fire safety standards.
Moreover, there is the broader point that the provisions of Clause 67(4)(b) are not intended to refer only to health and safety-related facilities and equipment. They are about guaranteeing basic standards of accommodation for some of the most vulnerable tenants.
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I hope that that is a satisfactory explanation. It is not meant to be a bucket of cold water. However, issues relating to Part 1 can and must be dealt with using the powers under Part 1.
Lord Hanningfield: My Lords, I thank the Minister for his detailed reply. Unfortunately, during some of it I was occupied in talking about the previous amendment. I heard the gist of it and I will examine it in Hansard in some detail to see whether we need to return to the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6 p.m.
Lord Hanningfield Lord Hanningfield moved Amendment No. 60:
Page 45, line 46, at end insert—
"(7) A licence may not include conditions imposing restrictions or obligations imposed under the management regulations or which are contained in a code of practice approved for the purposes of section 216."
The noble Lord said: My Lords, HMOs will be subject to control or regulation under the HHSRS standard, licence conditions, management regulations and the approved code of practice. Owners of HMOs are in the main small business people faced with a tremendous amount of regulation. It is a great burden to them. Experience shows with planning permissions how licensed conditions can grow and multiply.
The amendment's purpose is to cut down the risk of such duplication. If matters are dealt with in the management regulations or subject to the code of practice, there is no leave for them to be repeated as licence conditions. There is also the risk that, with the code of practice, matters that are really recommendations of good practice are given legal force by the imposition of licence conditions. I beg to move.
Lord Rooker: My Lords, I regret that my reply is longer than the noble Lord's speech in moving the amendment. As he said, Amendment No 60 would require that licence conditions do not duplicate restrictions or obligations already covered by the management regulations provided for under Clause 217 or the approved code of practice as provided for under Clause 216.
We have some sympathy with part of the amendment. The Bill's provisions would appear to allow the possibility of a landlord who breached a management regulation and a licence condition that replicated it being subject to double jeopardy; that is, prosecuted twice for the same offence. We do not want that situation to arise. I am pleased to say that it will not. If a local authority were foolish enough to pursue such a course, the attempted second prosecution would be thrown out as an abuse of process, regardless of whether the first prosecution was successful. It will pay the necessary cost, because it should not be a burden on the landlord.
We do not wish authorities to generate superfluous regulation. We have already noted that Clause 67 makes it clear that local authorities must be reasonable

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when setting the licence conditions. I have mentioned that landlords will have the right of appeal against any licence condition they consider unduly burdensome or inappropriate. We would expect local authorities to be aware that if, for example, they sought without good reason to impose a licence condition that closely duplicated the effect of a management regulation, such a condition would be deemed unreasonable and could successfully be appealed.
With regard to licence conditions duplicating elements of an approved code of practice, we appreciate that there is some circumspection about what is best practice becoming legally enforceable through replication as a licence condition. None the less, if a local authority has good reasons for including such a condition in a licence, we would not wish to prevent it from doing so.
As I said, landlords can always appeal against conditions they believe to be unfair or unnecessary. It would be perverse if something considered to be such a prime example of good management that it was included in the code of good management practice were banned from being a licence condition.
The management code has not yet been finalised. We hope that when it is finalised it will recommend that good landlords will ensure that smoke alarms are installed and regularly checked. We are certain that it is appropriate also to have a condition in every licence issued that the licensee will ensure that smoke alarms are installed and maintained. That is a requirement contained in Schedule 4.
It would make more difficult the task of driving up management standards in houses in multiple occupation if the amendment were pressed. I hope that it will not be and that my reply is satisfactory to the noble Lord.
Lord Hanningfield: My Lords, I thank the Minister. Again, we will analyse his answer. I was trying to make the point that I have made before: many HMOs are owned by small businesses and one does not want duplication or too much onerous bureaucracy in the processes. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hanningfield Lord Hanningfield moved Amendment No. 61:
After Clause 67, insert the following new clause—

HMO LICENCES—BREACH OF CONDITIONS
(1) A local housing authority may, if any of the conditions of the licence is not complied with, serve a notice (in this Act referred to as "a breach of condition notice") on the licence holder requiring him to secure compliance with the conditions as are specified in the notice.
(2) A breach of condition notice shall specify the steps which the authority consider ought to be taken to secure compliance with the conditions specified in the notice.
(3) The period allowed for compliance with the notice is such period of not less than 28 days from the date of service of the notice as specified in the notice but this period may be extended by the authority.
(4) If at any time after the end of the period allowed for compliance with the notice—

(a) any of the conditions specified in the notice is not complied with, and

(b) the steps specified in the notice have not been taken the licence holder shall be guilty of an offence.

(5) It shall be a defence for a person charged with an offence under subsection (4) to prove—

(a) that he took all reasonable measures to comply with the conditions specified in the notice, or

(b) that he had reasonable excuse for failing to comply with the notice.

(6) The person who is guilty under subsection (4) shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.
(7) The provisions of Part 3 of Schedule 1 (appeals) shall apply to a notice served under this section as if it were an improvement notice (omitting paragraphs 12, 13, 17 and 18).
The noble Lord said: My Lords, this amendment was included in an earlier group, but I wish to speak to it now. In relation to HMO selective licensing, the thrust of the Bill is to criminalise in the event of non-compliance.
I understood the Minister's remark during Committee stage that something might be so serious that only an immediate revocation would be a suitable answer. That is draconian and should be reserved for cases where there have been repeated infringements. However, we are tabling the new clause as we still believe that there is a need for something like our amendment to give some leeway to landlords, managers and local authorities in the first instance.
I will quickly remind the House of the main thrust of Amendment No. 61. A breach of condition notice is suggested as an intermediate step that the local authority can adopt in less serious cases. It would allow the local housing authority to set out the breaches complained of and the steps required of the landlord to comply with the notice. The landlord would have 28 days in which to comply.
Non-compliance with the notice would be a criminal offence, potentially attracting a level-five fine. There would be provision for a defence of reasonable excuse where the landlord could demonstrate that he had taken all reasonable measures to comply with the notice and/or that he had a reasonable excuse for failing to comply with all the conditions listed.
It enables a stern warning to be sent to the landlord without the need to go immediately to the extreme step of revoking the licence or instituting criminal proceedings. In most cases it will ensure compliance without the need to go any further. It would allow local authorities to fire a warning shot and is another weapon in their armoury. It would also avoid criminalising landlords. It will save costs for both local authorities and landlords and, through not having

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such a heavy-handed approach, it will foster good relations between housing associations and landlords. I beg to move.
Lord Bassani of Brighton: My Lords, Amendment No. 61 would enable a local housing authority to serve a breach of condition notice on a licence holder who fails to comply with any of the licence conditions. The notice would require the licence holder to comply with the conditions specified in the notice in a period of not less than 28 days from the date the notice was served but the period could he extended by the authority.
The amendment is aimed at ensuring that a person does not find him or herself in an inadvertent breach of a licence condition and at risk of prosecution. It inserts a procedural step to give landlords a last chance before they face having to go to court. Noble Lords will recall that Clause 70 has now been amended and provides that a licence may be revoked only where there are serious or repeated breaches of licence conditions.
It is difficult to conceive of any situation where a prosecuting authority would consider it in the public interest to bring a prosecution for a single trivial breach of a licence condition when it could not even revoke the licence for that breach. We have been over the issue and in making my comments earlier I made it plain that I did not think it was an appropriate amendment under the circumstances.
I also pointed out that it would have the unfortunate effect of inhibiting prosecutions where there have been deliberate and serious breaches of licence conditions. Some conditions are not capable of being remedied within 28 days of service of a notice and some breaches might be so serious as to warrant immediate prosecution. I hope that having heard what I have said, and what I said earlier, the noble Lord will withdraw his amendment.
Lord Hanningfield: My Lords, I thank the Minister for that reply. We will examine all this in some detail after today because we feel that there need to be steps that are not so serious as the final one. We will read in Hansard what the Minister said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 4 [Licences under Parts 2 and 3: mandatory, conditions]:
Lord Bassam of Brighton Lord Bassam of Brighton moved Amendment No. 62:
Page 209, line 34, leave out "keep smoke alarms in the house" and insert "ensure that smoke alarms are installed in the house and to keep them"
On Question, amendment agreed to.
Clause 68 [Licences: general requirements and duration]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 63:
Page 46, line 11, leave out "5" and insert "7"
The noble Lord said: My Lords, we turn to the concept that an HMO licence should continue in force for not more than five years, as we have just discussed. The Government estimate that 120,000 properties will
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be subject to compulsory licensing. The industry believes that that is a gross underestimate and considers the figure to be closer to 300,000. Even using the Government's estimate a massive effort will be required to meet the requirement for mandatory licensing of HMOs, and local authorities do not have the resources available to deal with the number of inspections required.
I believe that in Committee the Minister was not persuaded about the merits of a five-year timetable. That is why we have come back with yet another concession—the Government are getting many concessions out of us today—suggesting a seven-year period. We believe that it would be a more practical and sensible way forward and one that we hope the Minister will look upon with favour. I beg to move.
Lord Bassam of Brighton: My Lords, this amendment would increase the maximum duration for a licence from five to seven years. The issue of for how long a licence should be granted will depend on the merits of each case. However, there must always be a maximum period after which the local authority must review the matter and decide in the light of new circumstances or existing circumstances the terms on which a new licence should be granted, if at all.
In Committee we argued that 10 years was too long a period. The only real benefit of such a protracted duration would be a small saving in administrative costs. If local authorities were to try to keep in touch with what was happening on the ground in HMOs, they would inevitably have to review licences that they had granted for such long periods. That process in itself would incur substantial additional administrative costs.
We promised to give the issue further consideration in advance of Report but, having done so, we are firmly resolved to stick by the five-year period for the arguments that were made in Committee but also on several other counts. First, five years chimes with the existing provisions for registration schemes with control orders. I shall not regale the noble Lord too long on that but those control orders were set up under the Housing Act 1996 by a Conservative government and we have been under no pressure to extend similar provisions for registration schemes.
Secondly, there is a read-across from this provision in the Bill to others such as it being incumbent on local authorities to satisfy themselves that they have discharged their Part 1 functions in respect of licensable HMOs as soon as reasonably practical and within the five-year duration of the licence.
Thirdly, we would be faced with the prospect of a not insignificant raft of consequential amendments that would need to be tabled for Third Reading—not a prospect that I think anyone in your Lordships' House would relish, particularly having heard what was said today.

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Fourthly, I do not consider that we have had a convincing case made for a period longer than five years. Finally, I offer the reassurance that we are committed in any event to reviewing the licensing regime within three years of implementation and to consulting on the way in which the review is carried out. That would be the most opportune moment to make any changes once we have the benefit and knowledge of how the licensing regime is operating on the ground. We could well decide at that point that a compromise should be struck on the issue that would allow local authorities greater discretion. As a general rule and for now I think that the Government have pitched the period of five years about right for the maximum duration for a licence. As I explained, that has the benefit of being consistent with the provisions for registration schemes introduced by the previous Conservative government.
For those reasons I hope that the noble Lord will withdraw the amendment.
6.15 p.m.
Lord Hanningfield: My Lords, given the Minister's remarks I believe that he was almost persuaded that the relevant period should be seven rather than five years. I hear what has been said and note that the Government do not wish to depart from the period of five years for the maximum duration for a licence but that the matter will be reviewed in future. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hanningfield Lord Hanningfield moved Amendment No. 64:
Page 46, line 17, leave out "not"
The noble Lord said: My Lords, as the Bill stands, HMO licences and selected licences are not transferable. These remarks therefore apply to Amendments Nos. 64, 65 and 84 that would create a scheme for the transfer of HMO licences.
Again, the arguments in favour of such a scheme were well rehearsed in Committee. However, it is perhaps worth spending a moment reminding ourselves of their merits. Each time a property is sold, the existing licence holder will have to apply for the licence to be revoked and the proposed licence holder will have to apply afresh. The result is that each time the local authority will have to reconsider the property. It may want to change the standards or impose fresh conditions, that is despite the fact that these matters can be looked at every five years when the licence has to be renewed—as we have just discussed—although as a result of our previous discussion that period may become more flexible.
If there were a system of transferring licences, the local authority would need to look only at the issue of whether the licence holder and the manager, if different, are fit and proper persons and whether the management arrangements are satisfactory. It would not have to look at property specific issues. This would also narrow the uncertainty from the perspective of both buyers and sellers. You could have a situation where a property had been assessed for a licence just a
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few months before it was sold, but the local authority would have to undertake a new assessment. The workload for local authorities will be tremendous anyway. Having to assess a property every few months could become a nightmare. Landlords could be forgiven for thinking that this is a system which enables a new fee to be charged all over again.
A transfer system would enable a reduced fee to be charged to reflect the simpler processes, thus reducing conveyancing costs. Conveyancing costs would also be reduced if the terms of the condition of contract could be simplified by excluding property specific topics; otherwise, conveyancing will be slowed down even more. I beg to move.
Lord Bassam of Brighton: My Lords, Amendment No. 64 would change subsection (6) of Clause 68 to allow local authorities to transfer licences instead of having to go through the full licence application process. I believe that this amendment was discussed at some length in Committee. I do not think that the amendment is particularly helpful. The application process is, after all, designed to ensure that adequate standards of management are in place. That stands even where information relating to the property has been collected as part of the application process by the original landlord. These safeguards include checks that the landlord or manager is a fit and proper person and has adequate management experience and adequate arrangements are in place. Those are some of the fundamental objectives that underlie the Bill.
Amendments Nos. 65 and 84 would provide that transfers may take place either with the agreement of the licence holder or when there is a change of circumstances. The transfer process is akin to an application for a licence with the exception that the local authority does not have to satisfy itself as to the minimum, rather than the maximum, number of households or persons appropriate for the property in question.
I have some sympathy with the intent behind the amendment but, on balance, we do not think that it achieves its purpose. Given the similarities in the process to the existing new licence application process, it is not clear to me where time savings would be made. Such time savings could equally be achieved through a well targeted application form that allows landlords to identify where the property-related information supplied by the previous landlord is still pertinent or where the applicant has met the fit and proper test for another property.
An underlying aim of the proposed transfer scheme is to reduce the application fee that applies for licence applications, and hence reduce costs for the new landlord. In our view the application fees charged for licence applications are proportionate to the costs of the scheme and can be used only towards the costs of that scheme. Even in administering a transfer application local authorities will incur some costs as they are required to check whether any new licensing applicant meets the fit and proper test and that adequate management arrangements are in place. If this amendment and Amendment No. 84 were accepted, rather than receiving a full five-year licence in exchange for an application fee, the applicant for transfer would receive whatever

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remained from the previous landlord's licence in exchange for a transfer fee. I do not accept that that benefits anyone. I hope that the noble Lord will feel able to withdraw the amendment.
Lord Hanningfield: My Lords, I thank the Minister for that reply. I said that I thought that under the management scheme, the owners should go through a scrutiny process, but I was concerned that a building that had been inspected and agreed only a few months before it was sold should not have to go through the process again, involving costs and time for local authorities. There are 300,000 such buildings, many of which will change hands. If they have been inspected only a few months before, it should not be necessary to inspect them again. I certainly did not want to suggest that there would be no double-checking on the appropriateness of the management of the properties.
I note what the Minister said, and we may have to come back at Third Reading to the issue of the transfer of licences. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 65 not moved.]
Clause 72 [Offences in relation to licensing of HMOs]:
Lord Rooker Lord Rooker moved Amendment No. 66:
Page 49, line 14, after "he" insert "knowingly"
On Question, amendment agreed to.
[Amendment No. 67 not moved.]
Baroness Hanham Baroness Hanham moved Amendment No. 68:
Page 49, line 16, at end insert ", and
(d) in this subsection "occupy" means occupation as an only or main residence (or treatment as such in accordance with section 222) and any reference to occupation shall be interpreted accordingly."
The noble Baroness said: My Lords, Clause 72(2) creates an offence whereby a landlord permits a house in multiple occupation to be occupied by a number in excess of that permitted under the HMO licence for the property. The Government have met some of our concerns about the provision by introducing an amendment so that the landlord is guilty only if he "knowingly" permits occupation in breach of the licence. We have just supported the Government's amendment and withdrawn our one. I want to make that clear.
However, Amendment No. 68 is concerned with the definition of occupation for these purposes. Clause 245(6) defines an occupier simply as someone who,
"occupies the premises as a residence".
Legally one can have more than one residence. The presence at a property of someone who is a casual resident as opposed to a permanent resident could mean that a landlord is guilty of an offence. The amendment would clarify the expression "occupation" so that an offence would be committed only if occupation were by someone for whom the property is his only or main residence.
There is an inconsistency. When determining whether the house needs to be licensed, the test is one of only or main residence. We had understood that the offence would be committed only when the number of permanent residents exceeds the permitted number. Without the amendment there is a mismatch between the offence under the clause and the criteria for whether a house is one in multiple occupation in the first place.
In this day and age boyfriends or girlfriends regularly stay over, or people often stay with friends overnight. A landlord may let a licensed HMO to five people in which all the rooms have double beds that have been supplied by the landlord and are capable of being occupied by more than one person. Nowadays that is what tenants usually demand. What happens if on occasion all beds are occupied to their full capacity by guests? Alternatively, what if one room is occupied regularly at the weekend, for example?
The amendment would make it clear that the offence occurs only when the property is permanently occupied in excess of the permitted numbers rather than criminalising transient arrangements. I beg to move.
Lord Rooker: My Lords, it does not really matter whether the residence is "only" or "main". It just needs to be a residence. There is no way that weekend or overnight occupation will count as residence.
We are satisfied that the definition in Clause 245(6) is strict. It would prevent people who have stayed overnight being counted as occupiers for the purposes of Clause 72. That makes the amendment unnecessary. There are definitions, but it would not matter whether it was "only" or "main". It must be a residence. Transient, weekend or overnight occupation cannot be claimed as residence.
Baroness Hanham: My Lords, I am grateful for that reply. I hope that the Minister is correct. If an inspection took place and the number was in excess of that for which a licence had been granted, there would be a test of strength as to whether that person was a resident. If that is plainly and clearly on the record, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 69 not moved.]
Baroness Hanham Baroness Hanham had given notice of her intention to move Amendment No. 70:
Page 49, line 36, leave out "£20,000" and insert "level 5 on the standard scale"
The noble Baroness said: My Lords, the Minister dealt with this point and made it absolutely patently clear that there was not much point in my going further as the amendment would not be accepted. I shall not waste any more time on it.
[Amendment No. 70 not moved.]
The Deputy Speaker (Lord Boston of Faversham): My Lords, Amendment No. 70A is on the supplementary sheet. I must point out that if either this amendment or Amendment No. 71 is agreed to, I cannot call Amendment No. 72.
Baroness Hanham: My Lords, before the Minister speaks—
Lord Rooker: My Lords, what I am about to say will be really helpful.
Baroness Hanham: My Lords, shall I say it first so that the Minister can tell me how helpful he will be, as he will know the burden of my objection?
Lord Rooker: My Lords, if I get it wrong the noble Baroness can come back to me. I am determined to stay in order. There is no one to call order in this place as there are no orders. It is run on an anarchy basis. However, I shall move Amendment No. 70A so that I can speak to the government amendments. At the same time, I shall speak to the opposition amendments. Finally, when I am asked to move my amendment, I shall not do so. Does that help?
Baroness Hanham: My Lords, it would be helpful if the Minister could explain his amendments. The government amendments are being moved in anticipation of the amendments that we have tabled. The Minister said at the outset that his amendments were meant to address the matters raised by the amendments in the next group, the first of which is Amendment No. 71.
If the Minister is kind enough to explain his amendments, perhaps it will be possible for us to move our amendments and then for the Minister not to move his amendments formally.
Lord Rooker Lord Rooker moved Amendment No. 70A:
Leave out Clause 73 and insert the following new Clause—

OTHER CONSEQUENCES OF OPERATING UNLICENSED HMOS: RENT REPAYMENT ORDERS
(1) For the purposes of this section an "unlicensed HMO" means an HMO which is required to be licensed under this Part but is not so licensed.
(2) Nothing in this Part affects—

(a) any provision requiring the payment of rent or the making of any other periodical payment in connection with any tenancy or licence of a part of an unlicensed HMO, or

(b) the operation of any other provision of such a tenancy or licence.

(3) But amounts paid in respect of rent or other periodical payments payable in connection with such a tenancy or licence may be recovered in accordance with subsection (4) and section (Further provisions about rent repayment orders).
(4) If

(a) an application in respect of an HMO is made to a residential property tribunal by the local housing authority or an occupier of a part of the HMO, and

(b) the tribunal is satisfied as to the matters mentioned in subsection (5) or (7),

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the tribunal may make an order (a "rent repayment order") requiring the appropriate person to pay to the applicant such amount in respect of the housing benefit mentioned in subsection (5)(b), or (as the case may be) the periodical payments paid as mentioned in subsection (7)(b), as is specified in the order.
(5) If the application is made by the local housing authority, the tribunal must be satisfied as to the following matters—

(a) that, at any time within the period of 12 months ending with the date of the notice of intended proceedings required by subsection (6), the appropriate person has committed an offence under section 72(1) in relation to the HMO (whether or not he has been charged or convicted),

(b) that any housing benefit has been paid (to any person) in respect of periodical payments payable in connection with the occupation of a part or parts of the HMO during any period during which it appears to the tribunal that such an offence was being committed, and

(c) that the requirements of subsection (6) have been complied with in relation to the application.

(6) Those requirements are as follows—

(a) the authority must have served on the appropriate person a notice (a "notice of intended proceedings")—

(i) informing him that the authority are proposing to make an application under subsection (4),

(ii) setting out the reasons why they propose to do so,

(iii) stating the amount that they will seek to recover under that subsection and how that amount is calculated, and

(iv) inviting him to make representations to them within a period specified in the notice of not less than 28 days;

(b) that period must have expired; and

(c) the authority must have considered any representations made to them within that period by the appropriate person.

(7) If the application is made by an occupier of a part of the HMO, the tribunal must be satisfied as to the following matters—

(a) that the appropriate person has been convicted of an offence under section 72(1) in relation to the HMO, or has been required by a rent repayment order to make a payment in respect of housing benefit paid in connection with occupation of a part or parts of the HMO,

(b) that the occupier paid, to a person having control of or managing the HMO, periodical payments in respect of occupation of part of the HMO during any period during which it appears to the tribunal that such an offence was being committed in relation to the HMO, and

(c) that the application is made within the period of 12 months beginning with—

(i) the date of the conviction or order, or

(ii) if such a conviction was followed by such an order (or vice versa), the date of the later of them.

(8) Where a local housing authority serve a notice of intended proceedings on any person under this section, they must ensure that a copy of the notice is received by the department of the authority responsible for granting the housing benefit to which the proceedings would relate.
(9) In this section—

"the appropriate person", in relation to any payment of housing benefit or periodical payment payable in connection with occupation of a part of an HMO, means the person who at the time of the payment was entitled to receive on his own account periodical payments payable in connection with such occupation;

occupier", in relation to any periodical payment, means a person who was an occupier at the time of the payment, whether under a tenancy or licence or otherwise (and "occupation" has a corresponding meaning);

"periodical payments" means periodical payments in respect of which housing benefit is payable under regulation 10 of the Housing Benefit (General) Regulations 1987 (S.I. 1987/1971) or any corresponding provision replacing that regulation."

The noble Lord said: My Lords, I shall repeat what I said earlier this afternoon. Government Amendments Nos. 70A, 72B, 72B, 85A, 86A and 86B are, in effect, a synthesis of the amendments tabled by the noble Baronesses, Lady Hamwee and Lady Maddock, and those tabled by the noble Baroness, Lady Hanham, and the noble Lord, Lord Hanningfield.
Before I speak about the detail behind the amendments, I want to take the opportunity, as I tried to do this afternoon, to thank all four colleagues in the House for their co-operation in this matter. They may not be aware of it, but they have co-operated. Early sight of their amendments has meant that civil servants who, it says in my brief, "worked like the clappers"—they were here until 11.30 last night—have been able to assemble the government amendments. We have been in a position therefore to respond by tabling amendments on Report for your Lordships' consideration. I hope that the package of government amendments will meet something that all three parties think should proceed. That is an example of how the House can work. I shall withdraw my amendment so that we can come back at Third Reading.
6.30 p.m.
These amendments are a synthesis of those tabled by the opposition parties. Their effect is to amend the existing provisions to provide that rent is payable but that a landlord who receives rent while operating an unlicensed property could be liable to a penalty equivalent to any rent received during the period of the offence, up to a maximum of 12 months. The residential property tribunal would be given the power to make a rent repayable order, imposing the penalty where it determined that an offence had been committed under Clause 72(1) or Clause 93(1) in Part 3 of the Bill.
A local housing authority would be entitled to make an application for such an order where it discovered that a landlord or managing agent was committing an offence, including circumstances where there had not been a prosecution, and any housing benefit that had been paid to that landlord either directly by the local housing authority or indirectly by the tenant during by period when such an offence was being committed.
Persons other than the local housing authority who had paid money to the landlord would also be permitted to make an application to the residential property tribunal for a rent repayable order where an
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order had already been granted to a local housing authority in respect of the same property or where the landlord had been convicted of the offence. Such rent would be recoverable as an ordinary civil debt.
The sanction proposed would help to prevent a landlord profiting from renting properties illegally, including cases where this would be at the expense of the public purse through housing benefit. It would also provide a civil sanction through the residential property tribunal for cases where potentially slow and resource-intensive action through the courts was not practical.
Amendments Nos. 72B and 86B remove the right to automatic possession in Section 21 of the Housing Act 1988 in relation to assured shorthold tenancies for unlicensed landlords. That would have the effect of bringing licensing in line with similar provisions that have been introduced in Part 6 of the Bill in respect of the tenancy deposit scheme. As well as providing consistency with the tenancy deposit scheme, it would also mean that there would be an incentive for landlords to obtain a licence and it would also prevent landlords evicting tenants to avoid licensing.
We have included additions in these government amendments over and above what would have been included in a pure synthesis, and these are chiefly down to the fact that a number of technical points need to be ironed out. That is precisely why we were grateful for sight of the opposition amendments on the basis that we were not—I repeat: not—going to table any amendments for the reasons that I gave earlier.
The technical points to be ironed out include notably, for example, changes to deal with the treatment of housing benefit and also to provide for a "notice of intended proceedings" procedure, giving landlords an opportunity to make representations before any application by the local housing authority to the tribunal. Otherwise, the amendments are self-explanatory, although I accept that they are lengthy. As I said, they pick up the content of the amendments tabled by noble Lords opposite.
I did not have time to write to noble Lords and noble Baronesses opposite at the voluminous length that is normally the case, but I promise to do so later this week—that is, before the end of the week; it is now Wednesday. As I said, when the time comes, I shall withdraw the amendments so that, between now and Third Reading, we can tidy them up as required by outsiders and ourselves. These things are never perfect and we never have them exactly right; there is always something that needs to be looked at. That said, I repeat that we are extremely grateful for the early sight of the opposition amendments, which we honestly did receive.
Baroness Maddock: My Lords, I am very grateful to the Minister for that explanation. What upset us most was the fact that we had no forewarning of this matter. Our amendment was not tabled very early because of an indication that we received during the previous stage of the Bill, when the noble Lord, Lord Bassam, said:
"Officials are at present consulting relevant stakeholders on the issues. The best we can say today is that while we are convinced that we have the principles right, it is only right for us to give som further thought to the matter and report back at a later stage

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the Bill. At present we should retain the clause and further consider the issues in concert with the LGA, Shelter and the other organisations which have expressed understandable concern about a potential spin-off from the clause".—[Official Report, 9/9/04; col. 771.]
that spin-off being vulnerable tenants being evicted.
Discussions took place with the department and Shelter, and I am very grateful to Shelter for being the go-between on this issue. But I think that in the end we got rather muddled. My impression was that we would have a discussion now and the Minister would come forward at Third Reading with these amendments, but then they suddenly appeared today and that makes life rather difficult. However, we are getting there in a spirit of co-operation.
Our other big concern related to people on housing benefit and what would happen if overpayments of housing benefit were made. Very vulnerable people could risk being homeless. The tenants involved are likely to be the most vulnerable and those who find it most difficult to cope with the system. They are also tenants for whom the administration of housing benefit is not absolutely A1, and problems could arise.
I have one or two queries about the Minister's amendments. There is no point in my talking at great length because the Minister has covered some of the issues. We are very pleased with Amendments Nos. 72B and 86B, which, as the Minister said, affect Section 21 powers—an issue that I raised on the previous occasion.
The housing benefit issue is still something of a problem. Obviously the clauses have been drafted by the Minister's department, which has been able to consider the matter in far more detail and has been able to dot the "i"s and cross the "t"s in a way that is much more difficult for us to do. The Minister may not be able to confirm this today but we need to ensure that no tenants will be thrown out of their homes because council officers decide to seek repayment of housing benefit paid to an unlicensed landlord. That is one area about which we need to be careful.
That said, I appreciate what the Government are doing and I think that all those who were concerned about the matter also appreciate it. I hope that by Third Reading we will have got it right. When we reach my amendment, I shall not move it as I have spoken to the whole group together.
Baroness Hanham: My Lords, we have tabled Amendments Nos. 72 and 73 in this group. To some extent, I was trying to say the same thing as the noble Baroness, Lady Maddock. It would have been more helpful if the government amendments had come after our amendments because, in relation to amending an amendment, it would have provided an opportunity for those of us who have tabled amendments to address them rather than being slightly cut off, as we have been. There is absolutely no point in now going through in detail the amendments that we have tabled.
I am grateful to the Minister for saying that he will withdraw or not move his amendments today because that then gives us an opportunity to talk to those who have been concerned about this matter. We have not
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been talking to Shelter, but the Residential Landlords Association has also been very concerned. We now need to ensure that the synthesising has not synthesised out something about which that organisation would have been concerned.
I presume that the Government will bring back these amendments at Third Reading. If necessary, we shall also bring back some amendments, and we can then finally sort out the matter.
Lord Rooker: My Lords, I do not know when Third Reading will be.
Baroness Hanham: My Lords, it will be at the beginning of November.
Lord Rooker: My Lords, then there is some time. We have put our amendments on the table. Before the end of the week I shall write to noble Lords. I am happy to arrange for discussions so that we have all three names on the same amendments rather than have amendments to amendments. We should use this time to achieve a 100 per cent agreed position, if that is possible.
Baroness Hanham: My Lords, I thank the Minister for that response. That would be really helpful. As I have had little opportunity sitting on the Bench, listening with one ear and looking with one eye, to try to check the amendments, I believe we should perhaps accept that that is the best way forward. We shall have the amendments checked; we shall ensure that they cover all the aspects about which we have been concerned; and we can have a discussion before Third Reading, which I understand will be at the beginning of November. For today's purposes I too will not press the amendments on this matter that I have tabled. I hope we can return with agreed amendments at the last stage.
The Deputy Speaker: My Lords, I hesitate to intervene, but the noble Lord, Lord Rooker, should perhaps indicate his intention on Amendment No. 70A now.
Lord Rooker: My Lords, my intention is to withdraw Amendment No. 70A and not to press all the government amendments associated with it.
Amendment, by leave, withdrawn.
Clause 73 [Further sanctions relating to unlicensed HMOs]:
[Amendments Nos. 71 to 74 not moved.]
Clause 77 [Licensing of houses to which this Par applies]:
Baroness Hanham Baroness Hanham moved Amendment No. 75:
Page 53, line 18, at end insert—
"(6) Whatever the arrangements of management, it is th manager who shall be ultimately responsible for a house under Part possessing a valid licence."
The noble Baroness said: My Lords, considerable discussion on this issue in Cor we felt that it deserved to be looked at

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amendments require that applications for licences shall be made by the manager of a house. We are concerned that, as the Bill stands, the owner, rather than his agent—many owners employ agents to manage properties—remains responsible for licensing. Our amendments in this group are designed to target accurately the responsibilities by requiring that applications for licences be made by the manager of a house.
We need to consider what happens in relation to managing agents when a property is licensed to an owner who, within the terms of the licence, passes that responsibility to a managing agent; and whether managing agents need to have some form of licensing as well if they are to be responsible for the expanded nature of houses in multiple occupation. The purpose of the amendment is to scoop up the managing agents. I beg to move.
Lord Bassam of Brighton: My Lords, as the noble Baroness has said, we have had some discussion on these matters before. I shall try to summarise quickly why we think they are not a good idea.
In essence, the amendments would undermine one of the key provisions of the Bill. The licensing regime itself will identify who is the most appropriate person to hold the licence for any given property and that person will then be held responsible for resolving any issues that may subsequently arise. It would not be helpful, or indeed fair, to stipulate that the manager should always be the licence holder, regardless of the particular management arrangements that have been put in place.
6.45 p.m.
Amendment No. 75 seeks to add a new provision to Clause 77, placing the duty for obtaining a licence for a property in the designated area on the person managing, as opposed to the owner, of the property. From previous debates, I am aware that noble Lords opposite are concerned about the potential problem of a managing agent being paid to manage a property on behalf of the owner, but avoiding responsibility because the owner is the licence holder.
In the end, I believe that that is a fear that is unfounded. Under the provisions of Clause 86, an authority must be satisfied that the person holding the licence is the most appropriate person to do so. Therefore, if there is a fit and proper person willing to act as the manager, and he is the most appropriate person to hold the licence, we would expect the local authority to grant the licence to him rather than to the owner. In that case, as is right and proper, he will be the person liable should the property fail to comply with any of the provisions in this Bill.
On the other hand, it is often the case that the manager of a property is also a tenant. While he may technically have responsibility, the owner is, in fact, the person who is in control. In such situations, clearly it should be the owner who is the licence holder and not the manager.
Unfortunately, the amendment contains the phrase,
"Whatever the arrangements of management".
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That suggests to us that anyone with the title "manager" should be held accountable for applying for a licence, regardless of whether he has any genuine role in the management of the property. Needless to say, that is not how we would like to see licensing operate.
I am quite certain that the noble Baroness would not wish to enable bad landlords to avoid their responsibilities, but this amendment would allow an owner to employ someone at a nominal rate—possibly a tenant—to call that person the manager and thereby sidestep all the liability for provisions under this part of the Bill.
Amendment No. 82, also in this group, would replace the requirement that a local authority is satisfied with the management arrangements in place, with a requirement that the authority is satisfied that the manager has ultimate responsibility for the management of the property in question.
In a nutshell, there are two problems with this amendment: first, the subsection that it removes; and, secondly, the subsection that it introduces. I have already explained why an amendment making managers ultimately responsible for obtaining licences is unnecessary.
Clause 86(3)(d) is crucial to the efficacy of a licensing regime because it requires a local authority to approve the proposed management arrangements for a property when deciding whether or not to grant a licence to an applicant; for example, we do not want to end up with a situation where a manager is granted a licence because he is fit and proper, but no heed is paid to the fact that he cannot be reached in emergencies—or otherwise—because he will not divulge his telephone number.
It is for those practical, hard-nosed reasons that we believe that we have the balance of this part of the legislation right. I hope that the noble Baroness, having heard what I have said, will again agree to withdraw the amendment.
Baroness Hanham: My Lords, I thank the Minister for that explanation. Our concern remains with properties where the owner is absent. He cannot possibly be the manager of a house and have responsibility. I am sure that the Minister has many examples in Brighton of houses in multiple occupation which are owned by absentee landlords and where the responsibility for the management of the property is left in a vacuum or is passed to managing agents who may or may not look after the property.
I need to consider this amendment again in the light of what the Minister has said. I know we have addressed the matter once before. It is important that we ensure that people who manage properties are licensed and responsible. I shall withdraw the amendment today, but I cannot say that I shall not return to the issue again at Third Reading. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 78 [Designation of selective licensing areas]:
[Amendment No. 76 not moved.]
Clause 82 [Duration, review and revocation of designations]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 77:
Page 56, line 21, leave out "from time to time" and insert "keep under"
The noble Lord said: My Lords, in tabling this amendment again we are responding to a request from many noble Lords in Committee, including the noble Baroness, Lady Hamwee. I look forward to support from all noble Lords on this amendment. The words "from time to time" do not mean the same as "keeping under review". "Keeping under review" is a permanent action. We believe that this is far more important when it comes to a local authority reviewing the designations that it has made under this part of the Bill. I believe that even the Minister hinted that he preferred the terminology that I put forward in Committee. Therefore, in much anticipation, I beg to move.
Lord Bassam of Brighton: My Lords, we have been there before and I do not have a great deal to add. We discussed earlier the question of how best to monitor the effectiveness of a licensing scheme. The noble Baroness expressed concern about the term "from time to time", suggesting that it was insufficiently precise.
I do not think that there is a great deal of difference in our positions. I understand the point the noble Lord is making. None of us wants selective licensing schemes to continue in force when they are no longer performing any useful role. That would be completely unnecessary regulation. However, I do not think that the amendment offers an improvement to the provisions as drafted. To keep a scheme under review implies a continuous element to the review, and it is difficult to see how this would work in practice. "From time to time" encapsulates the level of monitoring that is reasonable under the circumstances.
I know that the words have been used by my noble friend, and there was perhaps a slight case of overheating at the time. However, I think it fair to say that "from time to time" is the legal equivalent of being kept under permanent review, and that was the point which the noble Lord made at an earlier stage.
I believe that there is understanding of the expression as we have it in the Bill, and I hope that the noble Lord, having made his point, will withdraw his amendment.
Lord Hanningfield: My Lords, I am very disappointed indeed that the Minister could not accept this amendment, as we almost had it agreed in Committee. As the Minister will not accept it today, it may be that we shall have to vote on it at Third Reading. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 83 [Requirement for Part 3 houses to be licensed]:
Lord Rooker Lord Rooker moved Amendment No. 78:
Page 56, leave out line 36 and insert—
"(c) a management order is in force in relation to it under Chapter 1 or 2 of"
On Question, amendment agreed to.
Clause 85 [Applications for licences]:
[Amendment No. 79 not moved.]
Lord Rooker Lord Rooker moved Amendments Nos. 80 and 81:
Page 58, line 34, after "under" insert "Chapter 1 of".
Page 58, line 36, leave out "Part" and insert "Chapter".
On Question, amendments agreed to.
Clause 86 [Grant or refusal of licence]:
[Amendment No. 82 not moved.]
Clause 88 [Licence conditions]:
Lord Rooker Lord Rooker moved Amendment No. 83:
Page 60, line 24, leave out "such steps as are reasonably practicable" and insert "reasonable and practicable steps"
On Question, amendment agreed to.
Clause 89 [Licences: general requirements and duration]:
[Amendment No. 84 not moved.]
Clause 93 [Offences in relation to licensing of houses under this Part]:
[Amendment No. 85 not moved.]
Clause 94 [Further sanctions relating to unlicensed Part 3 houses]:
[Amendments Nos. 85A to 87 not moved.]
Clause 97 [Interim and final management orders: introductory]:
Lord Rooker Lord Rooker moved Amendments Nos. 88 and 89:
Page 67, line 10, leave out subsections (5) and (6).
Page 67, line 29, at end insert—
"(9) In this Chapter "third party", in relation to a house, means any person who has an estate or interest in the house (other than an immediate landlord and any person who is a tenant under a lease or licence granted under section 103(3)(c) or 112(3)(c))."
On Question, amendments agreed to.
Clause 98 [Making of interim management orders]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 90:
Page 67, line 44, at end insert ", and
(c) on an application by the authority to a residential property tribunal, the tribunal by order authorises them to make such an order; and the authority may make such an order despite any pending appeal against the order of the tribunal (but this is without prejudice to any order that may be made on the disposal of any such appeal)."
The noble Lord said: My lords, the purpose of these amendments is to ensure that all interim management orders require the prior authorisation of the residential property tribunal. An interim management order is a severe remedy, under which the local authority takes over management and control of a property.
The local housing authority is under a duty to make an interim management order if an HMO is a Part 3 house which requires a licence, is not licensed, and they consider either that there is no reasonable prospect of it being licensed in the near future or that the health and safety condition is satisfied. An interim management order must also be made where they have revoked the licence and consider that, on the revocation coming

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into force, there is either no reasonable possibility of the house being licensed in the near future or that the health and safety condition will be satisfied.
The authority can make an interim management order where the health and safety condition alone is satisfied, but here they need the prior approval of the RPT. This is an inconsistent approach, especially as prior authorisation is required for all interim empty-dwelling management orders.
There is a right of appeal against an interim management order, but only after the event. By then, the local authority will have taken over the property and, if it transpires that the order has been made unjustly, the damage will have long since been done. There are already problems of delays in hearing appeals before RPTs.
If advance RPT authorisation is required in one category of case, why not in all? There are judgments to be made by the local authority before making an interim management order, so there is always the potential for disagreement as to whether an order should be made.
Arguments could well arise between the landlord and the authority as to whether there are prospects of the property being licensed in the near future. Issues could also arise as to whether the health and safety condition is fulfilled. These are matters where the landlord should be able to make representations to the RPT before any order is made, not afterwards on appeal. I beg to move.
Lord Bassam of Brighton: My Lords, the amendment would require the approval of a tribunal before an authority could make an interim management order in respect of a house which is required to be licensed under Part 2 or Part 3 but is not licensed, and where the authority consider that there is either no reasonable prospect of it being licensed in the near future or the health and safety condition in Clause 100 is satisfied.
As currently drafted, the Bill requires the approval of a tribunal for discretionary interim management orders, such as special interim management orders under Clause 98 and interim management orders for non-licensable houses in multiple occupation.
This recognises that an interim management order is a significant imposition upon landlords' rights. The requirement for approval by a tribunal is an appropriate safeguard where an authority is exercising its discretion. However, in regard to licensable HMOs the decision to make an interim management order is not a result of the exercise of discretion but, rather, a response to a set of circumstances prescribed in the Bill.
The local authority must make an interim management order in two defined sets of circumstances, the first of which is where there is no reasonable prospect of it being so licensed in the near future. This is the circumstance in which the landlord fails to apply for a licence or the landlord or managing agent cannot meet the fit and proper person test under the requirements of the Bill. In such circumstances, the local authority must make an interim management order.
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Interim management orders are implemented in situations which require a local authority to step into the manager's shoes where a suitable person cannot be found. Hence they need to be practical, workable and as unbureaucratic as possible—unlike the current control orders, which some authorities find far too cumbersome.
The other circumstance in which a local authority may make an interim management order is where the health and safety condition of the Bill is satisfied. This represents a very serious set of circumstances, in which the local authority is required to manage the property to protect the health, safety or welfare of the occupiers or licensable properties, or of people living nearby. In such cases it may be essential to the health and safety of the relevant persons that effective management controls should be put in place very quickly, not weeks or months down the line after a tribunal has considered the issue.
It is important to recognise that if a landlord disagrees with the local authority's decision to make an order, he or she can appeal against that decision to the tribunal. The tribunal has wide powers in these circumstances and can confirm the order, with or without amendments to the terms, or revoke it and order that a licence should be granted, or a temporary exemption notice issued.
I hope that has provided sufficient assurance to the noble Lord that there are safeguards in place to ensure that management orders are only made when it is appropriate to make them. I doubt whether the noble Lord has ever had any experience of an interim management order. In all the years I was a member of my local authority, I can remember only a few. They have to be approached very carefully by officers; they can take months to put in place; great care is taken to achieve the objective; and usually they are made only in dire circumstances.
All that I have said applies also to Amendment No. 91. It is probably even less appropriate in those circumstances. I hope that the noble Lord feels able to withdraw both amendments.
Lord Hanningfield: My Lords, I thank the noble Lord for his reply, which was helpful. As with several other amendments, we shall have to analyse it in some detail, but it probably covers the points that I was making. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
7 p.m.
[Amendment No. 91 not moved.]
Lord Hanningfield Lord Hanningfield moved Amendment No. 92:
Page 68, line 46, leave out subsection (8).
The noble Lord said: My Lords, I tabled the amendment again in the hope that the Minister would be able to furnish me with any further examples of what would be incorporated within subsection (8). I am still not entirely comfortable with the explanation on the face of the Bill.
Perhaps the Minister would explain how this would work in practice; for instance how would a housing authority know if part of the house was in shared ownership or in some other shared agreement? I beg to move.
Lord Rooker: My Lords, I recollect using most of my notes here in Committee when the noble Lord proposed similar amendments. I understand why he has raised the matter again, given the question that he has just asked.
The amendment would take away the local authority's discretion to make an interim management order which did not apply to any part of a house occupied by a resident landlord. I gave examples where it might be necessary to include a landlord's accommodation in the order, where, for example, he may have taken a room or set of rooms and shared facilities with the tenants such as a bathroom or kitchen, or if he was behaving in an anti-social manner or was harassing the tenants. Inclusion in the order in those circumstances would make it far more practical for the local authority to be able to take effective legal action against him—it would know which part of the house he was occupying. The landlord may occupy a self-contained basement flat and it may be reasonable for the authority to exclude that flat from an interim management order so that it does not have to carry out repairs or do other things at the landlord's expense. That landlord would himself have the discretion to determine how the money, which would otherwise be deducted from his rental income, was spent on the repair of the area in which he privately resides.
If the landlord is aggrieved by any decision to include or exclude his personal accommodation from the interim management order he will have a right to appeal against that decision to the residential property tribunal. I should mention that the exact precedent for this provision is contained in Section 380 of the Housing Act 1985, in relation to "control orders". So there is nothing new being proposed in this regard in the Bill. It is just a practical measure to ensure that controls are not imposed over owner occupiers—the landlords—unless they are essential. That is the purpose of the exercise.
Lord Hanningfield: My Lords, I thank the Minister for that reply. It seems that there will still be much dispute on this issue. How will a local authority know the situation without looking in every room in every house to ask, "do you live there or not", which the landlords might dispute? The Minister said that people could appeal. It seems that there will be many appeals on this matter. However, I have listened to the Minister and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 105 [General effect of interim management orders:immediate landlords, mortgagees etc.]:
Lord Rooker Lord Rooker moved Amendments Nos. 93 and 94:
Page 74, line 43, leave out "and in" and insert—
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"except to the extent that any of those rights or remedies would prevent the local housing authority from exercising their power under section 103(3)(c).
( ) In"
Page 75, line 8, leave out subsection (6).
On Question, amendments agreed to.
Clause 106 [Financial arrangements while order is in force]:
Lord Rooker Lord Rooker moved Amendments Nos. 95 and 96:
Page 75, line 19, leave out "relevant expenditure." and insert—
"( ) relevant expenditure, and
( ) any amounts of compensation payable to a third party by virtue of a decision of the authority under section (Compensation)."
Page 75, line 24, after "expenditure" insert "and any amounts of compensation payable as mentioned in that subsection"
On Question, amendments agreed to.
Lord Hanningfield Lord Hanningfield moved Amendment No. 97:
After Clause 111, insert the following new clause—

POWER TO REQUIRE NEGLECT OF MANAGEMENT TO BE REMEDIED
(1) If in the opinion of the local housing authority, the condition of a house is defective in consequence of neglect to comply with the requirements imposed by regulations under section 217 (management regulations), the authority may serve on the person having control of the house or the person managing the house a notice specifying the steps which, in the opinion of the authority, are required to make good the neglect.
(2) The notice shall require the person on whom it is served to carry out the steps specified in the notice.
(3) A person commits an offence if he fails to comply with a notice under this section.
(4) In proceedings against a person for an offence under subsection (3), it is a defence that he had a reasonable excuse for not complying with the notice.
(5) A person who commits an offence under subsection (3) is liable on summary conviction to a fine not exceeding level 5 on the standard scale.
(6) The provisions of Part 3 of Schedule 1 (Appeals) shall apply to a notice served under this section as if it were an improvement notice (omitting paragraphs 12, 13, 17 and 18)."
The noble Lord said: My Lords, the management regulations are detailed and deal with the day to day running of all HMOs, not just licensed HMOs. They are prescribed by central government. Under the Bill any breach would be a criminal offence. Breaches could be trivial. There is already excessive criminalisation of landlords under the Bill.
The current management regulations provide for criminal prosecution in the event of a breach but also allow for the service of a works notice where work is required to remedy a breach. Current government circular advice advises local authorities normally to resort in the first instance to service of a works notice rather than institute criminal proceedings in the event of a breach.
The amendment will allow service of a notice to take steps to remedy a breach, not just to carry out works as applies at present. The proposal contained in this suggested new clause would retain and improve the existing alternative of serving a notice in the event of a breach. Failure to comply with the notice would be a criminal offence. In serious cases the local authority

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could prosecute immediately. Serving a notice is not intended to be a precondition if there is a serious breach. Tenants are therefore protected. Indeed, the existence of a notice procedure will enable local authorities to take action to get the problem dealt with much more quickly, rather than just prosecuting. The notice procedure provides a half way house so that one does not have to resort immediately to criminal proceedings in less serious cases. I beg to move.
Lord Rooker: My Lords, I hope that I can satisfy the noble Lord. I understand the point he makes. I must say that, although I am not the daytime Minister with responsibility for this matter, I am not aware that we are receiving a large number of complaints from landlords about the Bill in the way that the noble Lord has just implied.
The amendment proposes that a local authority enforcing the management regulations can issue a notice specifying works to remedy physical defects in the condition of a house if the property was defective in consequence of neglect, to comply with the requirements imposed by the management regulations under Clause 217.
A similar amendment was tabled and debated in Committee and I pointed out then that the amendment misrepresented the purpose of the management regulations, which is to set basic management duties for HMO managers. The physical conditions of all properties, including HMOs, and housing conditions that pose a risk to the health and safety of occupants must be pursued by the powers provided under Part 1 of the Bill. We have always stressed that it is not the Government's intention to duplicate powers provided under Part 1 with management regulations powers. We do not wish it to be onerous for landlords.
Government Amendment No. 223 clarifies that management regulations may impose duties relating to repair, maintenance, cleanliness and good order on managers. This would serve the purpose of complementing the Part 1 powers by ensuring that managers are aware of their duties in taking care of situations that could develop into potential hazards. That should not be confused with the amendment, which seeks to duplicate powers available under Part 1 to combat hazards. I am happy to come back on this matter. The point has been well made that it is not our intention to duplicate the powers provided under Part 1, which is specific and applies to all properties.
Lord Hanningfield: My Lords, I thank the Minister for that reply. As is the case with several other amendments, we shall analyse it again. I take his point about not wanting to duplicate Part 1. We shall see whether we need to return to this matter again. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 114 [General effect of final management orders: leases and licences granted by authority]:
Lord Rooker Lord Rooker moved Amendment NO.98:
Page 82, line 24, leave out "and in" and insert—
346
"except to the extent that any of those rights or remedies would prevent the local housing authority from exercising their power under section 112(3)(c).
( ) In"
On Question, amendment agreed to.
Clause 115 [Management scheme and accounts]:
Lord Rooker Lord Rooker moved Amendments Nos. 99 to 103:
Page 82, line 47, at end insert—
"(ca) the amount of any compensation that is payable to a third party by virtue of a decision of the authority under section (Compensation) in respect of any interference in consequence of the final management order with the rights of that person;
(cb) provision as to the payment of any such compensation;"
Page 83, line 3, leave out "relevant expenditure;" and insert"—

"( ) relevant expenditure, and

( ) any amounts of compensation payable as mentioned in paragraph (ca);"

Page 83, leave out line 7 and insert—

"( ) relevant expenditure, and

( ) any amounts of compensation payable as mentioned in paragraph (ca);

( ) provision as to the manner in which the authority are to pay, on the termination of the final management order, any outstanding balance of compensation payable to a third party."

Page 83, line 18, after "meet" insert "—
(i)"
Page 83, line 19, after "order" insert ", and

"(ii) any compensation that may become payable to a third party"

On Question, amendments agreed to.
Clause 116 [Enforcement of management scheme by relevant landlord]:
Lord Rooker Lord Rooker moved Amendments Nos. 104 to 106:
Page 84, line 11, leave out "A relevant landlord" and insert "An affected person"
Page 84, line 25, leave out "a relevant landlord" and insert ''an affected person"
Page 84, line 27, leave out subsection (4) and insert—
"(4) In this section "affected person" means

(a) a relevant landlord (within the meaning of section 115), and

(b) any third party to whom compensation is payable by virtue of a decision of the authority under section (Compensation)."

On Question, amendments agreed to.
Clause 118 [Revocation of final management orders]:
Lord Rooker Lord Rooker moved Amendment No. 107:
Page 85, line 28, after "any" insert "other"
On Question, amendment agreed to.
Schedule 6 [Management orders: procedure and appeals]:
Lord Rooker Lord Rooker moved Amendments Nos. 108 to 111:
Page 219, line 34, at end insert—

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"(aa) the decision of the authority as to whether to pay compensation to any third party,
(ab) the amount of any such compensation to be paid,"
Page 219, line 35, leave out "right" and insert "rights"
Page 219, line 37, leave out "an" and insert "any such"
Page 226, line 4, at end insert—
"Right to appeal against decision in respect of compensation payable to third parties
31A (1) This paragraph applies where a local housing authority have made a decision under section (Compensation) as to whether compensation should be paid to a third party in respect of any interference with his rights in consequence of an interim or final management order.
(2) The third party may appeal to a residential property tribunal against—

(a) a decision by the authority not to pay compensation to him, or

(b) a decision of the authority so far as relating to the amount of compensation that should be paid.

Time limits for appeals under paragraph 31 A
31 B (1) This paragraph applies in relation to an appeal under paragraph 31A against a decision of a local housing authority not to pay compensation to a third party or as to the amount of compensation to be paid.
(2) Any such appeal must be made within the period of 28 days beginning with the date the authority notifies the third party under section (Compensation)(2).
(3) A residential property tribunal may allow an appeal to be made to it after the end of the period mentioned in sub-paragraph (2) if it is satisfied that there is good reason for the failure to appeal before the end of that period (and for any delay since then in applying for permission to appeal out of time).
Powers of residential property tribunal on appeal under paragraph 31A
31C (1) This paragraph applies in relation to an appeal under paragraph 31A against a decision of a local housing authority not to pay compensation to a third party or as to the amount of compensation to be paid.
(1) The appeal—

(a) is to be by way of re-hearing, but

(b) may be determined having regard to matters of which the authority were unaware.

(2) The tribunal may confirm, reverse or vary the decision of the local housing authority.
(3) Where the tribunal reverses or varies a decision of the authority in respect of a final management order, it must make an order varying the management scheme contained in the final management order accordingly."
On Question, amendments agreed to.
Clause 122 [Effect of management orders: furniture]:
Baroness Hanham Baroness Hanham moved Amendment No. 112:
Page 88, line 14, leave out subsection (1).
The noble Baroness said: My Lords, we return to the unpalatable proposal in the Bill that furniture should be seized and kept by the local authority and used as payment under management orders. This part of the Bill is difficult. I asked the Minister in Committee a question that he could not answer: what would happen where the furniture in question was owned by a third party—for example, a TV or video hire company, or even a suite or set of chairs that were either rented or
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on hire purchase? Will the Minister give us more information about that? I should be grateful if he could deal with the question of hire purchase. I beg to move.
Lord Rooker: My Lords, I will take advice on that point, but, frankly, the goods and chattels should not he in dispute. They are owned either by the landlord or by the tenant; alternatively, if they are owned by a third party, they are still not owned by the landlord. Goods on hire purchase remain the property of the person who owns the goods—that is, the retail company that is renting them out—so I suspect that they could not be affected. Anyway, Clause 122 does not permit a local authority to seize goods within a property that belong to the landlord or any other person, meaning those goods belonging to a third party or on hire purchase. The clause relates only to furniture and chattels that are provided for the use of tenants under the terms of their tenancy agreements, and one assumes there will be an inventory, and provides that only once an order is in force is the furniture vested in the local authority. Indeed, the landlord is free at any time to request that the furniture be returned to him, and the local authority can renounce its right to possession of the furniture on receipt of the request. Nothing would happen to a third party's furniture, because there is no transfer of ownership. I hope that is clear and that the noble Baroness is satisfied.
Baroness Hanham: My Lords, I thank the Minister for that helpful reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 113 not moved.]
Lord Rooker Lord Rooker moved Amendment No. 114:
After Clause 123, insert the following new clause—

COMPENSATION
(1) If a third party requests them to do so at any time, the local housing authority must consider whether an amount by way of compensation should be paid to him in respect of any interference with his rights in consequence of an interim or final management order.
(2) The authority must notify the third party of their decision as soon as practicable.
(3) Where the local housing authority decide under subsection (1) that compensation ought to be paid to a third party, they must vary the management scheme contained in the order so as to specify the amount of the compensation to be paid and to make provision as to its payment."
On Question, amendment agreed to.
Clause 124 [Termination of management orders: financial arrangements]:
Lord Rooker Lord Rooker moved Amendments Nos. 115 to 117:
Page 89, line 7, leave out from "of" to end of line 12 and insert—

"(a) the local housing authority's relevant expenditure, and

(b) any amounts of compensation payable to third parties by virtue of decisions of the authority under section (Compensation),

the authority must, as soon as practicable after the termination date, pay the balance to such relevant landlord, or to such relevant landlords in such proportions, as they consider appropriate."
Page 89, line 15, leave out from "of" to end of line 19 and insert—

"(a) the authority's relevant expenditure, and

(b) any amounts of compensation payable as mentioned in subsection (2)(b),

the difference is recoverable by the authority from such relevant landlord, or such relevant landlords in such proportions, as they consider appropriate."
Page 89, line 21, after "to" insert—
"(a) a third party, or
(b)"
On Question, amendments agreed to.
Schedule 7 [Further provisions regarding empty dwelling management orders]:
Baroness Hanham Baroness Hanham moved Amendment No. 118:
Page 246, line 6, at end insert—
"EDMOS: DUTY TO OBTAIN BEST RENT OR RENT FOR CONSIDERATION
(1) Subject to sub-paragraph (2), any right or interest created by the authority under paragraph 2(c) or 10(3)(c) shall be granted at the best rent or licence fee as is reasonably obtainable in the circumstances.
(2) If the authority considers it appropriate to create an interest or right at less than the best rent or licence fee reasonably obtainable in the circumstances, they may do so but (in addition to the rent or licence fee actually payable by the occupier of the dwelling) they shall pay to the relevant proprietor the difference between the rent or licence fee actually payable to the authority and the rent or licence fee which would be otherwise payable by virtue of sub-paragraph (1).
(3) If the relevant proprietor considers that the local housing authority has created an interest or right otherwise than as is required by sub-paragraph (1), he may apply to the authority for a determination to that effect and the authority shall either determine that the dwelling is the subject of a right or licence which complies with sub-paragraph (1), or if not the amount which is to be paid to the relevant proprietor under sub-paragraph (2).
The noble Baroness said: My Lords, given that we are effectively at Committee stage with regard to the section on empty dwelling management orders, as they were only introduced at the last stage, I hope the Minister will allow me a bit of leeway with these amendments, which are designed to probe the particular aspect of EDMOs relating to rent.
It is argued that there should be a specific obligation on the authority to obtain the best rent reasonably obtainable when letting or licensing a dwelling. There is currently no such obligation. There is an issue as to whether the authority will be letting to council tenants—that is, operating as a social landlord—or operating in the private sector. The schedule suggests the latter. Will the Minister tell us whether these EDMOs will be operated by a social landlord, or whether the local authority will expect them to be let within the private sector? Whichever way this is going, but particularly if they were to be let within the private sector, there is no obligation on the authority to obtain the best rent, and it is our view that there should be.
This is particularly relevant if the local authority carries out significant works prior to letting. One of the reasons why a property may be taken into ownership as an EDMO is that it has been lying empty and becoming derelict. Surely by securing the market rate for any property subsequently let out under this scheme, a local authority would be able to channel funds back into any outlay, thereby reducing the cost pressures of taking over these properties.
Our amendment specifies that a local authority is only under an obligation to obtain the best rent where it is "reasonably obtainable in the circumstances". That allows authorities with properties in areas of low demand to tailor their expectations of the rent that should be received accordingly, and would cover the areas in the north, mentioned by the Minister at the last stage, where there are large areas of terraced property that is empty for no good reason, and would be taken by the local authority to be let as a social landlord.
Will any further guidelines be issued to local authorities regarding whom they should allow to take over the properties subject to EDMOs, or will it be left entirely to the discretion of the relevant local authority?
Amendment No. 118 would place on an authority a duty to obtain the best possible rent. Amendment No. 119 would effectively create an appeal system whereby the owner of a property that was subject to an EDMO could appeal to the residential property tribunal in circumstances where the authority was clearly not obtaining the best rent possible.
I stress that these amendments are probing, even at this stage, and I hope that the Minister will be able to respond to them in that context. I beg to move.
7.15 p.m.
Lord Rooker: My Lords, I can respond in wholly positive ways to the points that the noble Baroness has made. First, the amendments are not necessary. That is good news, as I shall explain. For a final empty dwelling management order—I refuse to use the acronyms—the local authority must set out how it intends to manage the dwelling in a management scheme in accordance with paragraph 13 of Schedule 7.
Paragraph 13(3)(c) requires the authority to include details of
"the … rent … the dwelling might … be expected to fetch on the open market",
while paragraph 13(3)(d) requires details of
"the … rent … the authority will seek to obtain".
Where the amount of the rent payable is less than the open market rent, the management scheme must account for the difference. Paragraph 13(3)(g) provides that the local authority may charge a rent that is less than the open market rent, but it must make up any shortfall out of its own resources.
For an interim empty dwelling management order, there is no requirement to set out a management scheme. However, because the local authority cannot grant a tenancy without the consent of the relevant proprietor,

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it would have to secure the proprietor's agreement regarding the management of the dwelling, including any rent level—in other words, the proprietor has to approve the new tenant.
Paragraph 26 of Schedule 7 sets out the rights of appeal to the residential property tribunal in relation to empty dwelling management orders. There is a right of appeal against the terms of the final empty dwelling management order, including the terms of a management scheme, and there is a right of appeal against the terms of an interim empty dwelling management order. We do not consider that Amendment No. 119 would add anything useful to those appeal rights.
Baroness Hanham: My Lords, I am never minded to be totally satisfied until I have had a chance to look at what has been said, but the Minister's reply certainly goes a long way towards meeting our concerns.
Will the Minister be kind enough to go back one step? If the local authority has to have the approval of the proprietor, will the proprietor be able to object to the local authority passing the property to a registered social landlord, for example to rent out to somebody on the waiting list or elsewhere, and insist that the property is rented in the private sector?
Lord Rooker: My Lords, as far as I can see, the proprietor has a veto over the tenant. The management order might contain something about the management of the property to an RSL, but my understanding is that the actual tenancy has to be approved by the proprietor.
Baroness Hanham: I thank the Minister for his response to those amendments. I beg leave to withdraw.
Amendment, by leave, withdrawn.
[Amendment No. 119 not moved.]
Clause 128 [Making of interim EDMOs]:
Baroness Hanham Baroness Hanham moved Amendment No. 120:
Page 93, line 33, at end insert ", and
(c) to give him a reasonable opportunity to make representations as to why an interim EDMO should not be made."
The noble Baroness said: My Lords, the EDMO is a considerable interference with the property owner's rights. Before such an order is made, the relevant person should be given the opportunity to make representations as to why the order should not be made, which may bring to the local housing authority's attention the reasons why the order should not be pursued at a particular moment. The purpose of the preliminary notice is to ascertain what steps the recipient is going to take. He may not want to do so for perfectly good reasons, and he should be given the chance to explain these to a local authority, so that they can be properly considered. For example, there might be plans to convert the dwelling to non-residential accommodation, and there must therefore be a period allowed to the relevant proprietor, and a
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chance given, to inform the authority of the reasons why an order should not be made in circumstances such as these. I beg to move.
Lord Rooker: My Lords, I may come back on this. I do not get the noble Baroness's point about non-residential use. The idea of bringing these empty dwellings into use is to provide homes for people, so I am not quite sure about non-residential use.
Baroness Hanham: My Lords, as we understand it, a property that has been empty for some time is a residential property none the less. But there is nothing to stop an owner putting in a planning application to change its use. It might be unusual but it could happen. In a two-storey property, for example, the owner might want to change the bottom storey into a shop. That was my drift. It is possible that an owner or proprietor might want an opportunity to put such an application forward.
Lord Rooker: My Lords, we are talking about an owner who has left a place empty and probably derelict for years, depriving people of homes, and suddenly wants to do something with it. The whole idea of this process is to get the owner to do something with it. If the owner is given a wake-up call, an empty dwelling management order may not be necessary.
Clause l28(3)(b) requires that the local authority must ascertain what steps, if any, the relevant proprietor is taking or intends to take to secure occupation of the dwelling. Clause 128(4) requires that the local authority must take into account the rights of the relevant proprietor—that is right, because the ownership is not transferring. In addition, the residential property tribunal must be satisfied that the local authority has complied with these requirements and may refuse to authorise the making of an order if it considers that the local authority has not done so.
Taken together—this is about rights of appeal—it is inherent in the existing clause that the relevant proprietor will be given an opportunity to set out reasons why the dwelling should not be subject to an interim empty dwelling management order. If it is because they want to do something with it, they should get it occupied and then it will not be empty. That is good news for everybody.
Baroness Hanham: My Lords, I am grateful for the Minister's reply, which answers my questions. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hanham Baroness Hanham moved Amendment No. 121:
Page 93, line 36, after "rights" insert ", wishes and intentions"
The noble Baroness said: My Lords, it is our view that the residential property tribunal should not just consider the rights of the relevant proprietor when deciding whether to give authorisation for an order to be made but should also take account of the wishes of that person and what they intend to do in relation to the property. This order is a form of expropriation

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and a full balancing act needs to be carried out. By confining this to a person's rights, an unnecessary restriction is placed on the matters which the property tribunal should take into account. That is the purpose of the amendment—in fact, I think the Minister may have answered it last time. I beg to move.
Lord Rooker: My Lords, if I have answered this, I will sit down. I object to the word "expropriation", because it is a misreading of what we are attempting to do. The ownership of the properties will not change, and I always take expropriation to mean that. We are talking about empty dwellings.
If the relevant proprietor has expressed an intention to do something that would ultimately secure occupation of the dwelling, the local authority would not be inclined to pursue the matter. If it did, the residential property tribunal would never authorise it. If the relevant proprietor simply expressed an intention to keep the dwelling unoccupied, the local authority would be quite within its rights to make the order, all other things being equal. So I cannot really see that the amendment would add anything useful to the wording in Clause 128(4). The amendment is linked to Amendments Nos. 128 and 136, which we shall come to shortly.
Baroness Hanham: My Lords, once again, this was almost covered in the previous response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hanningfield Lord Hanningfield moved Amendment No. 122:
Page 93, line 38, leave out subsection (5).
The noble Lord said: My Lords, as the Bill stands, a local housing authority is expressly authorised to make an interim empty dwelling management order even though there might be a pending appeal against the order of the RPT to the Lands Tribunal.
It is important that the full appeal process should be exhausted before an EDMO is made. There may, for example, be an important point of law involved. In order to appeal, permission must be given by either the RPT or the Lands Tribunal. This is a significant safeguard against the possible abuse of the appeal procedure. The order should not come into force until the end of the appeal process. It is unlikely that there will be much urgency to override the full appeal process. I beg to move.
Lord Rooker: My Lords, Amendment No. 122 would remove subsection (5) of Clause 128. This provides that the interim empty dwelling management order may be made despite any pending appeal to the Lands Tribunal against the decision of the residential property tribunal to authorise the making of the order. We see no good reason why an interim empty dwelling management order should not come into operation as soon as it is authorised.
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The amendment amounts to a charter to delay even further the bringing back into use of a property which will already have been unoccupied for at least six months, and probably a good deal longer. I ask colleagues to remember that while an interim empty dwelling management order is in force, the local authority cannot grant any right of occupation unless the relevant proprietor consents. No final empty dwelling management order can come into effect until either the relevant proprietor agrees the management scheme or that scheme has been determined by the residential property tribunal. So the relevant proprietor's interests are hardly affected by the coming into effect of the empty dwelling management order.
The residential property tribunal will have the power to order a stay on any order authorising an interim empty dwelling management order in a case where there is genuine merit to an appeal. There are powers in Clause 213 to enable this to happen. If an appeal to the Lands Tribunal is subsequently made, it would be within the jurisdiction of the Lands Tribunal to revoke the order if that is the decision of the tribunal.
Lord Hanningfield: My Lords, I was not wanting to delay appeals but to make certain that there was fairness and that the proper process took place. Again, I shall read what the Minister has said, and if we need to come back to it, we will. I thank him for his reply and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Rooker Lord Rooker moved Amendment No. 123:
Page 94, line 10, at end insert—
"( ) in paragraph 7(6)—

(i) paragraphs (aa) and (ab) do not apply, and

(ii) paragraph (a) is to be read as referring instead to Part 4 of Schedule 7:"

On Question, amendment agreed to.
Clause 129 [Authorisation to make interim EDMOs]:
Lord Bassam of Brighton Lord Bassam of Brighton moved Amendment No. 124:
Page 94, line 24, leave out "the prescribed period of time" and insert "6 months or such longer period as may be prescribed"
The noble Lord said: My Lords, Clause 129 permits a residential property tribunal to authorise the making of an interim empty dwelling management order if it is satisfied that the dwelling has been occupied for a period of time prescribed in regulations. We will consult about what time period is appropriate to be specified in the regulations, but are certain that it will be a minimum of six months.
The Delegated Powers and Regulatory Reform Committee recommends in its 28th report that the regulations should be subject to the affirmative route. The reason was that in its view, the nature of empty dwelling management orders would be radically changed if the prescribed period were to be specified as very short.
This amendment will define the prescribed period as being at least six months or such longer period as may be prescribed by order of the appropriate national authority. Setting out on the face of the Bill a requirement that a dwelling must be unoccupied for a minimum period of six months before an interim empty dwelling management order can be approved addresses the committee's central concern. It retains flexibility to increase this period if the outcome of our consultations is that a longer period would be appropriate. But specifying a longer period would not alter the fundamental nature of empty dwelling management orders so the negative route is, in our judgment, correct.
I shall briefly address the other amendments in the group. Amendment Nos. 127, 132 and 133 all relate to matters that must be demonstrated by a local authority before a residential property tribunal can authorise an application to make an interim empty dwelling management order. All of the matters to which the amendments relate are to be the subject of secondary legislation. They are matters on which we intend to consult in detail before making regulations. I am happy to give an undertaking that we will consider the points made in drafting the actual wording in the regulations. I beg to move.
Baroness Maddock: My Lords, I shall speak to Amendments Nos. 127, 132 and 133, which have been grouped with Amendment No. 124. I listened to what the Minister said about them.
When we debated the empty dwellings management orders in Committee, I congratulated the Government on them. I declare an interest as patron of the Empty Homes Agency. Much play was made of the fact that a lot of work would be done voluntarily, involving a lot of persuasion, and that an EDMO would be the last resort. However, there is no mention in the Bill of the voluntary aspect. Amendment No. 127 would incorporate into the Bill the idea that much of the work would be voluntary; that is, local authorities working with people to persuade them to do things, with an EDMO being the last resort. That is the purpose of the amendment.
Amendments Nos. 132 and 133 would amend Clause 129(6), which lists grounds on which an owner could avoid an EDMO. Interestingly, paragraph (e) refers to an owner who is "genuinely" trying to sell the property, but paragraphs (c) and (d), which deal with repairs and planning applications, make no reference to genuine attempts. The amendments would tidy up that part of the clause and that is the spirit in which I tabled them.
On Question, amendment agreed to.
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.

Pornography
7.32 p.m.
The Lord Bishop of Oxford The Lord Bishop of Oxford rose to ask Her Majesty's Government what steps they are taking, together with international agencies, to shut down websites that give access to violent pornography.
The right reverend Prelate said: My Lords, I am very grateful to the Government for allowing time for this Unstarred Question. My concern arises out of the horrific death of the teacher, Jane Longhurst, whose mother lives in the Diocese of Oxford. Noble Lords will remember that Graham Coutts, who was convicted of Jane's murder in February, repeatedly accessed websites that depicted violent sex, and how elements of his action mimicked what he had seen online. Sites mentioned during the trial included Necro Babes, Hanging Bitches and Deathbyasphyxia.
Pornography on the Net is big business. In 2001, there were 74,000 adult websites or 2 per cent of all sites on the Web. It has been estimated that, each day, 20,000 new porn pages are added. They generate profits of more than 1 billion dollars a year, which are expected to rise to some 5 billion dollars a year by 2005. For some, the use of those sites is compulsive. Perhaps 1 per cent of the visitors to sex sites, some 200,000, are "cyber sex compulsive". That is the definition of people who spend more than 11 hours a week visiting sexually orientated areas.
The main problem, of course, relates to child pornography and child abuse images. It has been estimated that 5 million images of child abuse are circulated on the Internet, featuring some 400,000 children. In Britain, as elsewhere, the mere possession of such material is illegal and a number of successful police operations have been designed to tackle the problem. I recognise that dealing with adult sex that may depict violence against women, which is the subject of my Question, is more complex and is not so easily addressed.
In the United Kingdom, the relevant legislation is the Obscene Publications Acts 1959 and 1964 and the Criminal Justice and Public Order Act 1994. That legislation makes it a criminal offence to publish any article whose effect, taken as a whole, is such, in the view of the court, that it tends to "deprave and corrupt" those likely to read, see or hear the matter contained or embodied in it. That material now includes data stored on a computer disk or by other electronic means which is capable of being converted into a photograph. The difficulty is that other countries do not always have a similar law. In a country such as the United States, where, as a result of the First Amendment, freedom of expression is given overriding priority, it is possible for images that are illegal in this country to be put on websites without prosecution. In addition to different laws in different countries, there are of course different sexual mores, so that what might be regarded as unacceptable in one society is tolerated in another. So I recognise all those difficulties, but I know that the Home Secretary believes that something can and should be done by way of international co-operation.
Mrs Longhurst and those working with her inside and outside Parliament have put forward a five-point plan for dealing with this problem: blocking access to some of the material on which Graham Coutts depended; looking again at the relevant legislation to which I have already referred to consider whether the possession of the kind of material that he used could be a criminal offence; better international co-operation; the role of Ofcom in this area; and the way credit card companies might be involved in putting financial pressure on the providers of extreme images.
In a debate on this issue in Westminster Hall on 18 May, a number of helpful points were made in relation to each of the above proposals; for example, encouraging suppliers of personal computers to build in filters from the start in the way that cars are fitted with seatbelts at the point of manufacture; looking at how the Proceeds of Crime Act 2002 might be applicable in this area to stop people benefiting financially from the extreme images on the Internet; using the reserve power in the Communications Act 2003 to regulate, and so on. Ofcom would be very willing to be consulted by the Government about what helpful steps it might take and what might be possible. I hope that the noble Baroness, Lady Howe, will say something more about that. Whatever steps are taken, it is widely recognised that there is no one catch-all solution and that the problem needs to be tackled from a number of different angles.
During the debate to which I have just referred, I was disappointed that the Minister in another place said nothing about international co-operation, perhaps because of lack of time. That is the issue about which I am particularly concerned. The Internet service providers (ISPs) argue that they cannot be expected to vet the tens of thousands of Web pages and millions of messages on their systems. Many providers argue that their position is much closer to that of a post office, acting as a conduit for information, than to that of a publisher. Although there is some truth in that view, the analogy does not mean that nothing can be done. Some things are being done, at least in the area of child abuse images. For example, in June, British Telecom implemented a ban on illegal websites, using a list compiled by the Internet Watch Foundation—the industry's watchdog. The project, known as Clean Feed, means that subscribers to BT's Internet services such as BT Yahoo and BT Internet who attempt to access illegal sites will receive an error message as if the page were unavailable. BT will register the number of attempts, but will not be able to record details of those accessing the sites. However, the Internet Service Providers' Association (ISPA) has expressed some doubts about the effectiveness of this solution and stated that it will prevent only casual browsing of known websites. It will not hinder organised distribution of such images. It will not prevent access to new websites that offer illegal content. In short, preventing access is not a solution to the presence of those websites in the first place. The question is what can be done about the websites themselves.
My particular concern this evening is what international co-operation may be possible. I recognise the difficulties. As the noble Baroness, Lady Scotland, told the House:
"There is no international consensus on what constitutes obscenity, or when the freedom of an adult to have access to obscene or pornographic material should be constrained".—[Official Report, 23/2/04; WA 31.]
But the fact that there is no consensus now on what constitutes obscenity does not mean that it is impossible to arrive at a consensus in the future. Because there is no consensus now on whether an adult should have access to obscene or pornographic material, it does not mean that we should not seek to reach a consensus or strive to implement one.
This evening, I have mentioned other measures to tackle this problem. Some of the five points of the campaigning group are like trying to ward off the tentacles of an octopus. In the end, it is necessary to get at the octopus itself; that is, at the sites themselves. Most of these sites are situated abroad. There is no escaping the need for international co-operation, followed by international action. I know that the Government share this concern and I look forward to hearing what the Minister thinks may be possible and what progress he believes has been made so far.
7.41 p.m.
Baroness Dean of Thornton-le-Fylde: My Lords, I thank the right reverend Prelate the Bishop of Oxford for initiating the debate this evening. I very much agree with him.
An important issue is that these sites will prevail as long as the mass of people accept that it is difficult, and maybe impossible, to do something about them. Most people would reject that. The technology we now have has provided these websites and I am amazed that similar technology cannot be used to control them.
Although this is just a supper debate, it is on an issue that touches a nerve in many parts of Britain today. There are concerns about children and women—and young men, too—and about the use of these websites. It almost seems that one cannot prevent them coming into one's home. If we wait for international law, we will wait for ever. It needs international co-operation. I know that my noble friend Lord Puttnam, who is present, would like to have taken part in this debate. His vast knowledge of this whole area of technology—not of pornography—would have been an admirable contribution to the debate.
We must look at this from a different direction. One of the models that we can look at is ICSTIS, the telecoms regulator for the premium rate industry. That is an industry that came about as a result of the deregulation of telecoms. That regulatory body was created not by law but by an agreement with the service providers. I reject the view of the Internet service provider organisations that one cannot do a lot about this. One can do a lot by working together.
ICSTIS deals with premium rate services. Some of them come from abroad but immediately they are on UK lines that regulatory body can, and, indeed, does,

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step in. These services can be provided by telephone, as they originally were, fax, PC—which could be linked to e-mail, Internet or bulletin-boards—mobile phone or interactive digital TV, as allowed by new technology. There are 40,000 services at any one time, costing from 10p a call to £1.50 a minute. It is a sector that is regulated not by law but by consensus between the service providers themselves. The right reverend Prelate mentioned BT's decision earlier this year.
ICSTIS has recently introduced a licensing system whereby services have to be legal, decent and honest. Maybe that is the way forward. I do not know. There are specific provisions for forbidding content that is violent, sadistic or cruel. There was a case almost two years ago of a service from Germany that came into the UK and advertised child pornography. In fact, the service did not provide that. It was the come-on to get the public to go on the line. ICSTIS took the service off and fined it £75,000. That kind of emergency intervention, whereby one can take the service off within a matter of hours by the co-operation of the telecoms companies, is what is needed.
I find it objectionable and unacceptable for the website providers to say that there is nothing they can do about it because if they came together and said that they will work to do what they can, inroads could be made into what is quite clearly offensive and, more than that, dangerous for many innocent people in Britain. We all have computers on which messages pop up. We just click to get rid of them. If a child is on the computer that does not have a firewall, it is not quite so easy to do that. A lot of material is very offensive.
I sense that there is a will in Government to do something. The Minister will cover that when he responds. That is at the heart of this. We could get Ofcom and the service providers together and get a general international consensus. That would not be about the global line of acceptability, because we all have different standards, but the line has to be that if a service is coming into a country and that country finds it offensive then it should be possible to prevent that service going into that country. There are technological ways of doing that.
I welcome the debate this evening very much and I hope that the Minister will be able to be helpful. I am not suggesting that he has the answer because this is a very difficult conundrum. But as long as we try and do something about it, we can achieve something. I am not saying that we will be able to eliminate the cases that the right reverend Prelate the Bishop of Oxford mentioned, but these services are growing year on year and I suspect that the British people are almost becoming immune to them. It is like everything else. If there is a drip, drip, drip of violence, then it begins to be acceptable because one is no longer as shocked as one was a year before. It is time for us to see what we can do to stop this kind of service. It is not what the Internet was going to be about. It was about broadening horizons, not doing what some of these services are trying to do.
7.45 p.m.
Baroness Howe of Idlicote: My Lords, I am very glad indeed to have this opportunity to support the right reverend Prelate the Bishop of Oxford in his bid to press the Government for more action in response to what has been a horrifying growth in the distribution and viewing of violent porn and, particularly, of child abuse images. Clearly, the recent barbaric murder of Jane Longhurst has highlighted the problem of those people who not only have an appetite for watching violent pornography via the Internet but who also go on to act out their abhorrent fantasies in real life. This disturbed group of people may be, and hopefully is, relatively small in number but far too little is known about the long-term wider effects on society of indulging this kind of appetite, especially in a world where the material is all too universally available. By way of an illustration, I go back to the days when flashers were considered to be harmless, if somewhat embarrassing, eccentrics. Yet we all know now that that behaviour was all too often the early sign of far more deviant sexual behaviour.
It is very plain that the Internet has brought unimaginable benefits right across the globe. However, it is the very built-in absence of regulation that has brought the problems that now concern us. Since in today's world every form of communication can now be accessed via the Internet, including—I stress—broadcast programmes, those problems will continue to grow unless we can all globally agree a fundamental, comprehensive and "civil society" approach to what is and is not acceptable.
One hopes that that is not quite as impossible a task as it would have seemed only a few years ago. I agree with the noble Baroness that a lot of the technology produced enables restraints to be placed on that kind of material. It is only right to acknowledge that progress has been made. My own preference was that in this country, Ofcom should be given the main responsibility for the whole area. That was not allowed, and that provision is not within the Communications Act 2003. However, we should not forget that Ofcom has an indirect responsibility—that of media education. That can play a very important part in alerting parents and children to what they need to know to defend themselves.
Not all is gloom; there have been advances. On the voluntary regulation side, I would really rather praise the Internet Watch Foundation. It is funded by the industry itself, and not everyone agrees with that approach. But it has worked with government, Internet service providers, the police and others and has acted as a catalyst in getting other forms of European activities going.
On the European front, there is an organisation called INHOPE, which has the backing of some 17 members. At an international level, many countries are tightening their child pornography codes and their laws—such as Australia, South Africa and Canada, to name but a few. None of that would have been possible without the great advances that have been made on the technical side. A most encouraging sign is the creation of filtering systems,

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which allow individuals or parents to exercise, if not failsafe then nevertheless considerable, control. We have heard about search engines such as Yahoo, as well. In the UK, Internet service providers can apparently remove sites which break UK law or break their "acceptable use" policy. We can put that against the fact that only quite recently more than 300 MPs signed an Early Day Motion calling for more international action.
Changes in the law have helped, too. The Sexual Offences Act 2003 created the important new offence of grooming. Under Section 46 of that Act, the burden of proof has passed from the prosecution to the defendants to prove if they can the necessity for them to download indecent images of children.
As the paper, Supplying the Skills for Justice, highlights, enforcement needs specially trained police. Of the 140,000 police officers in the UK, apparently only 1,000 are trained to handle digital evidence and a mere 250 work with computer crime units or have higher level forensic skills. Recently, a major investigation involving some 6,000 UK citizens on suspicion of child pornography offences—Operation Ore—showed up that major resource discrepancy. It was itself the cause of delays of some nine months or so. So we can all agree that more action is needed.
I found BT's experience particularly worrying. The official figure for the percentage of reported child pornography hosted in the UK since 1997 had apparently fallen from 18 per cent to less than 1 per cent. That is clearly good news—but then came the bad news. BT reported that over its first few weeks of the new technology, a horrifying 150,000 such attempts had been made and blocked off. There are clearly even darker figures waiting to be uncovered in this distasteful area, as the extent of embedded addiction to what I would call the "drug" of pornographic viewing is revealed.
Clearly the Government have a vitally important task ahead, if the aim of the Home Office Internet Task Force on Child Safety, which we would all support—to make the UK the best and safest world for children to use the Internet—is to be effective. My hope goes further than that. I hope that the Minister will be able to reassure your Lordships that far more international as well as national action is on the agenda. The will to enforce decent standards has to be global. However law-abiding most of the developed countries are likely to be, if this distasteful and, as we have heard, hugely lucrative industry can move its operations to a part of the world where few controls exist, the problem is clearly going to continue to grow.
As the Minister will know, many of those concerned with the issue had hoped that the subject would be on the agenda of the recent G8 meeting in June. That did not happen. Can we be reassured that these issues still have a very high priority for this Government?
7.56 p.m.
Lord Chan: My Lords, I, too, thank the right reverend Prelate the Bishop of Oxford for securing this debate on websites with access to violent pornography. He has eloquently outlined the dangers of this
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pernicious and perverse use of the Internet and the ways in which websites can be shut down, and I support him in this debate. I intend to focus on pornography involving children and accessible on the Internet, where some interventions have taken place.
Interpol and police forces in several western countries continue to co-operate to identify people, mostly men, who use the Internet to distribute child pornography. In that way, some have been arrested. However, as my noble friend Lady Howe said, 6,000 people have been suspected of the crime in this country but not that many have been taken into custody.
The production of child pornography involves the abuse and exploitation of children. An image of a child or children involved in explicit sexual activity invariably identifies adults committing a serious crime. Ever images that appear less harmful, such as a photograph of a naked child in a sexually suggestive pose, still involves the exploitation and degradation of a child.
In August 2002, the Sentencing Advisory Panel, of which I am a member, published advice to the Court of Appeal on the sentencing of offences involving child pornography. The panel consulted the police, who gave priority to tracing children involved in recently produced material, because they were still at risk and in need of protection from further abuse. In addition, adults suffer continuing shame and distress from the knowledge that indecent images of themselves as children are still in circulation.
Much of the child pornography distributed by the Internet depicts children of typically far eastern appearance and does not originate from the United Kingdom. That is, however, by no means always the case, because the availability of handheld video cameras has encouraged the growth of a so-called cottage industry among paedophiles, involving their own children or others, whom they have abused.
Evidence exists that child abusers commonly use and are influenced by child pornography. Users of child pornography groom children before abusing them with the intention of having sexual intercourse with those children. People who collect child pornography are therefore a danger to children. People who regularly download child pornography and have been prosecuted are only a very small proportion of the real total, because pornography is easily accessible on the Internet.
Pornographic material involving children varies from images depicting nudity or erotic posing with no sexual activity to gross assault and sadism. Her Majesty's Government strengthened protection against sex offenders by reforming the law on sexual offences in the Sexual Offences Act 2003. A new offence of sexual assault was introduced to cover non-penetrative behaviour, carrying a maximum penalty of 10 years' imprisonment. Special protection for children formed part of the new Act.
The necessity for these legislative changes became clear on 21 January last year, when the Attorney-General referred to the Court of Appeal three cases of men who sexually interfered with children because he regarded their sentences as unduly lenient. All three

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defendants had assaulted children. The three Law Lords who heard the appeal agreed that all cases of sexual interference, whether amounting to rape or not, should be considered with guidelines formulated for the sentencing of rape. All three men received prison sentences varying from three to 13 years.
There must be many more sexual abusers of children or paedophiles who are at large. They continue to produce and distribute pornography involving children. The Sexual Offences Act 2003 identified offenders against children as the ones to be given the longest prison sentences. But the child victim of a sexual assault is physically and psychologically scarred and damaged for life. Therefore it is clearly preferable that everything should be done to prevent children from being abused by paedophiles.
One important step in prevention is to shut down websites that give access to child pornography. If it were possible to do that with child pornography, with international co-operation the same technology could be used to shut down other pornographic websites, especially those with violent pornography.
8.1 p.m.
Lord Hylton: My Lords, I am particularly glad that the right reverend Prelate the Bishop of Oxford has already drawn attention to the impact of pornography on children. He also commended British Telecom. I am delighted to agree with my noble friend Lord Chan in drawing particular attention to pornography involving children.
The making of such material almost always involves some degree of violence and/or deception. It harms people several times over. First, it harms the child when the films, photos or videos are made. Then it depraves and dehumanises those who view them, all the more so if the viewers happen—intentionally or otherwise—to be children or adolescents. A lot of this material is believed to originate in South-East Asia where there are large numbers of extremely vulnerable children and also governments who are not always fully in a position to give their own children the protection they deserve.
I therefore ask the Government to give special care and thought to the involvement of children when they are considering how best to prevent violent pornography. I should like to commend British Telecom, because I understand that that company has given a positive lead to all British Internet service providers by using special software which blocks out and more or less excludes material showing child pornography.
Have the Government already asked British Internet servers to adopt this practice? If this has not yet been done, will the Government be prepared at least to use compulsory powers and to provide penal sanctions?
8.3 p.m.
Lord Avebury: My Lords, I join other noble Lords who have expressed congratulations to the right reverend Prelate on bringing forward this important subject this evening. I am grateful for the practical suggestions that
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he made, all of which I agree with, except that Ofcom should have a role in the regulation content. Both he and the noble Baroness, Lady Howe, resuscitated an argument which I think we had at some length during the proceedings on the Communications Bill.
Your Lordships decided that that was not a matter for Ofcom. But I agree with the noble Baroness that ICSTIS has an important role to play and I have listened with care to the proposals that that body has made with regard to voluntary agreements with those who provide the material that goes out, particularly to people using mobile phones. That is an important aspect of the problem in the United Kingdom.
As the right reverend Prelate said, this debate is a useful sequel to the debate which was held in Westminster Hall last May, when a number of suggestions were made, but which the Minister who replied—Mr Paul Goggins—did not have adequate time to deal with. I shall ask a few questions that arise out of that debate.
It is common ground—it has been expressed this evening—that almost all the sites which offer violent pornography are hosted on foreign servers, and therefore are not committing offences under our law as it now stands. Therefore, although perhaps the Obscene Publications Act needs to he looked at, that would not touch the vast majority of the images coming into this country and which generate the enormous profit of £1 billion a year. I am surprised that it is not more than that considering the number of accesses which we have heard about, even in the short interval during which British Telecom has been able to monitor them.
But Operation Ore, which has been referred to, was successful in exposing thousands of people in the UK who had downloaded illegal images from foreign websites, as well as identifying 102 children within this country in need of protection. Chris Hanvey of Barnardo's says that this represents the tip of a large iceberg of abusers and offenders who are not being caught in the UK.
In Operation Ore, responses varied considerably between one police force and another, according to the resources available, and partly also according to the degree of co-operation by local IT providers with the force concerned. To get a uniform approach, there would have to be clarification of the circumstances in which service providers may give information to the police where Internet-related offences are suspected but when charges have not yet been made, and there would also need to be a more national approach to this type of crime. Whether that needs a new type of police agency, or whether it could be added to the terms of reference of the National Hi-Tech Crime Unit, is a matter for consideration. Certainly the great majority of local police forces are not well equipped to deal with this type of crime, as we have heard.
Operation Ore dealt with a single website, albeit a very large one. The data in relation to that site were collected by the FBI via the credit cards of 140,000 people worldwide—of whom I understood that 7,000 were in the UK, although the figure of 6,000 has been

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mentioned. It was suggested in another place by my honourable friend Mr Richard Allan, among others, that, as the right reverend Prelate mentioned, much more could be done by the credit card providers to block access to violent pornographic sites. I believe that the credit card providers are willing to co-operate through their "brand image protection programme" wherever they have the power to do so.
The problem is that VISA and MasterCard are franchises, and they may not have power to require their licensees to comply with restrictions on the use of cards to access given sites. Is this a question that the Home Office has discussed with credit card providers since May, and has it any methodology for dealing with it? The Home Office Minister Paul Goggins said in reply to a Written Question in another place in June:
"co-ordinated action by the major credit card schemes … can have a major impact on the commercial trade in child abuse images".—[Official Report, Commons, 14/6/04: col. 754W].
He undertook to work with them to make that as effective as possible. What progress is being made, and can the Home Office foresee our police having the technology to etect credit card access to the abusive sites by users in the UK, without having to rely on the FBI and the US to do the work for us?
The Home Secretary had discussions with the US Assistant Attorney General when he visited the US last spring, and Mr Goggins said that discussions were continuing after that at official level. There are sites hosted in the US which would be illegal anywhere in Europe, and apparently the Americans find it difficult to close down these sites or prosecute them in spite of the Child Pornography Prevention Act 1996, which makes it an offence attracting a mandatory 15 years' imprisonment to produce or distribute images depicting,
"a minor engaging in sexually explicit conduct".
No doubt it would not have been easy for the Government to get the administration to focus on this issue in the run-up to the presidential election, but can the Minister say whether any progress is being made in the conversations with the US, considering that the US is so much a key to an internationally effective solution to the problem?
The Oxford Internet Institute is planning a major international conference in September 2005 on the problems of international co-operation on Internet-based crime. I hope that the Government will come forward with some effective ideas that can be fed into that meeting.
Next year, Britain will occupy the presidency of both the European Union and the G8. This would be an excellent opportunity to develop a more robust European approach and to persuade the US and other OECD countries to join us. Although, as the noble Baroness, Lady Scotland, has pointed out—and this has been quoted already—there is no international consensus on what constitutes obscenity, there is agreement at the minimum that images of children involved in sexual acts are totally unacceptable, and there is a European Union framework decision on combating the sexual exploitation of children and
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child pornography, as well as a Council of Europe cybercrime convention which aims at common definitions and minimum standards for offences concerning child abuse images on computers.
Can we not build on those foundations, and attempt to secure a worldwide prohibition on the portrayal of violent sex on the Internet? Without this, the producers and distributors of this material can always move to a more lax jurisdiction, as they do now, and co-operation between prosecution agencies in different countries will always be harder to achieve.
8.12 p.m.
Baroness Buscombe: My Lords, the pornography industry has many distasteful and horrifying aspects that we would rather forget, but however shocking and appalling it is, it is our duty to tackle these issues head-on. Thus, I welcome the spotlight turned once again to the serious problem of violent pornography. I thank the right reverend Prelate the Bishop of Oxford for initiating this debate and noble Lords who have taken part in it this evening.
The right reverend Prelate referred to the dreadful case of Jane Longhurst. Many noble Lords will have seen articles by her sister, Sue Barnett. Jane's murder was aptly summed up by the Daily Mail as,
"unequally disturbing in that it could have happened only in this high-tech age, committed by someone whose murderous fantasies were fuelled by appalling images freely available on the internet".
As we know, Jane's killer, Graham Coutts, was addicted to violent pornography, in particular sites dedicated to necrophilia and sexual asphyxiation. The day before her death he spent hours trawling through dozens of appalling images of women being raped, strangled and hanged.
In the aftermath of her sister's tragic death, Sue Barnett has set up a trust in her sister's name, to help people to educate and protect themselves from violent pornography sites as well as to call for their outright ban. Eight out of 10 computers have no Internet filtering software installed and 48 per cent of children give out personal information online. With such shocking statistics at our fingertips I am sure that your Lordships will join me in wholeheartedly supporting this cause.
I support the call for the Government and Internet service providers to take action to block access to such sites and hope that the Minister may be able to shed some light on progress in that matter in particular when he replies. Have Her Majesty's Government ever considered making it legally binding for all computers to have filtering software installed?
One of the most difficult aspects of tackling the problem is the now-accepted finding that the Internet opens up a world of sharing experiences; of making people feel comfortable and confident that what they are doing and enjoying—and in many cases becoming addicted to—is okay. For many it begins with an initial search for a little excitement; a search that then extends beyond a little excitement into more and greater degrees of obscenity in its worst forms. We know that there are sites that actually teach people how to

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become "good paedophiles". There are probably similar sites to teach people how to ensnare mature victims, both men and women.
We must do all in our power to confront what appears to be a growing, ugly and despicable trend in our so-called civilised world. We all welcomed the tighter controls and moves against the sexual grooming of children in the Sexual Offences Bill last year. The many debates during the Bill's progress made several points hit home. Pornography is an old crime with new tools; new tools that mean it can reach a wider audience much faster and easier than it used to. It is common knowledge now that it is yet another money-making industry used by criminals and terrorists alike.
Will the Minister inform the House what active steps Her Majesty's Government have taken since the immediate aftermath of Jane's death? Will he inform the House in detail which government departments are involved in trying to stop violent pornography sites; and assure us that cross-departmental co-operation is occurring? I join the noble Lord, Lord Avebury, in asking the Minister what progress has been made with regard to credit card access to abusive sites.
While we welcomed the formation of the National High-Tech Crime Unit in April 2001, it recognises on its website that it is legally limited as to whom it can take action against. There remains a serious problem of offensive websites based in other countries. Will the Minister inform the House—as other noble Lords have requested—what meetings the Government have had with other countries regarding better international co-operation in shutting down such operations?
Are there any official memorandums of understanding or other legal or voluntary agreements within Europe or beyond on these matters? If so, what are they and what are their targets? If not, will Her Majesty's Government be making moves to bring one forward? We know that in the Westminster Hall debate on 18 May this year the subject was discussed in reference to meetings between the Home Secretary and political representatives in the United States. In addition, we understood from that debate that the Government were considering the scope for a wider initiative to influence how the issue is dealt with by other countries and for specially targeting those questions at the G8 summit. Perhaps the Minister can provide us with an update: is any action—as opposed to talks—proposed in the pipeline? We have already heard from the noble Baroness, Lady Howe, that sadly the G8 did not discuss the matter in June this year.
I entirely agree with the right reverend Prelate the Bishop of Oxford that co-operation is key and we must seek consensus. Inevitably a balance must be drawn between protecting children and other individuals on the one hand and letting adults make their own viewing decisions within the boundaries of the law.
That said, it is not necessarily adults who are accessing those sites. The next generation have proved themselves extremely adept in their use of the Internet to their advantage. In any event, violent pornography
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such as that related to Jane Longhurst's murder falls well beyond the legal remit and there is more we can do to address that horrific problem.
I am concerned regarding the paucity of resources targeting the problem. I understand that there are only 240 computer forensic officers devoted to tackling this growing problem and most of them are focused on Operation Ore and child pornography. That is no bad thing; but worse than that, I understand that there are only three police officers in the entire Metropolitan Police area devoted to tackling non-child pornography. Are the Government prepared to put more resources into that vital area?
While I would be the first to defend our civil liberties, freedom of speech and expression, violent pornography on the Internet exceeds all boundaries of what we in our society should be prepared to live with. I agree with the noble Baroness, Lady Dean, that ICSTIS is doing some great work, as is the Internet Watch Foundation. However, unfortunately the technology of abuse remains ahead of the law. The sentiment throughout the debate of tackling those problems head-on can be the only way forward. Perhaps we should initiate further debate so that we can hear from other noble Lords, including the noble Lord, Lord Puttnam, who has a wealth of knowledge in this area to contribute.
8.19 p.m.
Lord Bassam of Brighton: My Lords, I, too, express my gratitude to the right reverend Prelate the Bishop of Oxford for instigating this debate. Sadly, it is an issue with which regrettably I am all too familiar being a Brighton resident and following the tragic murder of Jane Longhurst who was very much a part of the Brighton community. I pay tribute not only to the dignity of her parents and sister for the way in which they have campaigned on the issue following her death but also to the MPs, David Lepper and Martin Salter, who in different ways have pressed for more and urgent action regarding this abuse.
Following the death of Jane Longhurst the Government have given very active consideration to what more can be done in this field. The implications of her trial have focused our minds tremendously. We are now reconsidering what can be done regarding websites that feature necrophilia and sexual violence. We are considering how we can proceed in relation to strengthening the law in that area.
The Government are obviously very concerned about the availability of violent or extreme pornography, and the influence that this sort of material could have on our children. The availability of such material on the Internet, accessible directly from our homes wherever we live, makes this an issue that affects all countries. As the right reverend Prelate and all other contributors to this evening's valuable debate have rightly said, it is a global and international problem.
Attempting to limit illegal material that is available via the Internet is an issue which can be tackled on many fronts. These present different, difficult but also interlocking challenges. However, they may also offer

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some opportunities for tackling the problem. We need to consider all of them in our attempts to reduce the availability of illegal material.
First, it is important that the Government seek to consider combating this problem domestically, and I shall go on to outline what our approach has been to this issue within our own jurisdiction.
However, the Internet is, as we all know, a very effective communications medium and allows millions of people to access and publish vast quantities of information. There are many hundreds of thousands of websites and news groups that purport to contain violent pornography of various types. Most sites require a small credit card payment to gain access and the registration and hosting of sites is spread around the world with many centres of activity, particularly in the United States, Russia and China.
Dealing with this issue internationally presents many challenges, not least because there are no common definitions or agreed priorities for criminalisation of adult pornography internationally. Indeed, that is perhaps the root and the cause of the problem. However, there is much that can be done in respect of seeking to deal with this issue internationally on a variety of fronts which I shall go on to outline.
The first consideration in any attempt to deal effectively with such material, whatever medium is used to convey it, is to consider if it is illegal. At present the obscenity laws (the Obscene Publications Acts 1959 and 1964) cover the publication, distribution, showing, giving, et cetera, and possession for gain, of material that has a tendency to "deprave or corrupt" those likely to read, see or hear it. This is admittedly a difficult test to apply, and very different from the way we deal with indecent photographs of children, which are relatively easy to identify. However, the purpose of the obscenity Acts is to tackle the spread of the material and the possible corruption of individuals by it, rather than the protection of children. That is why the obscenity Acts do not penalise simple possession of any material. They leave the test of what is obscene ultimately to the jury, which ensures that juries can reflect the moral standards of their day. The flexibility of the test is part of its strength.
It remains the case that it is illegal to publish some extreme images under the Obscene Publications Act 1959 whether via the Internet (websites) or other means. The Government are currently considering whether the law relating to pornographic material featuring violence and sexual abuse should be strengthened.
The Government and law enforcement agencies have developed excellent working relationships with our domestic Internet service providers in recent years. This means that where it is found that a United Kingdom Internet service provider is hosting illegal material, there is an excellent record of co-operation from the Internet industry in removing that material.
In addition, all Internet service providers have a customer relationship established via an acceptable use policy with those who use their services to host material. If that material is not illegal, but is considered to be of an objectionable nature by the
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company, again there are established procedures in place by which such material can be removed. The Government are currently working with the Internet industry to further promote good practice within such acceptable use policies.
The noble Baroness, Lady Howe, referred to the important work of the Internet Watch Foundation in the UK in providing a hotline for the reporting of child abuse images. She rightly paid fulsome tribute to its work. The IWF decides whether the reported website carries potentially illegal material, and passes details of illegal material to the relevant law enforcement agencies to take action. When the site is hosted within the UK, law enforcement will seek its removal with the relevant Internet service provider. That procedure has been extremely successful in practice.
In 2003, less than 1 per cent of illegal material identified by the Internet Watch Foundation was hosted in the UK. In respect of adult pornography, we are confident in the ability of the IWF to identify material that is potentially in breach of the Obscene Publications Act 1959 in response to complaints, and to refer to the police any that is hosted in the UK.
We are told by the IWF and UK law enforcement that hardly any extreme material that might he illegal in the UK if distributed to an adult is hosted within the UK. As already outlined, we have well established procedures and industry co-operation for seeking its removal. That may mean that the legislative environment, action taken by law enforcement agencies and industry co-operation in the UK have all contributed towards such material being hosted elsewhere. That makes it very difficult for the producers and distributors to be dealt with unless they also break local laws in the country where they operate.
There is much being done at present and which can be done in the future to combat extreme and violent pornographic websites, wherever they are hosted. It is important to tackle the problem on a variety of fronts. For example, dealing with the producers and distributors of material is much more effective than simply taking down one website.
One role undertaken by the Internet Watch Foundation and police units, such as the National Hi-Tech Crime Unit, is passing on the details of sites that are hosted outside the UK to other hotlines and law enforcement bodies in the hosting countries. They will consider the site under their own legislation and take action where appropriate. Law enforcement agencies have well-established relationships with their counterparts in other countries to share information and work together on investigations. In particular Interpol, Europol and the G8 contact network all facilitate that working.
However, it is important to recognise that this is an area on which there is no clear international consensus on what, if anything, should be done. Different countries have taken different approaches to violent pornography and what is legal to possess or distribute within their own jurisdiction. There are no common definitions or agreed priorities for criminalisation

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among adult pornography. Even with images of child abuse, there are different approaches, although with child abuse images there is a clearly agreed international consensus to tackle the issue.
The G8 countries have agreed a strategy to protect children from sexual exploitation on the Internet. It currently focuses on building a shared international database of images to speed the identification of victims and offenders to prevent further harm, and on targeting those who make a profit from trading in child abuse images. The strategy also seeks to promote mechanisms for sharing information and best practice internationally to further protect children from exploitation on-line. We continue to work with colleagues around the world, particularly the US, on what more can be done to close down those violent pornography sites. The Home Secretary has made it clear that we shall work with our G8 partners to see what more can be done to deal effectively with violent pornography.
Other work has focused on preventing payment mechanisms being used to purchase illegal material. The Association for Payment Clearing Services (APACS), the UK trade association for payments, the Internet Watch Foundation, and the Children's Charities' Coalition for Internet Safety, have all worked actively to prevent payment mechanisms being used for purchasing child abuse images.
The arrangements now in place have made it possible for law enforcement agencies to become more effective in investigating, detecting and taking action against the sites that use specific payment services to sell child abuse images. The relevant card companies will also seek to trace the banks and the billing companies involved in processing payments and will cease the use of their cards.
Units such as the National Hi-Tech Crime Unit, through its industry outreach programme, have been especially successful in working closely with industry on intelligence and designing out hi-tech crime. Again, while much of the focus here has been on child abuse images, given the clear international consensus to tackle this problem, action has been taken against illegal pornographic sites more generally, and we continue to see how the lessons learnt from dealing with child abuse images can apply more widely to other illegal images.
In addition, the Government continue to work with the Internet industry and others to see what can be done in various ways to reduce access to illegal material or that which might be deemed to be inappropriate by the user.
Much can be done by parents to seek to protect their children from discovering violent pornographic material. Chief among that is the need for responsible parenting, providing good advice and ensuring that children feel able to talk about material found which upsets them. Also available is a variety of software which can control content and allow parents to monitor their children's activity.
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Through the work of the Task Force on Child Protection on the Internet, the Government are considering ways in which the Internet can he made a safer place for children. They have engaged in several public awareness campaigns. They are also currently working with industry to see whether filtering and monitoring software products can be evaluated against an objective standard and impartial advice provided to parents. They are working with search engine companies to seek ways in which search can be made a safer experience for our children. We are also considering what technical solutions can be developed to block illegal images.
In closing, I want to deal with an issue relating to extreme and pornographic websites which presents us with a variety of challenges. Our resolution to deal with this issue domestically is not enough in itself. The development of the Internet has made a difference.
In 1959, the supply of obscene material was far more easily cut off. The advent of the Internet means that we now have to seek to influence other countries whose legislation, policy or practice in this area may well be very different from our own. The Government continue to work in a variety of international fora, seeking to discover how we can influence others and take other positive action.
As I highlighted, action needs to be taken on a variety of fronts, and the actions of law enforcement, industry and others in seeking to disrupt the mechanisms which support and facilitate this trade continues to play an important role in this work. This is a continuing problem, and we must continue to seek new approaches as the problem evolves.
Specific questions were asked but I do not have time to answer them all. However, I give a commitment this evening to write to noble Lords on the points that they raised so that I can deal with them thoroughly—particularly those relating to cost, the role of BT and international co-operation, in particular with the United States.

Housing Bill
8.33 p.m.
Consideration of amendments on Report resumed on Clause 129.
Lord Hanningfield Lord Hanningfield moved Amendment No. 125:
Page 94, line 27, leave out "immediate"
The noble Lord said: My Lords, the need to show that "immediate" steps will be taken places too heavy a burden on the person who is likely to be the subject of the order. What is meant by "immediate" in any case? Does it mean tomorrow or next week? It may simply not be practicable in the circumstances, even though the owner may well wish to take action to ensure that the property is occupied without undue delay. Planning permission may need to be applied for. Work may need to be done. The proposed alternative

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wording gives more flexibility to enable full account to be taken of the circumstances without compromising the need to avoid undue delay. I beg to move.
Lord Rooker: My Lords, I am sympathetic to the objective behind the amendment. However, in normal speak, the revised wording would weaken the intention of the clause, which 1 am sure is not the intention of the noble Lord. It is possible to conceive of many situations where it is wholly impractical for the relevant proprietor to let the property. That may be precisely why an empty dwelling management order is the proper course of action. If a relevant proprietor has reasonable and practical proposals to secure occupation of a dwelling, the matter will never even get to the residential property tribunal. Once a matter reaches that tribunal we do not want to allow any delaying tactics to the procedure.
I remind the House once again that an interim empty dwelling management order is not the end of the matter. If the relevant proprietor is willing to co-operate, there is no reason why the management of the property should not very swiftly be returned to him. The whole point of the exercise is to have someone living in the dwelling. It is not for us to choose; we want the dwelling used.
I understand the intention behind the amendment which gives the relevant proprietor more time to take any steps. If he can convince people that he is getting on with the job, quite clearly the property will not be empty. That is the whole purpose of the exercise. If this gives a kick-start to those who own empty properties to get them brought back into use we will have done our job, perhaps without issuing a single order—one never knows.
Lord Hanningfield: My Lords, I thank the Minister for his reply. I accept what he says about empty properties being occupied as soon as possible. He also said that he had some sympathy with the way in which we have tabled this amendment. Like many issues that we have discussed today, the Government have some sympathy with what we are doing, as we are trying to improve the legislation. The points have been well received. I hope that there may be some rethinking on some of these issues before Third Reading. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 126 and 127 not moved.]
Lord Hanningfield Lord Hanningfield moved Amendment No. 128:
Page 94, line 35, after "rights" insert wishes and intentions"
The noble Lord said: My Lords, this amendment allows the RPT to consider the wishes and intentions of the relevant proprietor and not just his rights. A proprietor may well intend to do other things with the property—perhaps to demolish it or to change it to non-residential accommodation. His wishes in this matter should, at least, be considered by the RPT before authorisation is given for the making of an EDMO. I beg to move.
Lord Rooker: My Lords, I do not want to sound at all dismissive—it is the way in which the amendments
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have been degrouped. On Amendment No. 121, I explained the fact that the tribunal has to consider those issues when authorising an interim empty dwelling management order. I explained that Amendment No. 121 was linked with Amendments Nos. 128 and 136 and that Amendment No. 121 was not necessary. The reasoning is exactly the same in relation to Amendment No. 128.
Lord Hanningfield: My Lords, I accept that answer from the Minister and thank him for it. Again, we shall look at this issue and consider whether we need to return to it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hanham Baroness Hanham moved Amendment No. 129:
Page 94, line 36, at end insert ", and
(c) the reason or reasons why the dwelling has been unoccupied"
The noble Baroness said: My Lords, we believe that this is an important proposal. It requires the residential property tribunal to review the whole history of why a dwelling is unoccupied and why a local authority seeks to make an empty dwelling management order.
There may be very good reasons why the property has not been occupied in the past and will continue to be unoccupied. The purpose of the empty dwelling management order is to deal with properties that have been unoccupied for some considerable time. Therefore, the residential property tribunal needs to investigate carefully the reasons why that situation has come about before an order is made authorising the making of an order. That is the reason for Amendment No. 129. I beg to move.
Lord Rooker: My Lords, in thinking about this I constantly go back to examples in my former constituency of frustration in relation to houses which were left empty. An ordinary suburban, tree-lined street, with two or three-bedroomed semis built in the 1920s and 1930s —nice houses, but with one stuck in the middle of a very long road. It was a nightmare. If we had had this kind of legislation then, my constituents would not have been asking why it was empty; they would have said, "Get something done about it".
The point I am making is that, by the time we get to the stage where the property has been vacant for such a long time, where there has been community interest, councillor interest, and so on, why it is empty is unimportant. If it fulfils the criteria, what is important is how it can be reoccupied. That is the purpose of the exercise.
I accept that there may be all kinds of reasons, some of which may be very sad. I understand the sorts of things which could cause a property to be left empty and I do not dismiss them: far from it. However, at this point it is a question of whether the relevant proprietor has a plan to secure reoccupation. If so, all well and good and no order would be required. If there is no such plan and no co-operation with the local

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authority, then I think that the local authority is quite right to seek such an order. It is not expropriation; it is certainly not confiscation. It is in order to get the dwelling used. It is a house or home for someone, but it is not just that: it is the rest of the community. We are dealing with individual dwellings, but the neighbours of such dwellings, whose own homes may have been blighted for all sorts of reasons, also have to be considered.
We think that the amendment is probably unnecessary in any event, simply because the tribunal will be required to consider the effect the order would have on the relevant proprietor's rights. This is sufficiently wide to enable the tribunal to consider any representations made. If the proprietor opposes the order, and part of the reason for opposition is a link to why it is empty, clearly the tribunal will be able to listen to that. If there is a really good reason, that is fine. That is what the tribunal is there for. It is not for us to second-guess that.
If there is a good reason, we would not want adversely to affect anyone's rights by an order being made; but the reasons why the dwelling is empty is not the key relevant issue that the tribunal will have to consider.
Baroness Hanham: My Lords, I do not think that we are suggesting that it is the key consideration. It is clearly a consideration.
Subsection (2) of Clause 129 states:
"The matters as to which the tribunal must be satisfied are…(b) that the relevant proprietor of the dwelling does not intend to take immediate steps to secure that the dwelling becomes occupied".
Part of the reason for doing that would he to find out why it was unoccupied. That is not spelt out. The reason why the dwelling has been unoccupied could be spelt out in subsection (3)(c). It is the history of what has led to this.
I accept the Minister's point of view and I, like him, have seen properties in some areas that have caused great distress. Equally, however, somebody has the rights of ownership of that property, and they certainly have a right to indicate why it has been left empty.
I am not sure that subsection (2)(b) fulfils that role. By strengthening it with this amendment, I should have thought that it would make it clear that such representation could be made.
I hear what the Minister says. I may want to return to this at a later stage but, for today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hanham Baroness Hanham moved Amendment No. 130:
Page 94, line 36, at end insert—
"(d) the extent and cost of any works which will be required to render the dwelling suitable for occupation."
The noble Baroness said: My Lords, to bring the property back into a liveable condition—indeed, probably better than a liveable condition—very extensive work may be required to make the property
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suitable for occupation. Considerable cost may consequently be involved and that could be excessive. It should be something at which the residential property tribunal is expressly required to look before authorising the making of an interim order.
It must be borne in mind that the owner of the property will ultimately have to meet the cost because they will not receive any rent until the local authority has recovered the cost of any such works. In an earlier amendment we were trying reach this point by suggesting that the local authority had to seek the best possible rent. The owner may wish to make representations regarding the extent and cost of any work—and the viability of doing that work, if it will be too expensive. I beg to move.
8.45 p.m.
Lord Rooker: My Lords, I fully accept the points made by the noble Baroness, but the amendment is not necessary for reasons which, I hope, are clear. No local authority will enter into such a project where it has to bear the financial risk that it might fail to recover the costs it incurs in making a dwelling habitable. The risk is with the local authority. I remind the noble Baroness—if the local authority fails to recover its costs, it returns the property to the relevant proprietor in a refurbished state and is unable to recover any of the outstanding costs. There is a big difference between interim management orders and final management orders under Chapter 1 of Part 4, and empty dwelling management orders.
Local authorities can be required to step in and make IMOs and FMOs when private rented properties suffer a collapse in management. But they choose to step in to make EDMOs. It is only right that they bear the risk if they decide to do that. On a practical level, it would also be fairly difficult for the property tribunal to make a judgment on matters of this sort because it could add hugely to the bureaucracy of hearings. The local authority has to bear the risk and so has to think about the matter before it proceeds with the order.
Baroness Hanham: My Lords, I thank the Minister for that reply. It settles the matter and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hanham Baroness Hanham moved Amendment No. 131:
Page 94, line 36, at end insert—
"(e) any disadvantage to the relevant person or third party in relation to any other premises adjoining or in the neighbourhood of the dwelling which may result from the making of the order."
The noble Baroness said: My Lords, one type of property which could well be the subject of an interim EDMO is a flat above a shop. As we have discussed in previous legislation, many of these are left empty for a number of reasons—one of which might be perceived problems of security. Property owners and investors often avoid letting flats above shops because of management problems which can result in them being unoccupied. Consequently, there is an increased risk

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of break-ins into shops. This is particularly the case if flats are then let out by local housing authorities to those who cause anti-social behaviour. It is right and proper that the residential property tribunal should look at the effect that may result on other properties close by if an interim order were to be made. I beg to move.
Lord Rooker: My Lords, I am grateful that the noble Baroness has made it clear that the amendment is concerned with the making of EDMOs in respect of flats over shops. Clause 127(4)(a)(ii) already provides that a dwelling for the purposes of EDMOs must have its own separate access. So, in the case of a flat over a shop, it must be possible to enter it other than through the shop. That is not unusual because one often sees street doors between shops giving access above. Nevertheless, that is a factor.
The amendment would effectively mean that the relevant proprietor, or someone else with an interest in the building, could block the making of an interim EDMO if they considered residential occupation of the flat would be unsuitable. We are making significant efforts to work with commercial property freeholders and retailers to persuade them to bring redundant commercial space above shops back into use. I accept that it is not easy. The Housing Corporation and English Partnerships are currently considering the scope for a new advice and delivery mechanism for vacant space above shops.
The work has the support of a number of organisations, such as the British Property Federation, which were involved in the Housing Above Shops Task Force that I commissioned when I was the Housing Minister. I pay particular tribute to the British Property Federation because, on the very day I raised the question with it in an informal way, it was very proactive and positive. It came to the department with some solutions, rather than a pile of questions, and the matter has been taken forward.
That work, however, is largely concerned with creating residential accommodation from void space that is no longer needed for commercial use. That is the key area. Where existing flats over shops are vacant, we consider that the case for securing their occupation is not in doubt, and do not see that a relevant proprietor, or anyone else, should be entitled to prevent that occupation. Of course, residential and commercial uses come into conflict. Commercial people say, "I'm running a business, I don't want to be a landlord. I don't want the hassle and all the rigmarole". This is part of the reason why a lot of these properties have lain empty; it is a real problem. We think, however, that it ought to be possible to prevent such problems arising through sensitive management and appropriate tenant selection, so we need that delivery mechanism or third party involvement.
Clause 129(3) already provides that the tribunal must take into account the effect of the order on the rights of the relevant proprietor and third parties. To that extent, the amendment is superfluous, but I do not dismiss it as irrelevant, as it raises the important issue of empty flats above shops. However, if they were used
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as dwellings in the past and they are just kept empty, I do not see why they should be exempted. However, we are looking at the issue more widely.
Baroness Hanham: My Lords, as leader of a council that started one of the projects on shops above commercial premises, I know exactly the problems associated with them. There are many reasons why those flats and apartments have been left empty. The Minister has drawn attention to an area in the legislation that probably covers the matters 1 have raised, and I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 132 and 133 not moved.]
Clause 130 [Local housing authority's duties once interim EDMO in force]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 134:
Page 95, line 35, leave out from "must" to end of line 36.
The noble Lord said: My Lords, the whole purpose of making an interim EDMO is to ensure that the property is occupied. If steps are not taken to achieve that purpose, the EDMO should be revoked altogether—there is no point in making a final EDMO and prolonging the process. This is the intent behind Amendment No. 134.
Regarding Amendment No. 135, we believe the local housing authority should also be placed under a duty to ensure that the property is secure, to prevent intruders. Additionally, the authority should take reasonable steps to minimise damage and sensible measures, such as cutting off the water to prevent pipes bursting in winter, which need to be taken by a local authority in addition to insuring the property. I beg to move.
Lord Rooker: My Lords, the noble Lord said that Amendment No. 134 relates to the local authority's duties once an interim empty dwelling management order has come into force. The amendment itself would remove the ability of the local authority to make a final empty dwelling management order if that authority concluded there were no steps it could take to secure occupation of the dwelling under an interim empty dwelling management order. Effectively, the only course of action open to the authority would be to revoke the interim order and take no further action.
The amendment fails to take into account the reasons why it might not be possible to secure occupation of the dwelling. Under an interim empty dwelling management order, a local authority cannot grant a tenancy without first obtaining the consent of the relevant proprietor. It sounds repetitious, but it is crucial that I get that point across. Where consent is not given, the only course of action open to the authority would be to revoke the interim empty dwelling management order and make a final empty dwelling management order. Under the final empty dwelling management order, the local authority would be able to grant a tenancy without the need to obtain the relevant proprietor's consent, though that is the "nuclear option". The amendment fails to take into

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account why securing occupation might not be possible, and therefore I ask the noble Lord not to pursue the matter. I hope I have answered him satisfactorily.
This is a complicated area—I freely admit that we are in uncharted waters. We have to be seen to be practical to make this work. In some ways, it will be down to the tribunal to assess all these conditions before the orders are made.
Lord Hanningfield: My Lords, the Minister did not speak to my other amendment about the local authority taking reasonable precautions with regard to securing the property.
Lord Rooker: My Lords, that goes without saying. The local authority is bearing the risk in going for the order in the first place. As I have said on previous amendments, it carries the risk of not being able to recover money spent on the property to make it habitable. Therefore, it will have to think about this. It does not make any sense for a local authority to start work without securing the property, whether we are talking about access to the utilities or physical access. Once the local authority does this, it carries the risk. It does not own the property but will be liable for it. Therefore, local authorities must be reasonable. Frankly, only the reasonable local authorities will go for these orders, not the weak ones. I know that there are no unreasonable local authorities, anyway—only unreasonable actions.
It goes without saying that professional people and local authorities will have to take the necessary precautions to secure the property while it is being refurbished and remains empty.
Lord Hanningfield: My Lords, I thank the Minister for his reply. As he said, this is new territory and the mechanisms are somewhat complex. We need to analyse them further before Third Reading. I accept everything that the Minister has said; obviously everything must be practical. We need to carry out more scrutiny on the process before Third Reading so that we can question it again before it becomes law. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 135 not moved.]
Clause 131 [Making of final EDMOs]:
Lord Hanningfield Lord Hanningfield moved Amendment No. 136:
Page 96, line 20, after "rights" insert ", wishes and intentions"
The noble Lord said: My Lords, as with similar amendments in this vein, Amendment No. 136 would require an authority to consider the wishes and intentions of the relevant proprietor before it makes a final EDMO. This is very similar to the discussion we have just had. For example, the owner might indicate that he now intends to let the property and is willing to find tenants for it. The property should not then be subject to a final EDMO. I beg to move.
Lord Rooker: My Lords, this is the final limb of Amendment Nos. 121 and 128. When I spoke to Amendment No. 121, I said that the same answer applied to Amendment No. 128, and I indicated that Amendment No. 136 was also in the parcel. Amendment No. 136 has the same effect as Amendments Nos. 121 and 128. Therefore, I ask those who are looking at what we have been doing today to read what I said on Amendment No. 128, because the reasoning is exactly the same for Amendment No. 136.
Lord Hanningfield: My Lords, I thank the Minister for that answer. I accept it totally. As I said on the previous amendment, we will scrutinise the answers and look at the process to make sure that we understand it absolutely. Again, this is new territory, and we want to make certain that the legislation is sufficiently scrutinised. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Rooker Lord Rooker moved Amendment No. 137:
Page 96, line 32, leave out paragraph (c) and insert—
"(c) paragraph 7(6)(a) is to be read as referring instead to Part 4 of Schedule 7;"
On Question, amendment agreed to.
Lord Rooker Lord Rooker moved Amendments Nos. 138 and 139:
Before Clause 140. insert the following new clause—

SUPPLEMENTARY PROVISIONS
(1) The appropriate national authority may by regulations make such provision as it considers appropriate for supplementing the provisions of Chapter 1 or 2 in relation to cases where a local housing authority are to be treated as the lessee under a lease under—

(a) section 103(5) or 112(5), or

(b) paragraph 2(6) or 10(6) of Schedule 7.

(2) Regulations under this section may, in particular, make provision—

(a) as respects rights and liabilities in such cases of—

(i) the authority,

(ii) the person who (apart from the relevant provision mentioned in subsection (1)) is the lessee under the lease, or

(iii) other persons having an estate or interest in the premises demised under the lease;

(b) requiring the authority to give copies to the person mentioned in paragraph (a)(ii) of notices and other documents served on them in connection with the lease;

(c) for treating things done by or in relation to the authority as done by or in relation to that person or vice versa."

Before Clause 140, insert the following new clause—

INTERPRETATION AND MODIFICATION OF THIS PART
(1) In this Part—

"HMO" means a house in multiple occupation as defined by sections 237 to 242,

"Part 3 house" means a house to which Part 3 of this Act applies (see section 77(2)),

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and any reference to an HMO or Part 3 house includes (where the context permits) a reference to any yard, garden, outhouses and appurtenances belonging to, or usually enjoyed with, it (or any part of it).
(2) For the purposes of this Part "mortgage" includes a charge or lien, and "mortgagee" is to be read accordingly.
(3) The appropriate national authority may by regulations provide for—

(a) any provision of this Part, or

(b) section 246 (in its operation for the purposes of any such provision),

to have effect in relation to a section 240 HMO with such modifications as are prescribed by the regulations.
(4) A "section 240 HMO" is an HMO which is a converted block of flats to which section 240 applies."
On Question, amendments agreed to.
Clause 140 [Index of defined expressions: Part 4]:
Lord Rooker Lord Rooker moved Amendments Nos. 140 to 144:
Page 101, line 31, leave out "97(6)" and insert "(Interpretation and modification of this Part)(1).
Page 102, line 6, leave out "105(6)" and insert "(Interpretation and modification of this Part)(2).
Page 102, line 9, leave out "97(6)" and insert "(Interpretation and modification of this Part)(1).
Page 102, line 17, at end insert—

"Third party (in Chapter 1)

Section 97(9)"

Page 102, line 18, after "Third party" insert "(in Chapter 2)"
On Question, amendments agreed to.
Lord Davies of Oldham: My Lords, I beg to move that consideration on Report be now adjourned.
Moved accordingly, and on Question, Motion agreed to.
House adjourned at nine o'clock.

Official Report of the Grand Committee on the Pensions Bill
(Tenth Day)
Wednesday, 13 October 2004.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Lord Geddes) in the Chair.]
The Deputy Chairman of Committees (Lord Geddes): I remind the Committee that in the case of a Division in the Chamber I will adjourn the Grand Committee for approximately 10 minutes. I also advise Members of the Grand Committee—I am sure that they know it already—that any interventions or speeches should be made standing.
Clause 252 [Increase in age at which short service benefit must be payable]:
On Question, Whether Clause 252 shall stand part of the Bill?
Lord Higgins: We resume our deliberations, beginning with Clause 252, following the four very hard-working and intensive sittings which interrupted the Recess, working under extremely difficult conditions. I feel bound to say that I hope that experiment will not be repeated. If there is only one lesson to be learnt, it is that the task of maintaining security in Parliament—and preventing the kind of the invasion of the Commons which we had—when the entire area is really a working building site is extremely dangerous. We were very fortunate that the outcome was no more serious than it was.
Since we last met there have been two important developments. The new Secretary of State appeared in his role following three previous Secretaries of State—none of whom were outstanding successes—and he began by making various statements and giving interviews and so on. For example, one report in the Sunday Times on 26 September stated, "No crisis yet says new pensions boss". The argument seemed to be that the crisis was 15 or 20 years ahead. That must have been rather heartbreaking to read for the people that we will be trying to help later on—for example, on the financial assistance scheme.
There is a crisis now—and it is growing. That has been spelt out in the Turner report which, no doubt, noble Lords have been studying very carefully over the past 24 hours or so. I think it is disgraceful that we did not have a Statement on that report. It was on the front page of every paper and on every television programme last night. It is an indication of the contempt in which the Prime Minister, in particular, and the Government generally tend to hold Parliament
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that we did not have a Statement on the report that was issued and which was described by the new Secretary of State only a few hours ago as perhaps the most important report we have had almost in living memory.
It is a very important report. It is extremely thorough and detailed. The crucial thing about it is that it brings to the public's attention what the problems are, although it tends only to deal with the long-term ones and not the ones with which we are primarily concerned in this particular piece of legislation. It creates a rather strange situation because I gather that the Government are proposing to do nothing about it until after the election. Apparently, they will go into the election with no policy to deal with these problems at all and say, "Vote for us. We will tell you what we are going to do afterwards".
But, be that as it may—
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): Now we get on to the more controversial issues.
Lord Higgins: We now get on to the more controversial issues. Indeed, the noble Baroness will be glad to know that I am going to go straight to deal with Clause 252 stand part. The Turner report states that the options are, effectively, to be poorer, to pay higher taxes, to get more savings and to retire later. That brings me to Clause 252, which is concerned with an increase in the age at which short service benefit must be payable.
The clause refers to Section 71 of the Pension Schemes Act 1993 on basic principle as to short service benefit, which I have here, and indicates that a change shall be made from the existing situation so that in future the short service benefits must—and I stress "must"—be payable as from an age no greater than the age of 65 or, if a member's normal pension age is greater than 65, the normal pension age.
In the context of the discussion by Turner about whether we should have a higher pensions age and so on, I am not clear exactly what is meant in Clause 252 by the "normal pension age". Perhaps the noble Baroness can tell us exactly what the import of this is and why it is necessary to change the Pension Schemes Act 1993 definition to the new definitions included in the clause.
On the face of it, if we are going to discuss whether pension ages should be raised and so on, it seems strange that this change is made. I have to confess that I am not even clear whether this raises the level or not compared with the 1993 Act proposals. But no doubt the noble Baroness can help us with that. It seems to be strangely triggered by the discussions in the press in the past few days.
Lord Hunt of Wirral: I intervene to support strongly the comments made by my noble friend Lord Higgins. Yesterday's preliminary report—that is how it is expressed—of the Pensions Commission revealed in some detail what we had all really feared, which is that

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this country faces a pensions crisis. Through their raid on private pension funds, the Government have served only to make matters worse.
There are certain provisions in the Bill, such as Clause 252, that are technically necessary and rather urgent, but we are faced with continuing our scrutiny of a Bill that serves only to be over-complicated yet ineffective at the same time. I cannot recall a Bill that has been so substantially amended by the same group of Ministers who introduced it in the first place. The homework was not done. I strongly agree with my noble friend Lord Higgins that Adair Turner's report should have been accompanied by a ministerial Statement and a proper and vigorous debate.
Pensions policy is not the particular province of any generation, nor is it the exclusive province of any political party. Surely, we should now redirect our efforts towards the production of a lasting cross-party consensus. That is essential. The continuous barrage of government amendments to which we have been subjected has stretched the spirit of co-operation and consensus on these Benches to breaking point. As it stands, I cannot see how the Bill will save a single firm or a single pension fund. Indeed, it has now become so complicated that it may achieve the opposite.
To summarise, I say to the Minister that her Bill has now become too complex, too oblique, and too vulnerable to interpretation and judicial activism. Speaking as a solicitor, I am filled with trepidation about the way in which the Bill will be interpreted. My only contribution is to ask Ministers to go back to the drawing board on a substantial part of the Bill and to start again. Fine, there are certain technical amendments, such as the clause that we are now debating, that need to go through, but there is a huge mass of provisions that need to be thought through once again. Cannot Ministers take the opportunity before it is too late to come back to Parliament with something more considered and relevant early in the new Session, which is, after all, only a matter of weeks away?
It was my privilege yesterday to listen to Jane Kennedy and Alan Johnson talking about the future and what the Government propose to do. The purport of what they said was that we needed to have a rethink of our policy on pensions. Certainly, the columns today and the editorials urge that on us. Why is the Minister ignoring the huge debate that is going on outside this place? Is it not about time that we tackled the real issues?
Lord Lea of Crondall: It is understandable that the noble Lord, Lord Higgins, should wish to make some reference at this stage to the important report of the Turner commission. I have known Adair Turner a long time, as other noble Lords have, from when he was director-general of the CBI. The report is an outstanding contribution to a debate that is quintessentially long-term if ever there were one. That does not mean that we should all start to debate it now, but a debate at a suitable stage on the report in the House would be very good.
The noble Lord, Lord Hunt, goes a further mile and—if I may say so—somewhat opportunistically says that the Bill achieves the opposite, so there are immediate ramifications for its relevance. That is going far too far. Nothing in what Adair Turner said removes the necessity of getting on with all the major reforms in the Bill. Indeed, until we have dealt with some of the immediate questions in a Bill such as this—notably, coming from a trade union background as I do, the whole question of the compensation fund and so on—we will not get people to address the issue. That issue will not be dealt with on a party political basis.
I very much take the point made by the noble Lord, Lord Hunt, that we need a consensus on the Turner report. The word "consensus" has been out of fashion for a long time in this country, but all the major parties—I include employers and trade unions, which is my background—need to find a way of thinking through the equation between retirement age, the problem that our savings ratio in this country has fallen to about 5 per cent instead of the 10 to 12 per cent that is the average in Europe, the financing of pensions and the question of compulsion on workers and employers. We need consensus on those questions.
Whether the immediate lump sum flashed around the newspapers from the report—£50 billion to £60 billion—is the right way into the debate or not, clearly a huge contribution is made by the Turner report. However, trying to be objective about it, I can see no way in which it does other than distinguish the immediate issues such as are in the Bill from those that must be debated as soon as is convenient in the Adair Turner report.
Lord Oakeshott of Seagrove Bay: I support what the noble Lord, Lord Lea, said. I do not propose to make any sort of Second Reading speech now, but want to put on record that we warmly welcome the analysis in the Turner report and the very clear conclusions to which anyone who has eyes can see that it points to. If I can out Adair, I should say that I served with him on the economic affairs committee of the SDP in the early 1980s. It is not surprising that he has therefore come up with just the sort of sensible and interesting report that one would expect.
A serious point is being made. The report should not delay proceedings on the Bill. It is a useful Bill so far as it goes. We should not talk about scrapping it and going back to the drawing board; we are here constructively to try to improve and amend it and get it to do what it can do. However, I ask the noble Baroness to assure us that there will be an opportunity at an early stage to have time to debate the Turner report, as has been suggested from both sides. It is, to a simple extent, separate from this Bill.
Baroness Turner of Camden: I wish to add a word to what was said by my noble friend Lord Lea. As we all know, one of the things that has come out of the Adair Turner report very strongly is that people are not saving enough. One reason why they do not do so is the lack of a feeling of security. One thing that the Bill attempts to do is to cope with that feeling of insecurity, by providing some kind of fund that gives people a

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basis for feeling that their occupational pension scheme, if they contribute to it, has some sort of security backing. All Members of the Committee support that concept.
Baroness Hollis of Heigham: I should have predicted, in a way in which I did not, that we would start with a query on this matter. Like others, I found the Adair Turner report fascinating, often because it made connections that I had not made before. A tiny one is that, as one moves from DB to DC schemes, so people are likely to work longer. That may pick up some of the points about people dropping out of the labour market at a relatively early age. It is a sideways move that I should have made and had not quite in that form, so I have found the report extremely rich and valuable.
The point is that it is a report. I may sound bureaucratic, but it is a report of a non-departmental body, which is not conventionally prefigured by a Statement in the House. There is nothing to stop the Opposition asking for a PNQ. I understand that it has not done so. The Opposition in the other House—in my view well timed—has opted for an opposition debate today on pensions. But if this House—bluntly—prefers to debate 800 foxes over 8 million pensioners, then so be it. Some of us do not.
3.45 p.m.
Obviously, we shall deal with the report and so on. I cannot give any undertakings—that is for the usual channels—whether or not there is any time allocated to a big pensions debate. After the Queen's Speech, we shall resume our Wednesday afternoon debates. There will be ample opportunity for any of the three parties to initiate a pensions debate when we have finished the Bill. I cannot really be more helpful than that. My understanding is that it would not necessarily be conventional, and certainly we have not had a request to take an unconventional response.
I hope that we do not come under too fierce an attack about what the Bill does. When I wrote books, I always used to get impatient when the reviewer criticised me for not having written a different book. I always got very cross with that. The noble Lord, Lord Hunt of Wirral, criticised us for not having a different Bill altogether. As my noble friend Lady Turner of Camden rightly said, the Bill is designed to do a couple of things. It is meant to inform people's awareness of what the future state of their pension provision will be. Part 4, in terms of informed choice, should go some way to doing that, along with some of the other subsequent announcements made by my Secretary of State about enrolment and so on.
It is clear that the publicity attached to the Adair Turner report probably has done more about that than anything we will do for the time being. None the less, we speak as one on this. First, the Bill is designed to make people realise that they need to save and what the shortfall is, given any assumptions they may have on what replacement earnings they would like in retirement and what they will actually get. We seek to do that in the
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Bill. I do not think we should underestimate it. We try to do it in a personalised way, whereas Adair Turner's report is about heightened awareness.
As my noble friends eloquently said, the second reason people why have been reluctant to save is the worry about security. The volatility of the stock market and so on has also encouraged fears in that direction. The third problem—if government is at fault, may I say that it is probably the actuarial profession which has failed to build the figures in properly—is growing longevity. That has also perhaps given us a false complacency—I include myself—about what is going to happen.
We should all take responsibility for this. As my Secretary of State said, there is no magic bullet that the Government can suddenly fire. We will all have to face up to the choices that Adair Turner has identified. We either work later, including working longer beyond the age of 55, or we have to save more or face increased taxes or to accept a reduced standard of living in retirement. As he rightly says, any forward solution is going to have to be a mix between those.
However, what the Bill seeks to do to a more limited extent is something important, and I hope as a result that we shall not get too sweeping a condemnation of that. Without informed choice and without the Pension Protection Fund, the state of defined benefit schemes would be even less attractive. They are certainly attractive to employees. They will be even less attractive to employers and employees in the future.
As for the changes in the build-up of the Bill that the noble Lord, Lord Hunt, criticised us for, he understands the situation perfectly well. The Bill came across as a framework, but most of the amendments that have arisen in this House have come in part because of some of the concerns expressed by noble Lords, including the opposition parties. For example, a major chunk of change has been moral hazard. That was run at the other end, quite rightly, all around the House, and it is because the pension Ministers took that on board that the Committee is being asked to scrutinise those clauses.
We have had, for example, the issue of pension liberation. That came up at the last moment, when we were dealing with those very nasty court cases in Oxford. Noble Lords thought it was right that we should do that. We are going on to do something on pension sharing, which again the Committee would want us to do. We have, for example, details of insolvency practitioners and how to get appeals right from their notices, subject to European law, which in no sense was an encumbrance on insolvency practitioners.
The noble Lord, Lord Hunt, pressed us in that area. We are responding. I am now being criticised by him in the nicest and most pleasant way for responding to the concerns he raised at Second Reading. It is unreasonable to criticise the Government for listening and then to criticise us for actually responding with amendments to that effect.
We have responded on member-nominated trustees, something which came from the TUC, on scheme wind-ups and the limited price indexation. The noble

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Lord at Second Reading made a very powerful point on LPI not just for DB schemes but for DC schemes. We are coming forward with responses to that. We are building it into the Bill. Now he tells me that that is not good enough; we have a Bill that we are actually constructing in the Lords. It is because the Committee is taking the Bill seriously and it is because I on behalf of the Government am taking the Committee's views seriously that we are adding the clauses.
I hope that I do not sound tetchy, but I think that it is slightly graceless of noble Lords opposite to criticise us for responding to the concerns raised by them, which we are taking seriously. I hope that on reflection the noble Lord, Lord Hunt of Wirral, will in future cast his criticisms of the Government in a more inclusive way. I have said enough on that.
There may be some misunderstanding about the clause. Certainly when I was first being briefed on it, I misunderstood the intentions. Perhaps I may say what it seeks to do, as that is not as obvious as it might be. The clause amends the legislation that applies to members who leave a scheme before pension age—early leavers. We are not talking about ill health, but early leavers; people who become deferred pensioners, in effect. Where a scheme's normal pension age is before 60, pensions for early leavers are payable no later than the age of 60. That applies to a limited number of schemes where normal pension age is lower than age 60 because of the nature of the work; for example, firefighters and the police.
We are not saying that police and firefighters do not get their pensions until the age of 60, but that someone who has perhaps been a police officer or a firefighter for three or five years 15 or 20 years before and has gone on to another job, and whose health is therefore not impaired, should draw his pension in the normal way—in other words, not necessarily in terms of the scheme rules for existing police or firefighters but for broader scheme rules that early leavers' pensions should be paid in the normal course of events.
We do not think that early leavers in that situation should need to be paid before the age of 60. In other words, we are making a distinction between when one would pay a serving police officer who had done his 30 years or whatever in the police force and was now entitled to draw his pension and someone who had perhaps served four or five years. We do not think that they should be able to draw their pension at the same time as the serving police officer who does need the particular consideration, given the onerous nature of his job.
In those cases, the pension is currently payable later than the normal pension age but no later than the age of 60. Clause 252 raises that age limit to 65, in line with general public policy of extending the working life and raising the public service pension age in respect of future service. I hope that with that explanation, the Committee will accept the clause.
Lord Higgins: I think we are grateful for that explanation. I shall pick up two points only on the
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earlier remarks. I have read most of the three volumes now, but not all of it. However, I notice that in the foreword the report says:
"We want to make clear the facts on which our analysis is based, enabling experts and interested parties to point out where we are wrong, or where we have missed key issues".
On the perhaps over-optimistic assumption that the writers of the report read our debates in the same way that we read their reports, let me say something. Certainly by implication the report criticises the Chancellor's obsession with moves towards means-testing and the effect that that has on savings, but I cannot for the moment find any reference to the £50 billion a year tax grab as a result of the change in ACT. If so, that seems to be a missed key issue, one that has been rather extraordinarily overlooked.
Lord Lea of Crondall: I think that that the noble Lord, Lord Higgins, meant to refer to the figure of £5 billion rather than £50 billion.
Lord Higgins: It depends on how many years you calculate. At any rate, it is £5 billion a year.
Baroness Hollis of Heigham: I am trying to find the page, but I am fairly sure that it states somewhere else that this is irrelevant in comparison with the £350 million that has been wiped out in pension schemes on the stock market. However, I do not have a decent index to the report, so I cannot locate where I read that point.
Lord Higgins: It would be astonishing if the report did not make any reference to the £5 billion, although it may be that I have not yet found it.
I make only one other party political point. The noble Baroness has said that it is extraordinary that the Opposition wanted to debate 800 foxes rather than 8 million pensioners. The Hunting Bill is not an opposition Bill, it is a government Bill. The Government want to debate hunting; we would be entirely happy to have no more discussion about hunting and for the Bill to disappear. The noble Baroness has that slightly wrong.
Turning to the clause, I understand that the "normal pension age" means the scheme's normal pension age, not a normal pension age in any other way. I make the point because I think that the general public would understand the expression "normal pension age" to be the age at which the state pension becomes payable. Perhaps the noble Baroness, who has rightly said that she is responding to points made by the Opposition, will consider whether the drafting could be marginally improved.
Baroness Hollis of Heigham: The noble Lord is absolutely right. We shall make sure that the drafting is as unambiguous as it should be.
Clause 252 agreed to.
Clause 253 [Early leavers: cash transfer sums and contribution refunds]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 312ZB and 312ZC:
Page 186, line 23, leave out from "as" to end of line 35 and insert "overridden by a relevant legislative provision,
(b) the relevant legislative provisions, to the extent that they have effect in relation to the scheme and are not reflected in the rules of the scheme, and"
Page 186, line 46, at end insert—
"(8) For the purposes of subsection (7)—

(a) "relevant legislative provision" means any provision contained in any of the following provisions—

(i) Schedule 5 to the Social Security Act 1989 (equal treatment for men and women);

(ii) this Chapter or Chapters 2, 3 or 4 of this Part of this Act or regulations made under this Chapter or any of those Chapters;

(iii) Part 4A of this Act or regulations made under that Part;

(iv) section 110(1) of this Act;

(v) Part 1 of the Pensions Act 1995 (occupational pensions) or subordinate legislation made or having effect as if made under that Part;

(vi) section 31 of the Welfare Reform and Pensions Act 1999 (pension debits: reduction of benefit);

(vii) any provision mentioned in section 292(2) of the Pensions Act 2004;

(b) a relevant legislative provision is to be taken to override any of the provisions of the scheme if, and only if, it does so by virtue of any of the following provisions—

(i) paragraph 3 of Schedule 5 to the Social Security Act 1989;

(ii) section 129(1) of this Act;

(iii) section 117(1) of the Pensions Act 1995;

(iv) section 31(4) of the Welfare Reform and Pensions Act 1999;

(v) section 292(1) of the Pensions Act 2004."

On Question, amendments agreed to.
On Question, Whether Clause 253, as amended, shall stand part of the Bill?
Lord Higgins: I shall speak briefly. Some six and a half pages of the Bill are given over to early leavers, cash transfers and so forth. I have no particular point to raise, but it is not clear why this is in the Bill since it does not seem to be related to the main purposes of the legislation. Perhaps the noble Baroness could tell us briefly what this clause seeks to do.
Baroness Hollis of Heigham: I am pleased that the noble Lord has raised this because it is a rather important change dealing essentially with vesting rights. Noble Lords will know that most schemes impose a period of service known as the vesting period. Where an employee member leaves a scheme before the end of the vesting period, he or she will not have vested rights retained in the scheme. Usually, all that happens is that people take the cash out and go. They do so because schemes do not want to take on the extra administrative burden.
Clause 253 makes provision for those members so that those who leave a scheme after three months' service, for example, will be able, not so much to have their rights vested, but to take their rights with them into a new scheme, including the employer's contribution. In terms of the financial benefit, let us take the case of someone who leaves a defined contribution scheme with an employee contribution of 3 per cent of pensionable earnings and an employer's contribution of 4.5 per cent of pensionable earnings. If they leave after one year with pensionable earnings of £15,000, they may take a cash refund—that is the case at the moment—which will be worth £360 after tax has been deducted. However, if they arrange for a cash transfer sum to go into the next scheme, taking with them the employer's contribution, they will be able to transfer £1,200. That is the virtue of it. It really aids job mobility and particularly helps women.
I could go on in greater detail, but that is the whole point. Basically, we are ensuring that people who leave a scheme after three months can take the value of the scheme as though it had been vested with them into the new scheme.
4 p.m.
Lord Higgins: I am most grateful for that explanation.
Clause 253, as amended, agreed to.
Clauses 254 and 255 agreed to.
Clause 256 [Voluntary contributions]:
On Question, Whether Clause 256 shall stand part of the Bill?
Lord Higgins: I am beginning to wonder whether the value of a clause is inversely related to its length. This is a brief clause, concerning voluntary contributions. As I understand it, it omits Section 111 of the Pension Schemes Act 1993, which relates to the requirement for schemes to provide facilities for members to pay additional voluntary contributions, generally known, I think, as AVCs.
I speak with some passion on the matter, having at one stage been chairman of a pension fund that had met the requirements of the Act and had introduced facilities for members of the scheme to take out additional voluntary contributions. Unfortunately, like so many others, acting on what was supposed to be good advice, we put the money into Equitable Life. It took many hours and an enormous amount of legal advice and expense to follow the traumas of Equitable Life, trying either to get some sense out of the company itself or to help members of the scheme who had invested in Equitable Life AVCs. It was a disaster area.
The real problem was that, as trustees—albeit an expert trustee board—we could not give any advice to our members about what to do because we were not registered financial advisers. On balance, I think that, although we all want to encourage people to take out further contributions and save more, the obligation on

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schemes to provide such facilities without the ability to give advice when something goes wrong creates a difficult situation.
Baroness Hollis of Heigham: I agree with the noble Lord. The reason for the change is that, in 1986, occupational schemes had to have a facility for members to make AVCs because tax laws did not generally allow members of an occupational pension scheme to make contributions to a personal pension in respect of the same period and source of employment. That is changing; from 2001, individuals can contribute to an OP scheme and a personal pension at the same time, if their earnings are below £30,000. The forthcoming tax changes in the Finance Bill will remove those restrictions altogether. The compulsion on employers to offer AVCs is no longer necessary, because there are alternative vehicles in which people can, if they wish, amplify their pension by running a personal pension alongside their OP.
The clause is part of that deregulation. It is no longer necessary to place a statutory requirement on every scheme to offer AVCs. We expect many employers to continue to offer that facility, but, given that individuals can now make their own choice to go into a parallel scheme to top up an otherwise reduced pension, the requirement is no longer necessary. We are freeing the system up.
Clause 256 agreed to.
Clause 257 [Payments made by employers to personal pension schemes]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 312A:
Page 191, line 12, after "must" insert "except in prescribed circumstances"
The noble Lord said: It might be convenient if, in moving the amendment, I refer also to Clause 258. The Explanatory Notes, incidentally, contain a misprint in the pre-penultimate line of paragraph 793. The paragraph says:
"where a contribution under the direct payment arrangements has not been paid by its due date, and the trustees or managers have reasonable cause to believe that the failure is likely to be of material significance to the Regulator in the exercise of any of its functions, then they must, within a reasonable period after the due date, give notice of the late or non-payment to the Regulator and the employee".
Should not that be "the employer"? That is my first question. In that case, which employee is it? It follows.
The Explanatory Notes go on to state, very helpfully:
"Under clause 84 the Regulator must issue codes of practice on the meaning of 'material significance' in relation to the exercise of its functions, and on the meaning of 'reasonable period'";.
Nowhere, however, can I find any description of where notice is not required, except of course in Clause 258. That clause refers not to personal pension schemes, but to occupational pension schemes. It has been put to us that employers' payments into personal pension schemes should be treated in exactly the same way in both clauses. I beg to move.
Baroness Hollis of Heigham: I am assured that "employee" is the right word—there is no misprint. The notes state that,
"they must, within a reasonable period … give notice of the late or non-payment to the Regulator and the employee",
because it is the employee's money. I presume that it means any employee so affected.
Lord Skelmersdale: With the greatest respect, I am afraid that that still does not make sense. The whole clause is headed:
"Payments made by employers to personal pension schemes".
While I was speaking, the noble Baroness gave me the impression that "employee" might be the right word and was intended, so my supplementary question at that point was, "Which employee?".
Baroness Hollis of Heigham: Any employee who is affected. The notes state that,
"where a contribution under the direct payment arrangements has not been paid by its due date, and the trustees or managers have reasonable cause to believe that the failure is likely to be of material significance … they must",
notify the "Regulator and the employee". In other words, we are dealing with where the employer may not only pay into a pension, but be the vehicle for the employee's payments into the pension. It is important that the regulator as well as the employee is notified of that.
Let me follow the matter up and write to the noble Lord, in case there is some issue about which he is concerned that I am missing. His substantive point is essentially on why we seem to have powers in Clause 258 that we do not have in Clause 257. We do not need them, because the regulator will have the flexibility to do exactly what he asks already. Is that enough, or does the noble Lord wish me to explain?
Lord Skelmersdale: Could the Minister explain?
Baroness Hollis of Heigham: OK. Clause 257 amends Section 111A of the Pension Schemes Act 1993, which deals with the monitoring of payments made by employers to personal pension schemes. It introduces greater flexibility, for reasons that we all understand.
We have discussed already that one of the problems for OPRA was that it was littered with a large number of late payments—136,000, of which fewer than 2 per cent warranted a preliminary investigation, and fewer than half of 1 per cent went on to have a detailed investigation. That was a waste of effort and activity. As we have said throughout, we seek for the regulator to identify and work with trustees and so on where there are areas of risk, rather than to have reports on everything that is two or three days late. Most of those reports were minor or trivial failures where payment was a day or two late. The more flexible approach introduced by the clause will enable the regulator to focus his efforts on those late payments where there is or may be a real risk to members' benefits.
Unlike the existing legislation, the provisions do not provide for a power to prescribe the circumstances when a late-payment report does not need to be sent to

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the regulator. That is because, under the new approach, the regulator will have the flexibility to do that for itself. The regulator will set out in its code of practice the circumstances in which a report should or should not be made. It is therefore not necessary to take a power as provided for by the amendment.
I am happy to continue down that path, but we have considered the issue raised. I am assured that the regulator already has powers and that any words such as those in the amendment would be superfluous, in terms of the working of the clause.
Lord Skelmersdale: I am grateful to the noble Baroness for that long, detailed explanation. I took in only about three quarters of it, so I shall have to read it most carefully.
I still think it somewhat odd that circumstances can be described under Clause 258 and not under Clause 257. It would be helpful to everyone to know from the very beginning where they stood, rather than waiting for the regulator to issue the code of practice. It goes without saying that a raft of regulations, statutory instruments, codes of practice and goodness knows what will flow from the Bill. I take the noble Baroness's point that she investigated the requirement for having prescribed circumstances in Clause 257 and has come to the conclusion that it is not necessary. If I come to the same conclusion, of course it will not be necessary to move an amendment on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 257 agreed to.
Clause 258 agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312B:
After Clause 258, insert the following new clause—
"WINDING UP
(1) For section 73 of the Pensions Act 1995 (c. 26) (preferential liabilities on winding up) substitute—

Official Report of the Grand Committee on the Pensions Bill

  73 PREFERENTIAL LIABILITIES ON WINDING UP
  (1) This section applies where an occupational pension scheme to which this section applies is being wound up to determine the order in which the assets of the scheme are to be applied towards satisfying the liabilities of the scheme in respect of pensions and other benefits.
  (2) This section applies to an occupational pension scheme other than a scheme which is—

  (a) a money purchase scheme, or

  (b) a prescribed scheme or a scheme of a prescribed description.

  (3) The assets of the scheme must be applied first towards satisfying the amounts of the liabilities mentioned in subsection (4) and, if the assets are insufficient to satisfy those amounts in full, then—

  (a) the assets must be applied first towards satisfying the amounts of the liabilities mentioned in earlier paragraphs of subsection (4) before the amounts of the liabilities mentioned in later paragraphs, and

  (b) where the amounts of the liabilities mentioned in one of those paragraphs cannot be satisfied in full, those amounts must be satisfied in the same proportions.

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

  (a) where—

  (i) the trustees or managers of the scheme are entitled to benefits under a relevant pre-1997 contract of insurance entered into in relation to the scheme, and

  (ii) either that contract may not he surrendered or the amount payable on surrender does not exceed the liability secured by the contract,

  the liability so secured;

  (b) any liability for pensions or other benefits to the extent that the amount of the liability does not exceed the corresponding PPF liability, other than a liability within paragraph (a);

  (c) any liability for pensions or other benefits which, in the opinion of the trustees or managers, are derived from the payment by any member of voluntary contributions, other than a liability within paragraph (a) or (b);

  (d) any other liability in respect of pensions or other benefits.

  (5) For the purposes of subsection (4)—
  "corresponding PPF liability" in relation to any liability for pensions or other benefits means—

  (a) where the liability is to a member of the scheme, the cost of securing benefits for or in respect of the member corresponding to the compensation which would be payable to or in respect of the member in accordance with the pension compensation provisions if the Board of the Pension Protection Fund assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 of the Pensions Act 2004 (pension protection), and

  (b) where the liability is to another person in respect of a member of the scheme, the cost of securing benefits for that person corresponding to the compensation which would be payable to that person in respect of the member in accordance with the pension compensation provisions if the Board assumed responsibility for the scheme in accordance with that Chapter;

  "relevant pre-1997 contract of insurance" means a contract of insurance which was entered into before 6th April 1997 with a view to securing the whole or part of the scheme's liability for—

  (a) any pension or other benefit payable to or in respect of one particular person whose entitlement to payment of a pension or other benefit has arisen, and

  (b) any benefit which will be payable in respect of that person on his death.

  (6) For the purposes of this section, when determining the corresponding PPF liability in relation to any liability of a scheme to, or in respect of, a member for pensions or other benefits, the pension compensation provisions apply with such modifications as may be prescribed.
  (7) Regulations may modify subsection (4).
  (8) For the purposes of that subsection—

  (a) regulations may prescribe how it is to be determined whether a liability for pensions or other benefits which, in the opinion of the trustees or managers of the scheme, are derived from the payment by any member of voluntary contributions falls within paragraph (a) or (b) of that subsection;

  (b) no pension or other benefit which is attributable (directly or indirectly) to a pension credit is to be regarded for the purposes of paragraph (c) of that subsection as derived from the payment of voluntary contributions.

  (9) Where, on the commencement of the winding up period, a member becomes a person to whom Chapter 5 of Part 4 of the Pension Schemes Act 1993 (early leavers: cash transfer sums and contribution refunds) applies, that Chapter applies in relation to him with such modifications as may be prescribed.
  (10) For the purposes of this section—

  "assets" of a scheme to which this section applies do not include any assets representing the value of any rights in respect of money purchase benefits under the scheme rules;

  "liabilities" of such a scheme do not include any liabilities in respect of money purchase benefits under the scheme rules;

  "the pension compensation provisions" has the same meaning as in Part 2 of the Pensions Act 2004 (see section 153 of that Act);

  "scheme rules" has the same meaning as in the Pensions Act 2004 (see section 303 of that Act);

  "winding up period", in relation to an occupational pension scheme to which this section applies, means the period which—

  (a) begins with the day on which the time immediately after the beginning of the winding up of the scheme falls, and

  (b) ends when the winding up of the scheme is completed.

  73A OPERATION OF SCHEME DURING WINDING UP PERIOD
  (1) This section applies where an occupational pension scheme to which section 73 applies is being wound up.
  (2) During the winding up period, the trustees or managers of the scheme—

  (a) must secure that any pensions or other benefits (other than money purchase benefits) paid to or in respect of a member are reduced, so far as necessary, to reflect the liabilities of the scheme to or in respect of the member which will be satisfied in accordance with section 73, and

  (b) may, for the purposes of paragraph (a), take such steps as they consider appropriate (including steps adjusting future payments) to recover any overpayment or pay any shortfall.

  (3) During the winding up period—

  (a) no benefits may accrue under the scheme rules to, or in respect of, members of the scheme, and

  (b) no new members of any class may be admitted to the scheme.

  (4) Subsection (3) does not prevent any increase, in a benefit, which would otherwise accrue in accordance with the scheme or any enactment.
  (5) Subsection (3) does not prevent the accrual of money purchase benefits to the extent that they are derived from income or capital gains arising from the investment of payments which are made by, or in respect of, a member of the scheme.
  (6) Where a person is entitled to a pension credit derived from another person's shareable rights under the scheme, subsection (3) does not prevent the trustees or managers of the scheme discharging their liability in respect of the credit under Chapter 1 of Part 4 of the Welfare Reform and Pensions Act 1999 (sharing of rights under pension arrangements) by conferring appropriate rights under the scheme on that person.
  (7) Regulations may require the trustees or managers of the scheme, in prescribed circumstances—

  (a) to adjust the entitlement of a person to a pension or other benefit under the scheme rules where the entitlement arises as a result of a discretionary award which takes effect during the winding up period;

  (b) to adjust the entitlement of a person ("the survivor") to a pension or other benefit under the scheme rules where—

  (i) a member of the scheme, or a person who was (or might have become) entitled to a pension or other benefit in respect of a member, dies during the winding up period, and

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  (ii) the survivor's entitlement is to a pension or other benefit in respect of the member (whether arising on the date of that death or subsequently).

  (8) Regulations under subsection (7) may, in particular—

  (a) prescribe how the required adjustments to entitlement are to be determined and the manner in which they are to be made;

  (b) in a case where the commencement of the winding up of the scheme is backdated (whether in accordance with section 145 of the Pensions Act 2004 (requirement to wind up schemes with sufficient assets to meet protected liabilities) or otherwise), require any adjustment to a person's entitlement to be made with effect from the time the award takes effect;

  (c) without prejudice to sections 10(3) to (9), 73B(2) and 116, make provision about the consequences of breaching the requirements of the regulations.

  (9) If the scheme confers power on any person other than the trustees or managers of the scheme to apply the assets of the scheme in respect of pensions or other benefits (including increases in pensions or benefits), it cannot be exercised by that person but may, subject to the provisions made by or by virtue of this section and sections 73 and 73B, be exercised instead by the trustees or managers.
  (10) For the purposes of this section—

  "appropriate rights" has the same meaning as in paragraph 5 of Schedule 5 to the Welfare Reform and Pensions Act 1999 (pension credits: mode of discharge);

  "discretionary award" means an award of a prescribed description;

  "shareable rights" has the same meaning as in Chapter 1 of Part 4 of the Welfare Reform and Pensions Act 1999 (sharing of rights under pension arrangements);

  and subsection (10) of section 73 applies as it applies for the purposes of that section.

  73B SECTIONS 73 AND 73A: SUPPLEMENTARY
  (1) Any action taken in contravention of section 73A(3) is void.
  (2) If any provision made by or by virtue of the winding up provisions is not complied with in relation to a scheme to which section 73 applies, section 10 applies to any trustee or manager of the scheme who has failed to take all reasonable steps to secure compliance.
  (3) For the purposes of subsection (2), when determining whether section 73A(3) has been complied with subsection (1) of this section is to be disregarded.
  (4) Regulations may—

  (a) prescribe how, for the purposes of the winding up provisions—

  (i) the assets and liabilities of a scheme to which section 73 applies, and

  (ii) their value or amount,

  are to be determined, calculated and verified;

  (b) modify any of the winding up provisions as it applies—

  (i) to prescribed schemes or prescribed descriptions of schemes;

  (ii) in relation to a scheme where only part of the scheme is being wound up;

  (iii) in relation to a case where any liability of the scheme in respect of a member has been discharged by virtue of regulations under section 127(4) of the Pensions Act 2004 (power to make regulations permitting discharge of scheme's liabilities during an assessment period).

  (5) Without prejudice to the generality of subsection (4), regulations under paragraph (b)(i) of that subsection may, in particular, modify any of the winding up provisions as it applies in relation to a scheme in relation to which there is more than one employer.
  (6) The winding up provisions do not apply—

  (a) in relation to any liability for an amount by way of pensions or other benefits which a person became entitled to payment of, under the scheme rules, before commencement of the winding up period,

  (b) in prescribed circumstances, in relation to any liability in respect of rights of a prescribed description to which a member of the scheme became entitled under the scheme rules by reason of his pensionable service under the scheme terminating before the commencement of the winding up period,

  (c) in relation to any liability in respect of rights of prescribed descriptions to which a member of the scheme had become entitled under the scheme rules before the commencement of the winding up period, or

  (d) in relation to any liability the discharge of which is validated under section 128 of the Pensions Act 2004 (power to validate actions taken during an assessment period to discharge liabilities of a scheme).

  (7) But nothing in subsection (6) prevents the winding up provisions applying in relation to a liability under Chapter 4 of Part 4 of the Pension Schemes Act 1993 (transfer values) which—

  (a) arose before the commencement of the winding up of the scheme, and

  (b) was not discharged before the commencement of the winding up period.

  (8) Regulations may provide that, in prescribed circumstances, where—

  (a) an occupational pension scheme to which section 73 applies is being wound up,

  (b) a member of the scheme died before the winding up began, and

  (c) during the winding up period a person becomes entitled under the scheme rules to a benefit of a prescribed description in respect of the member,

  his entitlement to payment of all or part of the benefit is, for the purposes of subsection (6), to be treated as having arisen immediately before the commencement of the winding up period.
  (9) If, immediately before the winding up period in relation to an occupational pension scheme to which section 73 applies, a person is entitled to an amount but has postponed payment of it, he is not, for the purposes of subsection (6), to be regarded as having become entitled to payment of the amount before that period.
  (10) For the purposes of this section—

  (a) "winding up provisions" means this section and sections 73, 73A and 74, and

  (b) subsection (10) of section 73 applies as it applies for the purposes of that section."

  (2) In section 74 of the Pensions Act 1995 (c. 26) (discharge of liabilities by insurance, etc on winding up)—
  (a) for subsection (1) substitute—
  "(1) This section applies where an occupational pension scheme to which section 73 applies is being wound up.",
  (b) in subsection (2) omit "(including increases in pensions)",
  (c) in subsection (3), after paragraph (d) insert—
  "(e) by the payment of a cash sum in circumstances where prescribed requirements are met.",
  (d) in subsection (4)—

  (i) for "rules of the scheme" substitute "scheme rules", and

  (ii) omit "(including increases in pensions)",

  (e)omit subsection (5)(b) and the word "or" immediately preceding it, and
  (f) after subsection (5) insert—
  "(6) For the purposes of this section—

  (a) references to assets of the scheme do not include any assets representing the value of any rights in respect of money purchase benefits under the scheme rules, and

  (b) references to liabilities of the scheme do not include any liabilities in respect of money purchase benefits under the scheme rules;

  and "scheme rules" has the same meaning as in the Pensions Act 2004 (see section 303 of that Act).""
  On Question, amendment agreed to.
  Clause 259 [Debt due from the employer when assets insufficient]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312C:
  Page 192, leave out lines 24 to 29 and insert—

  "(a) either—

  (i) no relevant event within subsection (6A)(a) or (b) occurred in relation to the employer during the period beginning with the appointed day and ending with the commencement of the winding up of the scheme, or

  (ii) during the period—

  (a) beginning with the occurrence of the last such relevant event which occurred during the period mentioned in sub-paragraph (i), and

  (b) ending with the commencement of the winding up of the scheme,

  a cessation notice was issued in relation to the scheme and became binding, and

  (b) no relevant event within subsection (6A)(c) has occurred in relation to the employer during the period mentioned in paragraph (a)(i)."

  The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 312D to 312N, which amend Clause 259. Clause 259 amends Section 75 of the Pensions Act 1995, which contains provisions for placing a debt on sponsoring employers if there is a deficiency in the assets of their salary-related occupational pension scheme. At present, a debt can become due from the sponsoring employer should their scheme wind up or should they become insolvent. Clause 259 amends Section 75 so that a debt can arise on the sponsoring employer if that employer experiences a "relevant event". A "relevant event" includes insolvency events, as defined in Clause 115, which we have already discussed. Clause 259 changes the definition of insolvency events used by Section 75 so that the employer debt provisions are aligned with provisions on the Pension Protection Fund (PPF).
  As well as the insolvency of a scheme's sponsoring employer, a relevant event can be an application or notification made to the board of the PPF by, or in respect of, a scheme. An application or notification would be made in circumstances where the future of the sponsoring employer as an ongoing concern was in doubt.
  The reason for the amendments to the clause, which in turn amends the Act, is that there is an event not included in the PPF definition of insolvency events, which is currently covered under the employer debt provisions, and which still needs to be covered for employer debt purposes: when the sponsoring company goes into a members' voluntary liquidation (MVL). The amendments alter Clause 259 so that the relevant events applicable for the employer debt provisions include when the sponsoring company goes into a MVL. An MVL is a solvent liquidation where the company's shareholders appoint a liquidator to realise the company's assets and settle all its debts in full within 12 months. Companies usually use MVLs when the company is solvent but is no longer required; for example, following a group restructuring.
  The involvement of the board of the PPF with a scheme is not triggered where the sponsoring employer has been through this type of insolvency event. That is because the sponsoring company is solvent and should, therefore, be responsible for maintaining the funding position of the scheme. However, to ensure that a debt can arise on the sponsoring employer when an MVL occurs, if the pension scheme is underfunded, provision is still needed in Section 75 to cover MVLs.
  4.15 p.m.
  The amendments also deal with notices issued by an insolvency practitioner that become binding. That reflects the changes—which the noble Lord, Lord Hunt of Wirral, encouraged—made in Part 2 of the Bill which we debated, starting with Clause 116, to recognise that insolvency practitioner notices must be binding to take effect. Clause 116 deals with the insolvency practitioner's duty to issue notices confirming the status of schemes.
  The change to Clause 259 is consequential to the amendments and is required so that the provisions on employer debt are consistent with those for the Pension Protection Fund. For the board of the PPF to be able to assume responsibility for eligible schemes, the sponsoring employer must have gone through a qualifying relevant event, which includes an insolvency event, and the insolvency practitioner dealing with that employer must have issued a notice stating what will happen to the scheme. The amendments set out that those notices must be binding to have effect.
  With that rather lengthy, technical description, I hope that the Committee will accept the amendments. I beg to move.
  Lord Hunt of Wirral: I thank the Minister for coming forward with these useful provisions. Further to my remarks at the outset, there was great anticipation before this Bill was produced that we would see a much wider, larger pensions Bill. No doubt, that will proceed at some stage. My point earlier was not to negate the importance of the technical provisions, which I excluded from my comments, but to say that in certain parts of the Bill we are straying into areas which would find a better home
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  in a much wider, larger Bill to simplify the whole system. I did not want in any way to detract from the Minister's willingness constantly to look at these very technical issues and to come forward with some positive proposals, for which I thank her.
  Lord Higgins: In the hope that we shall not need to debate the Question whether Clause 259 shall stand part, perhaps I might respond to the noble Baroness's remarks. I imagine that at present many defined benefit schemes are in deficit. So, as I understand it, all the provisions in the clause apply only to a scheme that is in wind-up. Therefore, there might be a case for making that clear in the heading.
  I was surprised to find reference at line 16 of page 192 to "liabilities". I thought that, due to the European directive and so on, one had to describe such things as technical provisions. There seems to be inconsistency in that regard. Both of those are drafting points, but I wish to raise three substantive points.
  First, does this change the priorities in wind-up? Secondly, I understand the point made about members' voluntary liquidations, which I normally regard with great suspicion, unless there is clearly no longer a need for the scheme. We have already discussed on several occasions the case of Nikko bank. I am not sure whether this clause will make it easier to deal with such problems as resulted from how Nikko bank appeared to operate its pension schemes. Finally, is this relevant at all to the cost regarding the financial assistance scheme? The financial assistance scheme, dealt with in Part 6, concerns schemes that have been wound up or that are in the course of winding up. I am not sure whether anything in this clause would enable the Government to reduce the extent to which they help out pensioners under the financial assistance scheme.
  Baroness Hollis of Heigham: First, I thank the noble Lord, Lord Hunt, for his courteous adjustment of the battering he gave the Government earlier. Following the further report from Adair Turner, there will certainly be a need for further reflection, and there may well be a need for further reconsideration of the structure of the pension schemes.
  Returning to the noble Lord's original point—I shall stop banging on about the wider pension schemes unless provoked by Members opposite—given that pensions are a 40-year project, he is absolutely right that unless we achieve consensus they will not have staying power. Each scheme will last about 10 years and be dumped and people will have an accretion of state-type rights—SERPS, S2P, this that and the other. In the same way as with deferred pensions, they will have an accretion of cash-value transfers from schemes in their employment.
  After looking at the press commentary—as we have all done—with regard to the Liberal Democrat proposals, the Conservative proposals and the Labour Party proposals, it would seem that although there is a fairly broad consensus as to what the issues are, there is not yet a clear consensus on issues such as compulsion. There are divergent views on compulsion. There is not a clear view

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  about the weight that could and should be carried by the tax and national insurance system. There is certainly a divergent view about whether we should raise the retirement age, as opposed to everyone's agreement that we should get more people between the ages of 55 and 65 into the labour market.
  Frankly, until we have addressed those major issues and found some consensus on the way forward, only then could any government of any complexion introduce a Bill that has a reasonable chance of meeting the pensions crisis. As Adair Turner said, although some people are in crisis now, this will affect a greater and much more significant tranche of people in 20 or 25 years' time. There is not a lack of political will, hard work or applied intelligence; there is a need for all of us to share a common direction.
  Over the past six months, we have seen agreement on what the issues are. I am not confident that on the bigger issues there is yet a consensus on which any of us could build. That consensus may emerge over the next 12 months—I suspect that Adair Turner's report will take us a long way towards it—but that is where we are at the moment. So it is not reasonable to criticise us for not introducing a more comprehensive Bill at this stage.
  Returning to the points made by the noble Lord, Lord Higgins, the provisions apply both to schemes that are in wind-up and to schemes where the input-sponsoring employer has had a relevant event. The intention of the clause is to amend current provisions that ensure that schemes are as well funded as possible when a scheme starts to wind up. They have not been introduced to support FAS. No decisions have yet been made as to what will be the status of schemes which have solvent employers but are underfunded in a situation where employees' benefits may be at risk.
  The term "technical provision" is taken from the European directive specifically for the purpose of certification by scheme actuaries. Elsewhere we believe "liabilities" should suffice. But if the noble Lord wishes to go back through all of this, no doubt we can have another go.
  I do not know whether the noble Lord wishes me to discuss the situation of Nikko European plc. I have some briefing help here but I am not sure that it is particularly relevant to the point that he was making. There is, indeed, an MVL liquidation.
  Lord Higgins: As I understand it, the problem with Nikko was that the subsidiary company went into a members' voluntary liquidation—I am rather inclined to put that in quotes—and consequently the kind of debt covered by the clause was not, in effect, recoverable. That may be the wrong way to put it. Perhaps on the Nikko matter the noble Baroness could let me have a note and we can, if need be, return to it later. I am not sure whether it will arise later on in the Bill.
  Baroness Hollis of Heigham: My difficulty is that we are dealing with what is, I suppose, regarded as commercially sensitive material. My understanding is that the independent trustees have asked Nikko to
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  address the shortfall. Nikko is waiting to see what the final deficit is before making a decision about whether there is a possibility of topping up the fund. I am happy to go beyond that for the noble Lord on Privy Council terms, but I have some embarrassment about doing so here, because of some of the information that we have. I am not sure what I am allowed publicly to reveal, but I am happy to brief the noble Lord on Privy Council terms, as I know that the matter is of particular concern to him.
  The public position is that, as and when it is aware of the final deficit, the company will consider whether it may top up the scheme. I am hesitant to go beyond that.
  Viscount Trenchard: I have a supplementary question for the Minister about Nikko. I have had several letters from members of the Nikko pension scheme.
  The noble Baroness just said that the members would find out what the deficit was and then decide. It is difficult for the members to decide if they do not know what alternatives they can choose between. It would be better for the members if Nikko were to decide earlier.
  Baroness Hollis of Heigham: I am sure that that point has been registered, but the noble Viscount will understand if I do not go down that line any further. His point is on the record.
  Baroness Turner of Camden: It may not be the right place to raise the issue, but I am sure that several of us will have had letters from pension scheme members who complain that their scheme has been wound up while the company is still solvent.
  We are discussing an amendment that deals with wind-up. I have had letters—I am sure that others have too—in which people have told me that their schemes have been wound up while the company was solvent and that, as far as they could see, the legislation did not cover their situation, particularly if the scheme went into wind-up prior to 11/6/03. They feel that they have been left in a sort of gap where there is no cover for them. A date has been set in respect of this kind of operation, and those people feel that they have no redress, as they are outside the timeframe. Has my noble friend any comment on that? Is this the right place to raise that matter, or is there another place later on? I gather that there is a Liberal Democrat amendment that deals with the issue to some extent.
  Baroness Hollis of Heigham: I am anticipating a debate when we get to FAS. All that I can say at this stage is that it is one of the issues under consideration.
  I also remind the Committee that there is an issue of moral hazard, if there is a belief or understanding that the Government will pick up a scheme, if it comes under FAS, when the employer is solvent. There is an issue there about government, taxpayers—people without DB schemes or even occupational pension schemes—picking up the bill for something that an

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  employer could, to a greater or lesser degree, remedy and was part of the initial pension promise. That is a difficulty.
  We have not yet seen how we can walk that tightrope. We are aware that it means that some employees will be left unprotected. However, the last thing that we want to do is send out a signal that companies can wind up and walk away and the Government will somehow pick up the tab. In anticipation of some of the amendments that we will discuss later, I ask my noble friend to recognise that it is a difficult problem without any obvious answers at this stage. We are still working on it.
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 312D to 312L:
  Page 192, line 31, leave out "qualifying relevant event" and insert "relevant event ("the current event")"
  Page 192, line 34, leave out "and" and insert"—
  "( ) the current event—

  (i) occurred on or after the appointed day, and

  (ii) did not occur in prescribed circumstances,"

  Page 192, line 38, at end insert—
  "(c) if the current event is within subsection (6A)(a) or (b), either—

  (i) no relevant event within subsection (6A)(a) or (b) occurred in relation to the employer during the period beginning with the appointed day and ending immediately before the current event, or

  (ii) a cessation event has occurred in relation to the scheme in respect of a cessation notice issued during the period—

  (a) beginning with the occurrence of the last such relevant event which occurred during the period mentioned in sub-paragraph (i), and

  (b) ending immediately before the current event, and

  (d) no relevant event within subsection (6A)(c) has occurred in relation to the employer during the period mentioned in paragraph (c)(i),"
  Page 192, line 41, leave out "A" and insert "Where the current event is within subsection (6A)(a) or (b), the"
  Page 192, line 43, leave out "qualifying relevant" and insert "current"
  Page 192, line 43, at end insert—
  "(4AA) Subsection (4B) applies if, in a case within subsection (4)—

  (a) the current event is within subsection (6A)(a) or (b), and

  (b) the scheme was not being wound up immediately before that event."

  Page 192, line 44, leave out from beginning to first "the" in line 45 and insert "Where this subsection applies"
  Page 193, leave out lines 1 to 15 and insert—
  "(a) a scheme failure notice being issued in relation to the scheme after the current event and the following conditions being satisfied—

  (i) the scheme failure notice is binding,

  (ii) no relevant event within subsection (6A)(c) has occurred in relation to the employer before the scheme failure notice became binding, and

  (iii) a cessation event has not occurred in relation to the scheme in respect of a cessation notice issued during the period

  (a) beginning with the occurrence of the current event, and

  (b) ending immediately before the issuing of the scheme failure notice,

  and the occurrence of such a cessation event in respect of a cessation notice issued during that period is not a possibility, or

  (b) the commencement of the winding up of the scheme before—

  (i) any scheme failure notice or cessation notice issued in relation to the scheme becomes binding, or

  (ii) any relevant event within subsection (6A)(c) occurs in relation to the employer.""

  On Question, amendments agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312M:
  Page 193, line 16, at end insert—
  "( ) In subsection (6)—

  (a) after "scheme" insert "rules", and

  (b) at the end insert—

  "In this subsection "scheme rules" has the same meaning as in the Pensions Act 2004 (see section 303 of that Act).""
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312N:
  Page 193, line 17, leave out subsection (4) and insert—
  "(4) After subsection (6) insert—
  "(6A) For the purposes of this section, a relevant event occurs in relation to the employer in relation to an occupational pension scheme if and when—

  (a) an insolvency event occurs in relation to the employer,

  (b) the trustees or managers of the scheme make an application under subsection (1) of section 121 of the Pensions Act 2004 ("the 2004 Act") or receive a notice from the Board of the Pension Protection Fund under subsection (5)(a) of that section, or

  (c) a resolution is passed for a voluntary winding up of the employer in a case where a declaration of solvency has been made under section 89 of the Insolvency Act 1986 (members' voluntary winding up).

  (6B) For the purposes of this section—

  (a) a "cessation notice", in the case of a relevant event within subsection (6A)(a), means—

  (i) a withdrawal notice issued under section 116(2)(b) of the 2004 Act (scheme rescue has occurred);

  (ii) a withdrawal notice issued under section (Withdrawal following issue of section 116(4) notice) of that Act (no insolvency event has occurred or is likely to occur);

  (iii) a notice issued under section 116(4) of that Act (inability to confirm status of scheme) in a case where the notice has become binding and section (Withdrawal following issue of section 116(4) notice) of that Act does not apply,

  (b) a "cessation notice" in the case of a relevant event within subsection (6A)(b), means a withdrawal notice issued under section 122(3) of the 2004 Act (scheme rescue has occurred),

  (c) a cessation event occurs in relation to a scheme when a cessation notice in relation to the scheme becomes binding,

  (d) the occurrence of a cessation event in relation to a scheme in respect of a cessation notice issued during a particular period ("the specified period") is a possibility until each of the following are no longer reviewable—

  (i) any cessation notice which has been issued in relation to the scheme during the specified period;

  (ii) any failure to issue such a cessation notice during the specified period;

  (iii) any notice which has been issued by the Board under Chapter 2 or 3 of Part 2 of the 2004 Act which is relevant to the issue of a cessation notice in relation to the scheme during the specified period or to such a cessation notice which has been issued during that period becoming binding;

  (iv) any failure to issue such a notice as is mentioned in sub-paragraph (iii),

  (e) the issue or failure to issue a notice is to be regarded as reviewable—

  (i) during the period within which it may be reviewed by virtue of Chapter 6 of Part 2 of the 2004 Act, and

  (ii) if the matter is so reviewed, until—

  (a) the review and any reconsideration,

  (b) any reference to the Ombudsman for the Board of the Pension Protection Fund in respect of the matter, and

  (c) any appeal against his determination or directions,

  has been finally disposed of, and

  (f) a "scheme failure notice" means a scheme failure notice issued under section 116(2)(a) or 122(2) of the 2004 Act (scheme rescue not possible).

  (6C) For the purposes of this section—

  (a) section 115 of the 2004 Act applies for the purposes of determining if and when an insolvency event has occurred in relation to the employer,

  (b) "appointed day" means the day appointed under section 118(2) of the 2004 Act (no pension protection under Chapter 3 of Part 2 of that Act if the scheme begins winding up before the day appointed by the Secretary of State),

  (c) references to a relevant event in relation to an employer do not include a relevant event which occurred in relation to him before he became the employer in relation to the scheme,

  (d) references to a cessation notice becoming binding are to the notice in question mentioned in subsection (6B)(a) or (b) and issued under Part 2 of the 2004 Act becoming binding within the meaning given in that Part of that Act, and

  (e) references to a scheme failure notice becoming binding are to the notice in question mentioned in subsection (6B)(f) and issued under Part 2 of the 2004 Act becoming binding within the meaning given in that Part of that Act.

  (6D) Where—

  (a) a resolution is passed for a voluntary winding up of the employer in a case where a declaration of solvency has been made under section 89 of the Insolvency Act 1986 (members' voluntary winding up), and

  (b) either—

  (i) the voluntary winding up of the employer is stayed other than in prescribed circumstances, or

  (ii) a meeting of creditors is held in relation to the employer under section 95 of that Act (creditors' meeting which has the effect of converting a members' voluntary winding up into a creditors' voluntary winding up),

  this section has effect as if that resolution had never been passed and any debt which arose under this section by virtue of the passing of that resolution shall be treated as if it had never arisen.""
  On Question, amendment agreed to.
  Clause 259, as amended, agreed to.
  4.30 p.m.
  Clause 260 [Debt due from employer in the case of multi-employer schemes]:
  Lord Skelmersdale Lord Skelmersdale moved Amendment No. 312P:
  Page 195, line 44, leave out from beginning to end of line 12 on page 196.
  The noble Lord said: We now move to the nightmare scenario of looking at multi-employer schemes and what happens when the employer becomes a "less multi-employer", for want of a better way of putting it. This clause would insert a new section after Section 75 of the Pensions Act 1995, which does not mention multi-employer schemes per se but treats them in a global fashion with every other scheme. At that point, it is fair enough.
  However, the amendment concerns proposed subsection (12), with which my noble friend and I had some problems. Subsection (12)(a) states that the regulations must,
  "provide for how the sum specified by the Authority in a contribution notice is to be determined",
  and,
  "the circumstances … in which a person to whom a contribution notice is issued is jointly and severally liable for the debt".
  They must also state what matters the notice must contain and provide for who may exercise the powers.
  The circumstances will be different in each case. I do not know whether the noble Baroness, Lady Hollis, has figures on how many multi-employer schemes we might be talking about. I suspect that the situation is rare compared to many of the other schemes that we have been talking about over the past few weeks. Each case will be different and the facts will pertain to that scheme. It worries us that, since the sum will vary each time, we might get a string of very specific and generally unnecessary orders. Alternatively, is it intended that there shall be one order, updated periodically as statutory instruments are, to cover global matters but allowing for schemes to be individually tailored?
  Much more seriously, proposed subsection (12)(b) allows for the modification of Sections 42 to 46 of the Act by statutory instrument. I do not approve of that in general. I will not make an issue of it now, but depending on the noble Baroness's answer to my next question, I might well do at the next stage. My question is simple: in what circumstance can she envisage that it would be necessary to exercise that power? At this point, we should have some idea of what may be going on. I beg to move.
  Baroness Hollis of Heigham: Clause 260 reforms the position in relation to the application of debt on withdrawal from associated multi-employer schemes. As the noble Lord will understand, employers do not want to be left as the last man standing, bearing all the pension debt.
  The current legislation on withdrawal from multi-employer schemes provides for circumstances where, provided that there are other companies left in such a scheme, a company can withdraw from the scheme and cease to be a sponsoring employer so that it will not be liable for any shortfall if the scheme winds up in the future. Employers can currently do that relatively cheaply, as the withdrawal debt is based on the minimum funding requirement (MFR). Of course the problem with that is that any shortfall then has to be met by the last employer remaining in the scheme, something that is not always possible. That is the dilemma. That would mean that the pension promise was not met, with consequent issues for the PPF. Clause 260 therefore allows for Section 75 of the Pensions Act 1995 to be modified to provide flexibility in calculating the Section 75 debt when a participating employer withdraws from a multi-employer scheme with associated employers.
  The detail of that provision will be set out in regulations; that mirrors the approach taken in legislation governing multi-employer schemes where provision is made in secondary legislation to reflect the diverse and complex nature of these schemes. In a sense, that answers the noble Lord's second question. The regulation-making powers contained in the clause will provide that a full buy-out debt will be triggered on withdrawal unless the withdrawing employer puts in place an appropriate financial support arrangement approved by the Pensions Regulator. Once appropriate arrangements are in place, the debt will be recalculated and a scheme-specific debt will be payable.
  The financial support arrangements put in place are likely to be similar to the arrangements that may be put in place under Clause 41. However, anyone named in an arrangement under this clause must agree to it. In other words, the residual employer must sign up. That is because in that situation members' benefits are protected by the full buy-out debt applying. The employer who wishes to withdraw and not pay that debt must put the arrangements in place.
  Financial arrangements may include joint and several liability for pension liabilities across the whole company group, so that the debt on the employer in the event that the scheme should wind up in the future could be claimed against any member of the group. Alternatively, the ultimate parent company in the group, whether participating in the scheme or not, could agree to meet the withdrawing employer's pension liabilities should the scheme wind up in the future. In addition, there will also be the option to transfer pension liabilities to an appropriate new scheme when the employer withdraws. That could also reduce in some cases the debt. That is how we envisage ourselves proceeding.
  Section 12, which the amendment seeks to remove, provides that where regulations provide for the issue of a contribution notice in the event that the arrangements break down or are not appropriate, they must provide for: how the sum specified in a contribution notice is to be determined; the circumstances in which a person to whom a contribution notice is issued is jointly and severally liable for the debt; the matters which the notice must contain; and who may exercise the powers to recover the debt due by virtue of the contribution notice.
  Those regulations are necessary, and their application will be tailored so that those involved in multi-employer schemes are clear about how the power will be exercised and how the sum due will be calculated. As I have said, because of the complexity of multi-employer schemes, it is important that those details are put in regulations rather than primary legislation.
  The purpose of subsection (12)(a)(iv) is that those named in the appropriate arrangements will know how the sum in the contribution is to be issued. Clause 42 may be modified using these powers; for example, a person may be asked to guarantee the debt. I think that that answers the noble Lord's queries. By virtue of the complexity of the scheme the provisions must be made in regulations rather than primary legislation. They will certainly be tailored to fit the individual circumstances of

  GC 85
  the scheme. The big issue that we need to address is to ensure that no employer may withdraw from the pension liabilities unless there is an acceptable alternative resource for that liability to be met.
  Lord Skelmersdale: I think that I am grateful to the noble Baroness, as far as she goes. She said that the regulations would be tailored. I suggested in my opening remarks that every scheme that withdrew would be in a different situation. My real question was whether the regulations would be of a global fashion but subsequently tailored to each scheme as they came out of the multi-employer schemes, or whether we would have a string of statutory instruments. I have not yet understood which of those two scenarios is the more likely.
  New Section 75A(12)(b) states that,
  "the regulations may apply with or without modifications some or all of the provisions of sections 42 to 46 of the Pensions Act 2004".
  I can understand that if you have a "tailored scheme", to use the words of the noble Baroness, it may be necessary to override some of these provisions in the Act. But, as I read paragraph (b), it is possible to totally redraft them. I asked in what circumstances the Minister thought that this power might need to be exercised.
  Baroness Hollis of Heigham: As always, the regulations are global, in the sense that they empower the regulator. How the regulator applies it will be for it to determine, which is where it gets tailored. I am sorry, I just thought that that was self-evident because we agree that every scheme is different, therefore, each one will not need to come to the House as a separate statutory instrument. That would be absolutely impossible. Which party, the amount of moneys, the proportions and all those sorts of things will be for the regulator. This provision empowers the regulator.
  Baroness Hollis of Heigham: As for the circumstances, the example I have been given is that A, B, C, D and E are in multi-employer schemes. A is issued a financial support direction which currently would have to be for the debt of all. The amendment would limit it to A's debt only. So the point about the regulation is that you would be stuck if you had joint and several liability. That is the reason you would need this regulatory power. Let me follow up the matter with a letter to ensure that there is no ambiguity before Report.
  Lord Skelmersdale: I would be extremely grateful for a letter. Although I understood the example the noble Baroness has just given, I do not think that it covers the point I was seeking to make. Perhaps if we both look at Hansard and have an exchange of correspondence we might get somewhere. I strongly believe that unless there is a good reason for it, statutory instruments should not change primary legislation. Therefore, when the power is asked for in a Bill of this sort, we ought to have at least some concrete examples of where it might be necessary, and to see whether the power is reasonable. Having said that, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 260 agreed to.
  Clause 261 [Resolution of disputes]:
  Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 313:
  Page 197, line 1, at end insert—
  "( ) The trustees or managers may provide for the informal resolution of questions, or for conciliation, in accordance with a code of practice issued by the Regulator pursuant to section 84(1) before a dispute is referred to the trustees or managers."
  The noble Baroness said: It is possible that while I was away some of this might have been dealt with already. As I understand it, the Bill simplifies the existing requirements for IDR procedures, principally by removing the requirement for a two-stage process. The change is driven by simplification and a view that the present process is too complex and time-consuming.
  The amendment, however, takes the view that a single formal stage will realise these advantages only if it is supported by informal procedures. It seeks to achieve that by requiring the regulator to produce a code of practice as provided for in Clause 84, commending this and by commending the use of informal procedures.
  I have been asked to put the amendment to the Committee by my union, based on its experience of representing members. It tells me that the nature of many complaints is that the member, while dissatisfied, may have very little conception as to the full facts and rules that are relevant to his case. In the era before IDRs were required companies often fobbed off complainants summarily.
  4.45 p.m.
  The key advantage of the two-stage procedure was that it allowed the complainant to make what might be called an uninformed complaint and guaranteed him or her a reasoned response; that is, an explanation, reference to the rules, and so on. He or she could then bring an informed complaint at a second stage if not satisfied. Often, the second stage was not so much an appeal as an elaboration of the original complaint, which might well include information not previously known.
  The purpose of commending informal procedures is to try to retain the essential advantages of a two-stage system while meeting the objectives of simplification. This is a very simple amendment based on the experience of people who have been involved in representing members and dealing with their complaints in occupational schemes. I therefore commend it to the Committee. I beg to move.
  Baroness Hollis of Heigham: I thank my noble friend for her amendment. I am not sure how much disagreement there is between us. Her amendment would provide that trustees may provide for informal procedures or conciliation in accordance with a code of practice to be issued by the regulator. Currently, all occupational pension schemes are required to have formal arrangements in place for dealing with complaints and disputes. Normally, that is a two-stage process. We have had representations made to us that,

  GC 87
  while that is obviously satisfactory for public-sector or large schemes, it is often unwieldy, cumbersome and inappropriate for small schemes.
  Clause 261 removes the detail. We hope that it provides an effective framework for the resolution of disputes while allowing trustees to adopt procedures best suited to their scheme. We do not think that we need to have regulations that set out what needs to happen. My noble friend's amendment would permit trustees or managers to enable questions to be dealt with informally before they are referred as disputes to the trustees. Very often, wisely, they will seek union advice.
  I am sure that that is what takes place in the normal course of events. It is only when informal inquiries cannot be settled that they become formal complaints and disputes. But I do not envisage any need for a code of practice to deal with normal day-to-day inquiries and questions that arise in pension schemes.
  Do we need a code of practice? There is nothing to stop specific schemes developing procedures that involve informal resolutions. It is right for them to do so within the context of their own schemes. In future, if it is felt that guidance in relation to any informal process is appropriate, the regulator may consider issuing practical advice. It is one of the situations where the regulator could certainly do so should the concerns that the noble Baroness has expressed become clear and need to be resolved in that way.
  Certainly, at the moment we feel that it is unnecessary to require the regulator to do that before we know that there is a problem he must address. But if my noble friend is right and the union's fears are reflected, I would expect the regulator to issue such a code of practice in due course.
  Baroness Turner of Camden: I thank my noble friend for that explanation. Of course, the union was a bit concerned without it; if it was not in a code of practice or written down somewhere, it simply would not happen. That is why the union suggested that we had it written into a code of practice. However, I note what my noble friend has said: that if it becomes necessary, it will be looked at again. On that basis, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 261 agreed to.
  Clause 262 [The Pensions Ombudsman and Deputy Pensions Ombudsmen]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313A and 313AA:
  Page 200, line 8, at end insert—
  "(6) The persons to whom section 1 of the Superannuation Act 1972 (c. 11) (persons to or in respect of whom benefits may be provided by schemes under that section) applies are to include a deputy to the Pensions Ombudsman.
  (7) The Pensions Ombudsman must pay to the Minister for the Civil Service, at such times as he may direct, such sums as he may determine in respect of the increase attributable to subsection (6) in the sums payable out of money provided by Parliament under that Act."
  Page 200, line 8, at end insert—
  "( ) The Pensions Ombudsman must also pay to the Minister for the Civil Service, at such times as he may direct, such sums as he may determine in respect of the amount payable out of money provided by Parliament under that Act which is attributable to the following persons being persons to whom section 1 of that Act applies—

  (a) the Pensions Ombudsman;

  (b) the employees of the Pensions Ombudsman."

  On Question, amendments agreed to.
  On Question, Whether Clause 262, as amended, shall stand part of the Bill?
  Lord Higgins: In earlier discussions on the role of the pensions ombudsman and so forth I referred to a letter forwarded to me from a constituent of Mr Ian Taylor MP. First, I thank the noble Baroness for her reply to that letter. Am I right in thinking that, effectively, this clause does not change the role, scope or discretion of the ombudsman but merely increases "an ombudsman" to "an ombudsman and deputy pensions ombudsmen"? If that is the case, I have only the same question as previously: will he get a non-contributory, index-linked final salary pension?
  Baroness Hollis of Heigham: Yes and yes.
  Lord Higgins: The noble Baroness might be well advised to look at the press today with regard to those who are happy enough to be in that situation. But I note what the noble Baroness says and we may wish to return to the issue.
  Clause 262, as amended, agreed to.
  Clause 263 agreed to.
  Clause 264 [Investigations]:
  On Question, Whether Clause 264 shall stand part of the Bill?
  Lord Skelmersdale: Basically, this clause gets rid of bits of previous legislation originating in the Pension Schemes Act 1993, as revamped by the Child Support, Pensions and Social Security Act 2000. Clause 264(2) would "omit the following provisions". I shall not go through what they do because that is not the point of the problem.
  The Bill states that these are to be repealed only,
  "to the extent that those amendments made by section 54 of the 2000 Act have been brought into force for the purpose of making regulations and rules".
  But the Explanatory Notes state that none of them has been brought into effect. So, once again, I am confused and would be grateful for an answer.
  Baroness Hollis of Heigham: I thought that this was an interesting issue, but I was intrigued that the noble Lord did not raise it. Under the Act, we originally sought to establish a way of involving what I call, not exactly class actions, but third parties affected by a decision of the ombudsman. I think that some of your Lordships were involved. The ombudsman would have a relationship with an individual, but his decision might have ramifications for other people not affected by that individual. In the 2000 Act we were trying to encompass that situation.
  I do not think that anyone, including the Opposition, said it at the time, but, effectively, it has turned out to be unworkable: the ombudsman has not been able to establish reasonably what would consist of the constituency to which he should have access. Given therefore that we have never brought it into force, we are simply getting rid of redundant verbiage. It is nothing more than that: we cannot do what originally we were seeking to do, which made good human rights sense—with a small "h" and "r". The regulations under the 2000 Act did not come into effect either, which is why we are getting rid of them.
  Lord Skelmersdale: Although I take what the noble Baroness has told us about this, I was questioning the last two lines of the clause, which state:
  "to the extent that those amendments made by section 54 of the 2000 Act have been brought into force for the purpose of making regulations and rules".
  The noble Baroness has just said that they have not been. So what is it doing there?
  Baroness Hollis of Heigham: I am having difficulty in understanding the noble Lord's point. We are omitting or seeking to repeal those provisions of the Act. As neither the provisions nor the regulations associated with the amendment have been brought into force they are going too. I am sorry; I am being dense.
  Lord Skelmersdale: But they are only going to the extent that those amendments made by Section 54 and so forth,
  "have been brought into force for the purpose of making regulations and rules".
  In the noble Baroness's substantive answer to my question on this clause, she said that no regulations have been made. So if no regulations have been made, why do we need an exception for things that have not been made? I do not understand.
  Baroness Hollis of Heigham: I wish I had the Act with me: I should have brought it. We are repealing the whole provision. Powers to make regulations were commenced but the regulations were never made. The wording is just a legal convention. I was just checking to determine whether some part of that section was introduced and therefore we needed to do that. But that is not the case.
  The advice that I am given is that the only bits of the regulations that were introduced were those that gave us authority to introduce the regulations, the powers of commencement—therefore we need to do it. As a result, they, too, are redundant because nothing subsequently followed.
  We consulted on the regulations. As a result we were persuaded. I am only sorry that this happened after the event rather than before, but they were basically unworkable because we could not take third-party considerations into account. Some regulations were brought into force, which were the possibility of the commencement. In fact, the rest of the regulations were not commenced. Therefore, the whole thing needs to go.
  Clause 264 agreed to.
  Clause 265 agreed to.
  Clause 266 [Annual increase in rate of certain occupational pensions]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 313B:
  Page 201, line 30, leave out from "subsection (1)" to end of line 35 and insert "—

  (a) omit "and" at the end of sub-paragraph (i) of paragraph (a),

  (b) at the end of sub-paragraph (ii) of that paragraph insert—

  "(iii) in the case where the pension becomes a pension in payment on or after the commencement day, is not a money purchase scheme, and", and.
  (c) for paragraph (b) substitute—
  "(b) the whole, or any part of, the pension is attributable——

  (i) to pensionable service on or after the appointed day, or

  (ii) in the case of money purchase benefits where the pension is in payment before the commencement day, to payments in respect of employment carried on on or after the appointed day, and"

  The noble Baroness said: In speaking to Amendment No. 313B, I shall speak also to Amendments Nos. 313C to 313Q and Amendment Nos. 350ZC and 350C. This important group of amendments fulfils a commitment I made at Second Reading to further simplify pension legislation by removing the post-1997 limited price indexation requirements from defined contribution schemes.
  Amendments Nos. 313B to 313Q remove the LPI requirement for money purchase scheme benefits derived from rights accrued post-1997. I should perhaps clarify—otherwise the noble Lord, Lord Skelmersdale, will chase me on the precise wording—that "money purchase" is the term used in legislation. It does, of course, have the same meaning as "defined contribution". The change will only affect pensions coming into payment after the relevant clauses come into operation. We expect that to be in April 2005. Regulations can and will carry back the same removal of indexation to 1988. But that does not need, by virtue of regulations, to be in the Bill.
  Amendments Nos. 313B to 313G cover occupational pension schemes; Amendments Nos. 313H to 313L cover personal pension schemes; and Amendments Nos. 313M to 313Q cover pension credit benefits. That is not pension credit as in the state pension scheme, it is the slice that goes with a pension sharing order following divorce.
  The term LPI refers to the way that pension rights have accrued since 1997. Perhaps it is worth going over the arguments again. Our original proposal was to reduce the LPI cap from 5 per cent to 2.5 per cent for all pensions. As Members of the Committee will know, that was designed to ease the burden on providers of defined benefit schemes.
  But, on reflection, we were persuaded by the arguments. I listened carefully to what the noble Lord, Lord Hunt, said. Ultimately, there is a money

  GC 91
  purchase pot, which is spent by the individual on the annuity—75 per cent of them buy a level annuity. Unfortunately, very many of them do not also buy a survivor's annuity. But it seems unreasonable to start retaining bits of how that pot should be spent when individuals can make their own choices based on their own knowledge of what they believe their longevity and life expectancy will be, and so forth. We are simply freeing it up as money purchase schemes are disposed of by the individual, who I hope will be taking financial advice.
  I do not know whether I need to go beyond that except to say that this is carried back to 1997 and by regulations will be carried back to 1988, freeing individuals to deploy their money purchase pot in the way that best suits their own circumstances, and basically treating them as adults. I beg to move.
  5 p.m.
  Lord Hunt of Wirral: I thank the Minister for the careful consideration she and her colleagues have given to this whole area. I even went as far as to encourage her to be "courageous" when I introduced this subject. I noticed a kind of shiver run through her officials when I mentioned that word because all those of us who adhere to "Yes Minister" know that that can be the kiss of death to any Minister.
  But, lo and behold, the Minister has come forward with some interesting proposals. We are still considering the effect of them—it may be necessary to return to them on Report—but they are a further advance in the direction of simplification and relieving the administrative burden. I am grateful to her for the careful thought that she has given to this issue.
  Lord Higgins: The noble Baroness is right; this is an important series of amendments. In some ways, Clause 266 is related to Clause 267. I say that with some confidence as the heading of Clause 266 is,
  "Annual increase in rate of certain occupational pensions",
  and the heading of Clause 267 is,
  "Annual increase in rate of certain personal pensions".
  Fairly clearly, the two seem to be related.
  When the Government first announced their broad proposals enshrined in the Bill, they included a provision that LPI should be reduced, effectively, from the rate or inflation of 5 per cent, whichever is the lower, to the rate of inflation or 2.5 per cent, whichever is the lower. As I have said previously, I have mixed feelings about this. It was presented as some huge improvement as a result of a government initiative. It may indeed reduce the burden on final salary schemes but, on the other hand, it also reduces the benefits obtained by the members of final salary schemes.
  There have been strong representations on this by the ABI, which argues that if this does reduce the burden on final salary schemes it may—I should have added "at the margin"—result in some schemes not changing to defined contributions schemes as a result
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  of the burden on them having been reduced. I do not find that terribly plausible. It will have a very marginal impact. One can think of many other ways.
  The whole impact of the Bill, alas, is to discourage people from having final salary schemes and encouraging them to have defined contribution schemes. I therefore still have some doubts. I cannot see the beneficiary of the scheme receiving the protection they have hitherto had—rather than say it is going to be "significant", "material" is perhaps the right way of putting it—as far as the attitude taken by the company whose scheme it is is concerned.
  But, at all events, the Government, in an excess of enthusiasm for this particular point have, as I understand it, extended it from final salary schemes to defined contributions schemes. The ABI has made some very strong points. It argues that the amendments we are now considering would mean that consumers would gain in three ways: they would have greater choice to focus on purchased annuities, linked annuities and so on; it would be simpler; and it would be better value. All of those arguments are valid and, therefore, to that extent, are to be welcomed.
  It even goes on to calculate that if we were forced to go ahead with the present proposals unamended, a 60 year-old man would have to live to 93–14 years longer than the average life expectancy—before the totalling up of income from the index-linked annuity overtook the income from a comparatively level annuity.
  On all these grounds, the amendments are to be welcomed. But, so far as concerns defined contribution schemes, I still have considerable doubts about the position of final salary schemes and may wish to return to the issue on Report. Other than that, the amendments are welcome. I think that covers all the main points which arise in the context of Clauses 266 and 267.
  Baroness Hollis of Heigham: I am not sure that I really need to reply on that. The moves on DC schemes have been broadly welcomed and I am sure that is right. At the moment, providers sometimes have to buy eight different parts of an annuity before they can act. It is crazy because that is not the way in which people would use their money themselves.
  Let me make two points on the LPI. I understand the noble Lord's reservations; they are probably shared by my noble friend. Although she has not today contributed to the debate, she has shared her concerns in the past. It is not that we necessarily expect inflation to be above 2.5 per cent—we have already accepted that there will be a 1.5 per cent or so fluctuation around that mean over a period—but trustees have to provide, on fairly conservative estimates, for inflation at 5 per cent or thereabouts. Reducing the maximum liability means that employers can make lower contributions to the scheme to meet the costs of pensions deriving from benefits. With the appropriate savings that should produce—£370 million, we estimate—that is where the funding will come in for the PPF. This is part of that package and has to be seen in that context.
  The noble Lord is right to say that the overall effect on an the pension of an individual will be relatively modest. We estimate that it will be about 2 per cent for a man and 2.2 per cent for a woman over time. Compared to the impact on their pension of factors such as at what point they started, how long they stay with a company, how often they change, at what age they draw their pension, at what age they take retirement—let alone, above all, what has happened to their own earning profile—then obviously that 2 per cent or 2.2 per cent is relatively modest. The noble Lord is right about that.
  I do not believe that he has put any particular points that he would wish me to take further at this stage. He has expressed a residual concern, which I understand and which he may wish to revisit in due course.
  Lord Oakeshott of Seagrove Bay: Perhaps I may speak briefly—I was waiting for the noble Baroness, Lady Turner, to intervene—to make our position clear. As far as concerns defined benefit schemes, we oppose the cut from 5 per cent to 2.5 per cent in the LPI. Over the years, that could be more significant than the 2 per cent effective cut to which the noble Baroness refers. We are not talking about a theoretical situation that might arise in the future. Today the retail prices index—although it is not widely publicised—is running at more than 3 per cent. So, if this were established today, people would have their pension payments cut in real terms. People need to know that.
  The problem with having such a low limit as 2.5 per cent is that you can never claw it hack. You lose perhaps 0.5 per cent—or 1 per cent even in the present climate—and you have lost that forever. It does not average out at 2.5 per cent over a period; the ratchet is always against you.
  We are talking about a real and immediate problem. Again, we may well want to take up the issue on Report.
  Lord Higgins: The view with regard to inflation—this is my personal opinion—is extremely optimistic. The Government are borrowing enormous sums of money. If that is not fully funded, which can be done only at significantly higher interest rates, then the money supply will be expanded—it is an unfashionable concept but it is coming back to haunt us, I fear—and the rate of inflation could go very much higher.
  That will of course take some time to work through to the system but, given the level of government borrowing, unless interest rates go up very strongly indeed over the next two or three years we could see a very significant increase in inflation. At that point, this clause becomes extremely important for individual pensioners.
  The noble Baroness says that this is really about reducing part of the costs of the scheme. That of course ties in with the levy. This is an aspect of it which will not be related at all to the risks of a particular scheme
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  and the issues that we have discussed on that. We shall need to consider this matter very carefully between now and Report.
  Baroness Hollis of Heigham: I may well follow up the technical point in correspondence, but I want to come back on the point made by the noble Lord, Lord Oakeshott. The loss of 2 per cent that I indicated—2.2 per cent for women—is a 2 per cent loss of total retirement income for an average pensioner. It represents the most that someone might lose and is based on a comparison between a whole working life under the old and new indexation arrangements. I am not sure whether the multiplier effect indicated by the noble Lord is valid, but I shall look at the technical papers to see whether he is right. However, the indications I have been given at the moment suggest that we might take issue with that assumption.
  Lord Oakeshott of Seagrove Bay: If the noble Baroness carries out some projections and simulations working back with the RPI running at 4 or 5 per cent over a period, I shall be very interested to see the result of those calculations. However, I think that it will add up to a lot more than 2 per cent in cumulative total.
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313C to 313G:
  Page 201, line 42, at end insert—
  "( ) In subsection (2) after "money purchase benefits" insert "where the pension is in payment before the commencement day"."
  Page 202, line 13, leave out from "day" to end of line 15.
  Page 202, line 21, leave out from "day" to end of line 23.
  Page 202, line 28, leave out from "day" to "and" in line 30.
  Page 202, line 32, leave out from "day" to end of line 33.
  On Question, amendments agreed to.
  On Question, Whether Clause 266, as amended, shall stand part of the Bill?
  Baroness Turner of Camden: Much of what I want to say has already been said in connection with the previous amendment, but I want to put on the record my objection, as I am sure my noble friend will appreciate, to the attempt in this clause to reduce the amount by which pensions in payment can be increased.
  As we know, under the present law all benefits earned after April 1997 have to be increased by the rate of inflation, or 5 per cent each year, whichever is the lower figure. We have now heard that the Bill will reduce the 5 per cent floor to 2.5 per cent. I understand that this is justified as being a suitable response to lower inflation, offering savings to employers and as compensation for the costs arising from the PPF levy.
  Other noble Lords have pointed out that there is no guarantee that inflation will stay at its present level. Indeed, indications suggest that it will rise. Although no doubt all governments will maintain a policy of trying to keep inflation low, they may not be able to do so. In principle it is desirable that pensions retain their value during what could in any case now be a rather

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  difficult period for those in retirement, and long-lived pensioners will be the ones who will feel the greatest impact of this unless we can amend it. In fact, women will feel it most because they tend to live for five years longer than men.
  We have all had a copy of the ABI briefing on these clauses. It is in favour of the reduction in limited price indexation and thinks that it is an important reform. But I am totally and absolutely opposed to it. For those who feel the same, given that the amended clause has been more or less agreed, the only way forward is to raise this matter again on Report. It is quite unsatisfactory to ask older pensioners to bear the costs of the PPF, which is what this really means. We shall come have to back that to on Report and test the opinion of the House, because it is desperately unfair. I feel very strongly about it and I will pursue it at the later stage.
  Baroness Hollis of Heigham: I thought that we had debated this so I shall not go over all the arguments again. All I would repeat is that this is a permissive power. Many schemes, perhaps most of them, if they share the view of my noble friend, will not reduce their current level of protection against possible future inflation.
  However, I have to say that when looking at all the representations made to us by industry and so forth, this is one of the biggest problems faced by the purveyors of DB schemes. After all, DB schemes are voluntary, So far as I am aware, in the United States there is no inflation-proofing at all on such schemes.
  Most of the representations made to us by industry regarding the factors driving their move away from DB to DC schemes suggest that it is the requirement to lay off the risks—not only investment risks but also the risks of longevity as reflected by what has happened to the LPI and so forth—on to the individual. It is companies' concern about those risks that has driven them to DC schemes.
  5.15 p.m.
  I think that the more appropriate way forward may well be the development of the hybrid schemes that we are beginning to see. I was interested to note that the Turner commission report seems to endorse one or two versions, such as cash balance schemes and so forth. In that case, one party takes the investment risk and the other party takes the longevity risk. That may be sensible.
  However, my noble friend will have to indicate where she thinks the money for the PPF levy is to come from if it is not to be raised by this sort of trade-off with employers. I know that if my noble friend feels passionately about LPI, she feels even more passionately about the PPF. I do not want to see the balance of the package being upset. No free money is coming from the taxpayer. We would be asking low-paid women, not in OP schemes, to pay through their taxes for what we currently envisage employers will be paying through their levies, offset by this change.
  I toss the ball back. If you unpick this, other things may unravel. I am not saying that the PPF will go or anything remotely as draconian, but this is part of a package. The Government cannot easily seek to unpick certain elements of it because we like some parts but not others. I put that warning now to my noble friend. This was the way we secured reluctant consent to funding the PPF. I suspect that if industry had its way, there would not necessarily be a PPF. I ask my noble friend which is more important.
  I really believe that most people in DB schemes would buy protection through the PPF for a modest reduction in the potential of a cut in future inflation-proofing. My noble friend has made a distinction between pensioners in payment and those with deferred pensions. We discussed this when we looked at where the levy would fall. If it does not fall on them, it will fall elsewhere—on active members or on deferred members. That, too, is not reasonable. We have looked at this and we cannot make those distinctions.
  None of us can have all the parts of this Bill we like and dump all the parts we do not like. It is a package. If we jeopardise it, there will be serious issues in industry regarding its willingness—it has been a reluctant willingness—to accept the principle and funding of the PPF. As my noble friend put it so eloquently earlier today, the PPF is probably the single most important protection for members in the Bill, and we should not undermine in any way the reluctant consensus.
  Lord Higgins: The people who are paying or losing are not those who are gaining.
  Baroness Hollis of Heigham: That is not the case. If a scheme were to go into the PPF two years down the road, it would include risk to the benefits of existing pensioners as well as to active members and deferred pensioners. All will receive protection. We have made it clear that, under the PPF, existing pensioners will continue to receive their pensions at 100 per cent, but indexation would come well down the list.
  They would gain from the PPF in exactly the same way as active members, because otherwise pensioners in payment could find— in exactly the same way as members whose schemes are seriously underfunded—that their existing pensions were also seriously depleted.
  Lord Higgins: I may have misunderstood it, but I understand that those who are going to lose are those in defined benefit schemes. When faced with a rate of inflation of over 2.5 per cent, they will not get the extra increase or the partial preservation of the value of the pension to which the noble Baroness, Lady Turner, referred. The people to gain are those whose schemes go bust and who would otherwise be paying a levy which may or may not be related to risk—but in any event it looks like not for a considerable time. In reality, they are not the same people.
  I may have misunderstood the point, but I put it to the noble Baroness that those who lose are all those in schemes which will suffer if inflation goes over 2.5 per

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  cent. They are not the same people who will gain from the PPF if it does something to protect certain people in certain schemes that go bust.
  Perhaps I may also raise a point mentioned by the noble Baroness. She said that this is a discretionary or voluntary matter.
  Baroness Hollis of Heigham: I said that it is permissive.
  Lord Higgins: In what sense is it permissive?
  Baroness Hollis of Heigham: On the immediate question, the only requirement for companies in DB schemes will be to provide RPI protection at 2.5 per cent. They are fully entitled to provide protection against possible inflation beyond that figure if they so wish, but this will be the new floor which they must meet.
  Lord Oakeshott of Seagrove Bay: While it is a compulsory floor, the Minister cannot declare on the one hand that it is permissive, thereby implying that it might not happen, while on the other hand claiming all the savings and regulatory impact assessments. Either we assume that it will happen or we assume that it will not.
  The noble Baroness is right to say that overall, someone has to pay if some have more or fewer benefits, but I am very taken by the powerful point made by the noble Baroness, Lady Turner, which seems absolutely clear and must be right. It will be a disproportionate burden on those who live longest and have pensions in payment over the longest period—overwhelmingly women; noble Lords will be aware that in this party we are focusing state help for the over 75 year-olds—because inevitably they will be the group most likely to have experienced a burst of inflation running at over 2.5 per cent at some point over the 30-odd years since they have retired. The real value of their pensions will be cut.
  That is what we are talking about here: the real value of the pension will be cut when it runs up against the ceiling. Having seen the real value cut, those who live longest will have a few years of living on a lower pension. It seems to me that the point cannot be argued.
  Baroness Hollis of Heigham: I would argue with that point. Turning to the trade-off with the PPF, I do not dispute that where this will be experienced is in retirement. Those who go on to retire will have many more years in retirement to experience this cap than pensioners who have enjoyed a higher level of protection. So the obverse of my noble friend's point is probably correct.
  However, the point I wanted to make was a different one, concerning the PPF. The nature of the fund is that it is a compensation scheme operated by a levy which, if you like, will pool the risk. Any pensioner today could be in a scheme and no one is able to foresee whether five or 10 years down the line the company funding that current pensioner's scheme may wind up, become insolvent or otherwise be unable to meet its
  GC 98
  liabilities. That scheme will then come into the PPF. Whether that existing pensioner, currently in payment, continues to enjoy her—my noble friend is right to mention that it is more likely to be "her"—pension will depend on whether there is some rescue capacity in the system. Otherwise the existing pensioner, as well as the worker—the deferred pensioner—will each lose some element of their pension.
  We have already changed the winding-up priorities so that that pensioner will probably lose indexation rights, but at least they will get a pension. In the present situation, as we know from some schemes, if they are sufficiently underfunded they could lose the lot. So in my view it is simply not true that existing pensioners uniquely will bear this burden. The people who will bear it have not even reached pension age yet. However, pensioners will enjoy broadly the same level of protection, with the enhanced benefits available to other members. Those pensioners will get 100 per cent, while the workers will get 90 per cent. The workers receiving 90 per cent will be working for longer and thus exposed to the lower level of indexation protection than the existing pensioners. I would argue, therefore, that my noble friend's point is exactly the opposite.
  Lord Higgins: Clearly we are in disagreement on the main issue and we shall need to consider it very carefully. However, I am still a little puzzled on one point. If it is "permissive", the word used by the noble Baroness, why do we need these clauses at all?
  Baroness Hollis of Heigham: If we did not have these clauses, many schemes would follow the American model and have no indexation at all.
  Lord Oakeshott of Seagrove Bay: It means that schemes can offer more, but not less than indexation at 2.5 per cent.
  Lord Higgins: I now understand what the noble Lord means by "permissive". I suspect that if one follows the argument which has been put to us about it affecting whether people change, if you really do not want to deter people from closing down their final salary schemes and going to DB schemes, you would not have this clause and they could then index whatever they thought fit. Perhaps one ought to think about that angle as well. Why 2.5 per cent rather than 0 per cent? The point is not made clear.
  Baroness Hollis of Heigham: We can go into the financial thinking here. The Treasury is working on assumptions which have not been gainsaid by Bank of England forecasts or other financial commentators that the rate of inflation is expected to be around 2.5 per cent, although everyone accepts that it could be 1.5 per cent above or below that level. However, the point is that I have been told by major financial players that trustees, and in particular actuaries and accountants, are being pressed by their professional advisers to make provisional or contingent arrangements on a Domesday scenario of much higher rates. That is why this represents a real reduction in their potential liabilities.
  In terms of the floor, companies can continue to provide their existing levels of protection if they so wish. What they may not do is drop below an RPI rate of 2.5 per cent.
  Lord Higgins: I think that we have gone as far as we can with the argument. However, we shall need to consider the issues carefully on the central point, and the deal on the subsidiary point is still unclear. We shall need to come back to it.
  Clause 266, as amended, agreed to.
  Clause 267 [Annual increase in rate of certain personal pensions]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313H to 313L:
  Page 203, line 21, leave out "subsections (2) and (3)" and insert "subsection (2)"
  Page 203, line 23, at end insert—
  ""( ) the pension became a pension in payment before the commencement day,"
  Page 203, line 34, leave out subsections (3) and (4).
  Page 204, line 34, after "supplementary)" insert "—

  (a) in the definition of "appropriate percentage", for the words from "revaluation period" to the end substitute "latest revaluation period specified in the order under paragraph 2 of Schedule 3 to the Pension Schemes Act 1993 (revaluation of accrued pension benefits) which is in force at the time of the increase (expressions used in this definition having the same meaning as in that paragraph of that Schedule)", and

  (b)"

  On Question, amendments agreed to.
  Clause 267, as amended, agreed to.
  Clause 268 [Power to increase pensions giving effect to pension credits etc]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313M to 313Q:
  Page 204, line 43, at end insert—
  "( ) In subsection (2), for "This" substitute "Subject to subsection (2A), this".".
  Page 204, line 45, after "(2A)" insert—
  "Subsection (2) does not apply to pensions which—

  (a) are money purchase benefits, and

  (b) become pensions in payment on or after the commencement day.

  (2B)"
  Page 205, line 12, at end insert—
  """money purchase benefit" has the meaning given by section 181(1) of the Pension Schemes Act 1993;""
  Page 205, line 15, leave out "relate." and insert "are (directly or indirectly) attributable;"
  On Question, amendments agreed to.
  On Question, Whether Clause 268, as amended, shall stand part of the Bill'?
  Lord Higgins: This clause will take power to,
  "increase pensions giving effect to pension credits".
  There is a massive group of government amendments related to all three clauses we have been considering. However, I am not clear how Clause 268 is now
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  different from the way it appears in the Bill in relation to the increase in pension credits. Perhaps the noble Baroness could explain it.
  5.30 p.m.
  Baroness Hollis of Heigham: Clause 268 extends our discussion about LPI to one particular situation, which is pension sharing on divorce. Section 40 of the Welfare Reform and Pensions Act 1999 made provision for pension credit benefit to be subject to indexation capped at 5 per cent—the share that went in. At present, pensions in payment derived from a pension share are subject to indexation up to a maximum of 5 per cent.
  Clause 268 will amend that section to mirror the changes being made elsewhere—to pensions not subject to pension sharing—so that the same indexation cap, which is being reduced from 5 per cent to 2.5 per cent, will apply to pension-sharing pension splits or fractions as that for occupational pensions not so shared.
  Lord Higgins: So people who are divorced and sharing their pensions under the 1999 Act will now, if inflation goes above 2.5 per cent, pay for the insurance of people whose defined benefit schemes go bust?
  Baroness Hollis of Heigham: That is one way of putting it, but not the way I would put it. As the noble Lord will know, when a couple divorce, as a result of the changes that the previous government and the current Government made, there are two or three different options for them to dispose of their pension. If they are over retirement age and there is a pension in payment, that pension will normally be split by consent through the courts according to what off-setting of other assets there may be. We are talking only about divorce, obviously. A spouse might receive 50 per cent of the pension in payment or 20 per cent of it and have other ISAs, PEPs and whatever in lieu.
  If those involved are younger and the pension is not in payment, they are much more likely to go not for ear-marking, which is a lean-on, further down the line, but for a split of the capital sum. When that sum matures, it becomes a pension in payment. We are saying that the same indexation rules on reduction about which we have been talking apply. It is no different from how we treat a whole pension. We simply say that the same rules apply to half a pension or a third of a pension, or whatever else may happen on pension sharing following divorce.
  Lord Higgins: I hope that the Government will arrange to tell people in that situation that they are helping to pay for the insurance schemes of company schemes that go bust.
  Baroness Hollis of Heigham: Except that that they are also, under the pension levy, enjoying the protection of the payments that follow.
  Lord Higgins: Not if they are already divorced.
  Clause 268, as amended, agreed to.
  Clause 269 [Exemption from statutory revaluation requirement]:
  On Question, Whether Clause 269 shall stand part of the Bill?
  Lord Hunt of Wirral: I hope that the Minister might allow me to press her on the question of internal controls. This is a very technical clause on recalculation of benefits, but it is broadly related to the question of internal controls. By that I mean the need to check that recalculations are correctly undertaken. We had an exchange on a previous occasion, and I know that the Minister has been considering the question. It would be very helpful if she could outline her progress.
  Lord Skelmersdale: As a sort of supplement to that, I seem to have spent the entire afternoon looking for possible weasel words in the Bill, and I am afraid that I have come across another one. Proposed new section 84(6)(b) of the 1993 Act, which is in Clause 269, is to do with the retail prices index. In a sense, that is part of the discussion that we have just had about uprating.
  Proposed new section 84(5)(b) of the Pensions Schemes Act 1993 for some reason omits a definition of the retail prices index—of inflation. The first definition is fine by me. It is on,
  "the general index of retail prices (for all items)"—
  those are the important words—
  "published by the Office for National Statistics".
  That includes housing costs, in other words, which are substantial at the moment. Many people dispute the two levels that seem to be used by the Government of the state of inflation. The noble Lord, Lord Oakeshott, just mentioned a figure of 3 per cent; I thought that it was more like 2.8 per cent, but I shall not argue over 0.2 per cent. If we exclude housing costs, however, the figure is considerably under 2 per cent, which is a very big difference.
  Proposed new section 84(6)(b) reads,
  "where that index is not published for a month"—
  the global index, the 3 per cent or 2.8 per cent index—
  "any substituted index or figures published by that Office".
  If the Government's preferred measure of inflation—very naturally, it is the lower amount—is to become the norm, the Office for National Statistics would presumably be told no longer to publish the other level of the retail prices index. That would be extremely misleading and could be very expensive for pensioners where their pensions were in payment.
  Lord Lea of Crondall: The noble Lord has got the wrong end of the stick on the matter. From my experience as a member of the retail prices index advisory committee, I remember that we had a vote some years ago to maintain the housing element in the RPI. That is when the Treasury decided to also publish RPI-minus X.
  However, any index is only a rate of change. The RPI could be higher than the RPI-minus X or RPIX, or lower. It is a non-point to say that housing is
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  somehow in the RPI—it clearly is—and that, somehow, someone could play games with this form of words. The substantial point made earlier by my noble friend was totally different. The idea that there is a question here about RPI and RPIX is a non-point so far as the Bill is concerned.
  Baroness Hollis of Heigham: I never knew that the noble Lord, Lord Skelmersdale, had such a cynical or jaundiced view as to think that the provision was a way to manipulate whether we went for the Rossi index or the non-Rossi version of the index. I think that was his point—whether we could play games with it. If I am wrong, I shall write to him, but my understanding is that we are simply reintroducing words that were inadvertently omitted. So far as I am aware, those are the original words that were part of the original 1993 Act of the government whom he supported. It was an inadvertent omission when the functions of the Occupational Pensions Board were brought to an end by the Pensions Act 1995.
  The clause therefore amends the revaluation requirements in Section 84 of the Pension Schemes Act 1993. It enables them to continue as they have in the past. When the Conservative government first introduced the words, no doubt it was with all the cynical interpretations and intentions that the noble Lord described so eloquently to us today.
  I am grateful that the noble Lord, Lord Hunt, raised internal controls, because I am glad to have the opportunity to tell the Committee where we have got to with our thinking. As this is one of the more technical issues, it is right that an equally technical question should hang on it. I gave an undertaking—I hope and expect—that we will bring forward a government amendment on Report to require schemes to have adequate internal control mechanisms to ensure compliance with Article 14(1) of the EU pensions directive. I remember that the noble Lord, and the noble Lords, Lord Oakeshott and Lord Lucas, were very impressive on insisting that we should take that forward.
  In the limited time available, we have not been able to reach an agreed provision acceptable to all the stakeholders in terms of the Bill. It is particularly important that the wording of the provision is compatible with that used by the accountancy profession in its own tried-and-tested material on internal controls. Basically, I have run out of time to do what I had hoped to do. I am glad to have the opportunity to undertake instead to make regulations under Section 2(2) of the European Communities Act 1972 to introduce that requirement. In taking that route we will have more time to take on board the views of the Institute of Chartered Accountants for England and Wales, which has been responsible for pressing the Government to introduce a provision on internal controls into domestic legislation.
  I am sorry that I am not able to do that in this Bill, but we will do it by another route. Clearly, we need more consultation and consent on the precise form in

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  which we do it than we have so far managed to achieve in the time available. I hope that Members of the Committee will find that assurance helpful.
  Lord Oakeshott of Seagrove Bay: For the record, the noble Lord asked about the latest figure for the retail prices index. It was 3.1 per cent for the 12 months to September. It was 1.9 per cent for all items excluding mortgage interest payments and 1.1 per cent on the CPI, the rate that the Government target.
  Lord Skelmersdale: I thank the Minister. I will discuss the situation with the institute. It may be helpful if at some stage the Minister could at least publish in draft the sort of wording that she and her colleagues have in mind, and on which they are consulting, to share with us the opportunity to have an input to the consultation. I am assured by her remarks that the discussions are ongoing. We look forward to their resolution as soon as possible. It is obviously an opportunity to utilise other legislation to ensure that they are brought into effect.
  Clause 269 agreed to.
  Clause 270 [Meaning of "working life" in Pension Schemes Act 1993]:
  On Question, Whether Clause 270 shall stand part of the Bill?
  Lord Higgins: How have we survived since 1993 without this clause?
  Baroness Hollis of Heigham: Clause 270 is needed to correct a cross-reference in the Pension Schemes Act 1993.
  Lord Higgins: Has it only just been discovered?
  Baroness Hollis of Heigham: When the legislation increasing women's state pension age was introduced, the decision was made not to apply that change to GMP. It was felt that it would be wrong retrospectively to reduce the value of a woman's private pension rights. Furthermore, since many occupational pension scheme rules are based around the existing GMP, to introduce changes could represent a significant complication for many schemes. In this clause we are ensuring that the original intention is achieved.
  I do not know why nobody has picked the matter up before, given the Pensions Act 1995. Presumably, it was because the provision only kicks in from the 2010 alignment of pension age. That may be why all previous governments have not had their eye on that particular ball.
  Lord Higgins: Does it affect anyone?
  Baroness Hollis of Heigham: No, it protects accrued rights. As women move to the new, later state pension age, they will have differing accrued rights for national insurance purposes. The GMP underpins DB contracted-out occupational pension arrangements in calculating the length of an individual's working life. We
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  seek to ensure that the increase in the state retirement age for women between 2010 and 2020 should not make any difference to the change to their GMPs.
  Lord Higgins: Does that mean that nobody has noticed it until now, that everything has been all right, and this amendment will ensure that everything is all right in the future?
  Baroness Hollis of Heigham: That is my belief.
  Clause 270 agreed to.
  Clauses 271 and 272 agreed to.
  5.45 p.m.
  Clause 273 [Meaning of "stakeholder pension scheme"]:
  Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 314:
  Page 207, line 9, leave out "(10)"" and insert "(11)""
  The noble Baroness said: In moving Amendment No. 314, standing in my name and that of my noble friend Lord Hoyle, I shall speak also to Amendments Nos. 315 and 316, with which it is grouped. We are now on to the difficult issue of compulsion, about which there has been so much discussion arising from the recent report on pensions by Adair Turner.
  At Second Reading I referred to the failure of stakeholder provision to encourage greater participation from workforces where there is currently no occupational pension scheme. I believe that the Government are disappointed, but participation has dramatically increased where the employer makes a contribution.
  Employers are now obliged to facilitate access by providers to their workforces, but they are not obliged to make a contribution themselves. Many of course decline to do so. Half of all employees receive no voluntary contribution to their pension from their employer. That leaves them with only the low level of contribution and benefits associated with the state second pension.
  For an employee on average earnings, the employer national insurance contribution towards their second-tier pension is around only 2.8 per cent of total earnings, to which the contribution of the employee is another 1.2 per cent. The combined contribution of around 4 per cent of earnings is inadequate to produce a decent standard of pension.
  A lifetime of work should be associated with a decent minimum income in retirement. That is what a higher level of compulsory contributions is intended to achieve.
  We need also to bring to an end a situation of unfair competition, whereby employers making decent levels of pension contribution on behalf of employees have to compete with employers not making any pension contribution to employees.
  A parallel argument can of course be made relating to employee contributions. Why should employees who choose not to save for pensions be able to claim means-tested benefits at the taxpayer's expense while those who have saved may not do so?
  It is appropriate to discuss compulsion in the context of this Bill because a key theme is the need to boost pension contributions and to restore confidence in pension provision. We have a raft of measures, including simplification, extending education and awareness about pensions and improving security. But the approach is still to be voluntary. Simpler, safer schemes with tax relief on employee contributions will all add to incentives, but are likely to have only a limited effect on employees. The most effective incentive to contribute is well known to be a decent employer contribution. The stakeholder experience demonstrates that. And of course there is a case for compulsory employee contributions as well.
  While many employees continue to be unwilling to commit themselves individually to joining pension schemes, there is mounting evidence that public opinion is increasingly supportive of compulsion. A recent survey conducted on behalf of my own union—Amicus—showed 72 per cent in favour of compulsion and only 17 per cent against, and surveys have indicated growing employer support for the idea. Indeed, whenever pension provision has been discussed in this House, the idea of compulsion is raised. Of course it is very much to the fore now as a result of the Adair Turner report. Everybody is now discussing compulsion. Of course, we have the Australian experience to guide us. It is quite appropriate that the issue of compulsion, which is very important in relation to pension security and the whole question of pension provision, should be raised in the context of this Bill. I beg to move.
  Baroness Dean of Thornton-le-Fylde: I want to speak very briefly in support of the amendment. I never thought I would be speaking in favour of compulsory pension contributions, although at one time that is how it used to be in a company. The company had a scheme and everybody had to join it. The current pensions crisis, certainly very much supported by the Turner report, which most of us have not yet had time to digest although we have read the sexy bits from it—
  Lord Oakeshott of Seagrove Bay: Oh!
  Baroness Dean of Thornton-le-Fylde: Well, you know him better than I do Now may well be the time to consider the issue. We are therefore obliged to the noble Baroness for raising it. She is right to say that it came up at Second Reading, from a source that I never thought that I would hear it—the noble Lord, Lord Fowler. He was very much in favour of compulsion. The facts have driven people like him to say that we need to consider compulsion, as we now have a time bomb for many people who will spend retirement in poverty if we do not get things right this time. I support the amendment.
  Lord Skelmersdale: Whatever one's views on compulsion, it is of course a fact that compulsion already exists in the system—the state pension scheme. I am sure that my noble friend Lord Fowler would think the matter a minor extension, although for many
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  of us it is quite a serious step that needs a lot of consideration. That is roughly what I said in answer to him at Second Reading.
  We ought to consider something else at this point. There are companies who still—pace the Chancellor—have good pension schemes for their employees. There are not as many as there were, but they certainly exist. One thing not allowed by law is for them to promote those schemes, because in promoting them they are giving one-sided investment advice. The companies are, of course, not licensed by the Financial Services Authority, like other financial providers, consultants and so on. Even a cursory view of the Turner report suggests that the idea should be supported. I would very much like to know the Government's view on allowing a bit more laxity in the area. I am sorry if, by asking for that, I have hijacked the arguments of the noble Baronesses, Lady Dean and Lady Turner.
  Lord Lea of Crondall: I want to add one point that has not been made. I am sympathetic to the amendment, but my remarks relate to Adair Turner. It is clear that if he says one thing on process, it is that in his final report—that report will deliberately be after the election; we know all the reasons for that—above all he wants consensus on this question. Chapter 7 of the Turner report already makes that clear. If the noble Lord, Lord Fowler, were in the Room, he might find that he was talking about compulsion on workers, not necessarily about compulsion on employers. I might mean compulsion on employers and not necessarily on workers, and so on.
  It is very important that we do not get into a football game at the moment, given the tremendous prize to be gained if Adair Turner and his final report can find a consensus. We must not have people kicking the issue around and saying that compulsion is another form of taxation, a stealth tax, and all the rest of it. We need to go forward on a united basis. The amendment is exactly the sort of thing that we will need. It is an open secret that Adair Turner would be very sympathetic about going in such a direction, but the consensus to which the Minister referred on an earlier amendment is absolutely vital. We have to tread carefully in going forward with the Turner process, in order to build up that consensus rather than destroy it prematurely. That is my central point.
  Lord Oakeshott of Seagrove Bay: That is a sensible approach. I want to ask the noble Baroness one question, as I probably have not read the amendment as carefully as I should. Does it propose compulsion on employers and workers, or just on employers?
  Baroness Turner of Camden: Both.
  Lord Oakeshott of Seagrove Bay: I certainly support that principle; it is very important if one moves towards compulsion. The Liberal Democrats thought long and hard about the issue when producing our policy on it over the past few months. On balance, we did not think it right to come out in favour of it at the moment, but it is certainly an option on the table for discussion. It is overwhelming in significance, and the

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  important thing is to have a really big increase and get away from means-testing on the basic state pension, and see what effect that has on incentives for private saving. We felt that that was the No. 1 priority.
  Very much in the spirit of the remarks of the noble Lord, Lord Lea, we will be happy to discuss the matter again as an emerging consensus develops. On that basis, we would probably not support the amendment at the moment.
  Baroness Hollis of Heigham: I agree with the previous two speakers. I suspect that, if pressed, so would the noble Lords, Lord Higgins and Lord Skelmersdale.
  The national insurance system currently represents a degree of compulsion on both employers and employees, which can be abated by contracting out. It may be in the discussions—I do not know whether they have any future—that there is some argument for ending contracting-out and bringing it back into a different system. No doubt that will also be part of the small print of the discussion.
  As my noble friend Lord Lea rightly said, there is an issue about whether saving is regarded as a tax. There is another issue—which the noble Baroness, Lady Barker, might have chosen to remind us of—with regard to the capacity of people, particularly of lower-paid women and part-time women workers, to save.
  Adair Turner is very clear that a broader based solution will need consensus. That consensus is currently not there on any of the three Front Benches of the political parties. He also says that, over and beyond those considerations—this has been put to me in other cases—it is not entirely clear what the macro-economic effect would be. The evidence from Australia is somewhat ambiguous; there has simply been a displacement of voluntary saving into compulsory saving. Indeed, if you add additional saving to your existing voluntary saving, it is not clear what the implications will be for the economy—the Keynesian effect; you will be taking that money out of consumption.
  Over and beyond the political issue of whether it is to be regarded as a tax, over and beyond the implications it would have for the national insurance scheme, which are considerable given that there is already a level of compulsion there, and given the macro-economic effect, everything must be done very slowly. In other words, there must be a top-sliced growth in national wealth as opposed to redistribution from the existing wealth in different directions. Only then can we go down that path.
  One of the great virtues of the report—there are many—is that it lays the issues open for us. Debate will continue. It also makes it clear that consultation will continue on some of its findings, which I do not doubt will take up a large part of the agenda for next year.
  I think my noble friend and the noble Lord, Lord Oakeshott, are right: there may turn out to be consensus on the issue of compulsion and that we should go for it. There may turn out instead to be a belief that something short of compulsion, such as auto-enrolment
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  and allowing employers to require that you be a member of the occupational pension scheme, is needed. There are many other schemes which may turn out to be a half-way house to getting most of us to where we would like to be—which is to ensure adequate coverage in retirement so that people do not experience poverty, penury or serious deprivation.
  Baroness Turner of Camden: I thank my noble friend for that response. I am glad that the issue is being seriously considered. I am sure that in doing so consideration will be given to the Australian experience which has been rather good—from the standpoint of the pensioners anyway—because a high proportion of the population not covered before by pension provision is now covered.
  I know that there are difficulties. The noble Baroness referred to some of them. There is the general effect on the economy if you take out purchasing power—which you will do, of course, if people have to take more money out of their salaries at the time that they are earning and so on. I understand all that. On the other hand, we now face a serious situation, which has been highlighted by the Adair Turner report. We have to do something to ensure that future generations of pensioners will not be left in extreme poverty. It seems to me that we have an opportunity in the wake of this report—perhaps after Adair Turner produces his second report—to move in the right direction.
  My union has supported it and believes that that is the right course; I think that the TUC does as well. It has sounded out the views of its members, who seem to be willing to make a compulsory payment to pension schemes. Therefore, the time is getting riper and riper for compulsion. I therefore hope that we shall move in that direction very swiftly—perhaps within the next 12 months.
  6 p.m.
  Baroness Hollis of Heigham: Before my noble friend sits down to decide what she will do—obviously, she will withdraw the amendment given the context of this Committee—I should say that the Turner report gives the figures very clearly. I have seen these figures before, but visually they are expressed much more effectively in this report than is normally the case.
  If one makes the assumption that the net replacement income that one could reasonably expect to enjoy is around 67 per cent—or two-thirds—for those with a £15,000 to £30,000 income as an average, it shows that the replacement income of those earning below £15,000, given the state system, is likely even to equal their in-work income. Certainly, the very low-paid will do adequately under the state system. That would not be in terms of absolute income, but as a replacement factor. Those under about £9,000 or £10,000 per year may see replacement incomes of nearly 100 per cent of what they were earning.
  He also accepts, although it is not particularly his concern, what happens to those at and above the UEL, which is around £29,000 or £30,000. He is absolutely right in saying that it is between those two groups of people—the second, the third and some of the fourth

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  quintile, I suspect—who will not, given current patterns, live to see the replacement income that they would like to enjoy.
  I am working through the statistics myself. Part of the current problem is that they were done on the basis of individuals. One needs then to reconstruct on assumptions about household formation and household income and not just individuals' replacement. There is a lot of work still to be done about what levels we can reasonably assume for women, particularly partnered and married women. For example, will they extend their hours in the labour market, get above the LEL, and add in, as a result, a household replacement income as opposed to an individual's replacement income, which is none the less acceptable between the two?
  Obviously I am very interested in this issue. There is a lot of work still to do. Until that work has been done, which will happen over the next year or so, none of us can be sure that compulsion is the right way to give people the choice that they want of having an acceptable retirement. Under our present structure, the very poorest will enjoy replacement incomes well above that of the middle range of people. Whether those incomes are adequate is, of course, another debate.
  Baroness Turner of Camden: I thank the noble Baroness for that response. It seems that it is appropriate to discuss it in the context of this Bill, which is about security. One cannot really say to trade union members, "We are going to support compulsory deductions from your salary" or "Well, it's right that your money should be taken from you to contribute to a scheme" if they are not convinced that their savings being taken in this way are reasonably secure. Therefore, security is the other half of the argument, which is why it is appropriate to raise it here. This is a Bill about security. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 315 and 316 not moved.]
  Clause 273 agreed to.
  Clause 274 [Financial assistance scheme for members of certain pension schemes]:
  Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 316ZA:
  Page 207, line 26, after "payments" insert "entirely from public funds, with no charges or levies to be imposed on private sector businesses"
  The noble Lord said: The proceedings so far have been relatively consensual or even permissive—to use words that have been bandied about. This issue is obviously rather more political. Now that we turn to the financial assistance scheme, we start to focus on this simple point. Amendment No. 316ZA, supported by my noble friend Lady Barker, would make it entirely clear that any payments to this financial assistance scheme should be met entirely from public funds with no charges or levies to be imposed on private sector businesses.
  There has been a certain amount of vague talk from the Government that they will determine what help the private sector can give. Various phrases have been flying around. Clearly, if anyone wants to offer assistance from the private sector, that is up to them. But I know of no pension funds which think that it would be appropriate for them to make any contribution. Indeed, I expect that they would be in breach of their trustees' rights if they did. It would not be right to lay any burdens on business in this way.
  I want it to be clearly on the record that if the Minister is prepared to give me a satisfactory undertaking, I shall withdraw the amendment. But we are putting it in that form to make it entirely clear that this should not in any way be a burden on private business or private pension funds. I beg to move.
  Lord Higgins: This amendment and my amendment on the same point are the beginning of a series of amendments related to the single clause concerning the financial assistance scheme. It is worthwhile spending a moment on the genesis of this. It is well known that enormous pressure built up in the House of Commons in relation to those schemes, solvent or insolvent, whose pension schemes had failed to produce for their members the benefits that they expected. A whole series of Early-Day Motions were tabled. Certainly, the Labour Motion was signed by a vast number of Labour Members, which was, I think, clearly sufficient for the Government to be defeated if nothing were done.
  As a result, in what might reasonably be described as something of a panic measure, the Government made an announcement on 14 May, and then tabled the amendment which is now embodied in the clause that we are considering, to give assistance for workers who have lost their pensions.
  But the clause is, of course, in the very clearest way, a mere skeleton. It is not the least bit clear how the scheme will operate or what the amounts involved are. The points made by the noble Lord, Lord Oakeshott, bear that out very clearly indeed. The problem is that, as the Government have made clear, they do not intend to clarify the situation on a number of absolutely essential issues until after the Bill has become law.
  That means that it will be impossible for us, or anyone in either House who wishes to amend what the Government propose, to do anything about it. It will all be in regulations. The regulations will not be amendable. They will be on a "take it or leave it" basis. There are many occasions when that is so, but it is so of the entire clause virtually. We have no idea what is really envisaged.
  Therefore, I have to say in the strongest terms that I do not think that that is an acceptable way of proceeding. If I were very cynical—perhaps, to some extent, this reflects my experience as a Treasury Minister—I would say that the danger is that the Treasury would double-cross those who did not revolt and defeat the Government in the Commons.
  Perhaps that is too extreme a way of putting it, but, at the very least, I think that it is likely that they will be short-changed. In the Government's response, they came out very strongly as saying "Smith announces £400 million government assistance for workers who have lost their pensions". In fact, it is not £400 million up-front; it is £400 million over the life of the pensioners. In present-value terms, estimates were being made of perhaps £250 million.
  At the moment, we have no idea whether that is the right amount. It is not the least bit clear whether that is a cap on the amount. Certainly, nothing in the clause states that there will be £250 million, whether there will be a cap, or how it is to be distributed. That is why the noble Lord, Lord Oakeshott, and I rightly feel that we ought to clarify at any rate who will pay. If the noble Baroness can at least tell us that today—whether it will be the Treasury rather than the private sector—it will do a little to clarify the situation so far as the overall scheme is concerned.
  A number of statements made by the former Secretary of State and others have suggested that the Government are looking for some contributions from industry. Is that the case? If not, we shall have to do all we can to clarify the situation on Report.
  Our problem is that we are clearly in favour of the clause but, without having any detail whatever, there is a danger that it will turn out to be completely unsatisfactory. On this occasion, the noble Lord, Lord Oakeshott, and I have tabled a number of amendments seeking to clarify the position. We may return to those as we go along.
  But, as far as possible, there are a number of issues on which we can be clear. In her usual helpful way the noble Baroness has circulated a note explaining where she appears to have got to at the moment. The short answer to that is that, while the note was helpful, the Government have not got very far. However, for a number of issues there is no reason why they should not be clear about the position. I mention, for example, the one covered by this amendment on schemes that have gone down and whether the company is solvent or insolvent; whether there will be a gap between this scheme and the PPF coming in; what the level of payment is likely to be; and, most particularly, to what extent the amount involved is adequate. Again, that reflects the amendment.
  The Government have apparently carried out new research. A press release was produced in June on insolvent pension wind-ups, detailing new research into the number affected. It suggested that some 65,000 people had lost significantly, by more than 20 per cent of their expected pension benefits. A survey covered some 250 final salary schemes where, presumably, the pensioners had lost out.
  I mentioned earlier the remark of the new Secretary of State to the effect that there is no crisis now, but will be later. However, all these people are in crisis, so far as their personal lives are concerned. They face enormous uncertainties about what is happening. They do not know how or to what extent this scheme
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  may or may not help them. It would be most helpful if, by whatever means are most convenient, the noble Baroness could indicate on which side of the dividing line the 250 schemes we know about from the survey fall, particularly with regard to the starting date. That in itself will affect profoundly the amount and determine who is going to pay.
  This is an extremely unsatisfactory situation. A number of decisions need not be delayed until after the Bill becomes law, and the Government's position could be made clear, either by way of amendment introduced on Report or by way of a statement from the Minister. But we cannot accept that this measure, introduced in the way I have described, is satisfactory if it merely remains in its present form in the Bill.
  Baroness Hollis of Heigham: I agree entirely with the comment of the noble Lord that this is not satisfactory. It certainly gives me no pleasure to bring before noble Lords these clauses, which I accept absolutely are framework provisions.
  However, I put it back to the noble Lord that the reason we have a problem is not because the Government failed the schemes; those schemes have collapsed. The Government are seeking, with consent, to see what they can best do to protect those schemes. It is therefore unreasonable to move the language across, as it were, so that the Government are somehow culpable when we are seeking to address the degree of culpability of other organisations.
  Before turning to the specific points raised in the amendment, I want to put one or two questions to Opposition Members of the Committee to encourage them to share, if not to own, the problems we face. I accept that these questions will be quasi-rhetorical, although they are not meant to be.
  Does the noble Lord agree that a financial assistance scheme is needed? I am sure that he does and I doubt whether there is any dispute about that in this Committee. Does he further agree that a financial assistance scheme should be funded by central government? Again, there is agreement that it should be.
  6.15 p.m.
  Lord Higgins: We are not inclined to accept the financial assistance scheme as it is.
  Baroness Hollis of Heigham: I agree that it is technically defective on about 14 counts, but I had not thought to use that as an argument. Instead I seek to address the broader points of contention raised by the noble Lord. I do so because I do not want Opposition Peers to ride the constitutional horse. Constitutionally they are entitled to do so, in saying that this is only a framework provision, but they should not do so without recognising the problems we face in addressing the situation. That is why I am putting the point in this way.
  The noble Lord therefore agrees that there should be a FAS scheme and he agrees that it should be funded by central government. Does he also agree that the problems with those particular schemes have emerged and that FAS itself came on to the table only five

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  months ago? After all, the PPF was trailed in the original Green Paper back in December 2002 and there has been ample time to consult stakeholders on its ultimate shape. Does the noble Lord agree that, when we discussed and debated at length those Green Papers, there was no suggestion that there might be a need for a financial assistance scheme? I certainly cannot recall any such suggestion. It has arisen only recently and came to the table in May.
  Does the noble Lord agree that the Government lack detailed information on those 65,000 members in the 250 schemes? He himself has identified that the Government do not routinely collect information from private sector occupational schemes regarding their trustees and actuaries. Indeed, when I had a meeting with trade union representatives about a particular scheme—it shall remain nameless—that was going under, I asked what proportion of their union members were deferred members. The trade union representatives could not tell me, even though they had come to discuss it, because they do not routinely collect those statistics.
  However, we know from our researches that half of all pensions in payment are worth less than £3,000 a year, while a quarter are worth under £1,400 a year. That suggests a high ratio of very small payments for which we do not even have the statistics. Does the noble Lord agree that we have to collect those statistics before we can produce a sensible way forward? Does he also agree that once we have that detailed information on pensioners—deferred pensioners, active members, the number of assets held and so forth, the costs of possibly acquiring additional annuities to top up those schemes—we then still have to make very difficult decisions about, for example, the extent to which a scheme should be included when the winding-up has not yet been completed, what we should do as regards targeting and meeting hardship, and whether we should make distinctions between those close to retirement age and those further away, who may be in a position to rectify the situation? These are extremely difficult issues which we will be able to address and consult on with interested parties only when we have the database that is still in the process of being collected, given that this scheme has been on the table for the past few months.
  However, we are seeking to go ahead because if we were to approach this in the normal Civil Service way—collect all the information, work on how the resources should best be divided, seek consent and then publish—that would delay the scheme for at least a year and thus well beyond the introduction of the PPF. In the process the very people whom the noble Lord wants to help—those in crisis now—will lose out on the possibility of the scheme coming into effect in April next year.
  That is the broad shape of the dilemma we face. We can wait to collect the information so that we can more thoroughly address the questions to which the noble Lord wants answers and so that Parliament knows what it would be signing up to before, possibly, the Bill has completed the Report and Third Reading stages. But, if we do that—and, constitutionally, he has an
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  absolute right to say that that should be the case—he has to accept that because this has come to the table in the last five months, the result would be to defer and delay any such scheme, with the accompanying personal price paid by members. That is the dilemma we face.
  It is a question of which is the lesser of two unsatisfactory options. The Government judge that it is better to proceed with the framework scheme that we have outlined. I can assure the noble Lord that as soon as I can I shall bring the detail to your Lordships. Whether it can be done by the Report stage or by Third Reading, whether it can be done at all. I do not yet know, but as soon as I can I shall place that information on the table so that all of your Lordships will have it. I give way to the noble Lord.
  Lord Higgins: Much of the uncertainty to which the noble Baroness refers determines the cost of the operation. The reason the Treasury is so anxious to obtain all this data is to work out whether or not it wants to pay it. Unless the noble Baroness can tell me on what basis it was calculated, we believe that the £400 million figure was plucked out of the air. Anyway, as I say, it is not £400 million; in present value terms it is £250 million.
  But there are a number of points on which the data are not required but a decision in principle is. For example, whether the scheme will cover companies or schemes that went down at a certain moment. That does not require data; it is a question of what is the scope of the scheme. There is no reason why we should not be told that. As to eligibility, obviously again it could be decided whether or not it will cover insolvent companies. Unless one has got the shadow of the Treasury behind one asking what it is going to cost, you can perfectly well make a decision on whether a particular scheme in time will or will not be eligible. There is no reason why, in principle, one should not say, as one of the subsequent amendments says, that we will make sure that this carries through into the PPF operation. One can also probably calculate what the equivalent of a PPF pay-out would be.
  None of these points require data, except, as I say, where the Government are concerned particularly about the cost. There are a number of points on which they can make a decision, in principle, by the Report stage. It is important that they should do so otherwise the scheme will be viewed with suspicion. It is said that this will increase confidence in company schemes. This clause will not increase anyone's confidence in anything.
  Baroness Hollis of Heigham: I accept that some decisions are more blue skies than others. I do not challenge that for one moment. However, we are still working on whether that £400 million is, as the noble Lord seems to think, going to be £250 million or what the pattern of payment is. That is still under work at the moment. Until we know that we have basic consent and that basic decisions have been made about the nature of the structure of the moneys, for example, we cannot come on to some of the questions of the noble Lord.
  I accept his point about solvent and insolvent, but that comes back to some of the previous discussions we had about moral hazard issues and so on. We shall come to some of the detailed amendments later. As to whether it could go into the PPF, that again depends on decisions made as to whether we are topping up annuities or pooling assets. That decision will depend on data that we have not yet received.
  I do not want to hang too much on the data, although it is one of the major drivers. I should say to the noble Lord that I do not recall during my years in opposition in the House—during Maxwell and all the rest of it—that the Government then, or indeed any government, thought to bring forward a scheme of such complexity, as inevitably the FAS scheme will be, from a cold-standing start—to use an athletic metaphor—in which there has been no warm-up period, and tried to get it delivered from start to finish in 11 months; in other words, it was ready to go in 11 months down the line.
  That comes with that package. The Government are acting in good faith and seeking to deliver an effective scheme. I cannot—I wish I could—give the noble Lord answers to the questions he has posed. I have tried to share with him the dilemmas the Government face and explain why I cannot at this moment in time give him the answers that he seeks.
  Perhaps I may now go on to the noble Lord's amendment, or does any noble Lord wish to contribute to the wider debate at this stage?
  Lord MacGregor of Pulham Market: I am simply going to say to the Minister that none of the arguments she has produced have any relevance to the amendment because none of them affect the position in relation to anyone other than the Government. She is talking about how the Government finally frames the scheme and what degree of financial assistance will be given and so on. I understand all of that. You have to have facts in order to be able to come forward with final conclusions.
  But none of that affects the issue of whether the private sector should be contributing to this at all. All the points made by the Minister make it even more important that she makes it clear that the private sector will not.
  Baroness Hollis of Heigham: But the whole point is that the noble Lord—I think the noble Lord was here when he said this, but he may not have been—used the opportunity to make an opening statement about the state of the FAS and said that the Government should behave differently and so on. He produced a series of questions and a series of reservations and a series of objections to the way in which the Government were handling it before we got back to the amendment. That is what I was seeking to address in the hope—perhaps forlorn—that it would enable us not to repeat the same arguments on the subsequent amendments. But that may not be the case. Perhaps I may now go on to the noble Lord's amendment.
  Lord Oakeshott of Seagrove Bay: I want to make some points which would have arisen in response to
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  the questions asked by the noble Baroness. I thought I would move my amendment specifically on that point and bring up some of the other issues later. This is a very simple and very clear question. It is to be hoped that we can lay it to rest.
  Baroness Hollis of Heigham: Yes. But, as I say, the noble Lord, Lord Higgins, perfectly properly, was using the first of a series of amendments on this clause to state his position, rather than doing so as part of a clause stand part debate. We have done so elsewhere in the Grand Committee and I think it is perfectly reasonable. That is why I responded in the way I did.
  As to the noble Lord's amendment, I can put on record that the Government will not use this Bill to impose a statutory levy or charge on private business to fund the financial assistance scheme. Neither does Clause 274 enable us to introduce a levy by secondary legislation even should we wish to—and I have made it clear that we will not.
  These amendments are defective and would have a more damaging effect; they would rule out the possibility—I am not saying other than that—of voluntary funds. I have given a very clear statement of the Government's position on this. I have made it clear that we will not be doing it under primary legislation; and we cannot do it—nor would we wish to—under regulations. I hope that as a result of that explanation the noble Lord will feel able to withdraw his amendment.
  Lord Higgins: There have been a number of statements by the Government which suggest that, in one way or another, they expect the private sector to contribute.
  Baroness Hollis of Heigham: No. We would welcome the private sector contributing. I was being pressed about whether there would be any powers for the Government to impose a levy—a compulsory contribution—on the industry. We are saying "no".
  Lord Oakeshott of Seagrove Bay: I welcome the noble Baroness's assurance. I am sure that she is also saying that any contributions would be entirely voluntary.
  Baroness Hollis of Heigham: That is exactly it.
  Lord Oakeshott of Seagrove Bay: On that basis, I am happy to accept the undertaking. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 316A not moved.]
  Lord Higgins Lord Higgins moved Amendment No. 317:
  Page 207, line 27, at end insert—
  "( ) Such payments must not be made to cover the cost of guaranteed minimum pensions."
  The noble Lord said: Amendment No. 317 deals with an interesting point. As I understand it, the payments which would be made here could possibly be argued to cover the GMP, which would anyway be financed. Therefore, to that extent, the cost of the

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  £400 million would be less than it would otherwise be. We were anxious to establish—and this has nothing to do with data or anything else—that the GMP payments and the funds available for them would be ring-fenced and totally outwith this scheme. Will the noble Baroness give an assurance to that effect? I beg to move.
  6.30 p.m.
  Baroness Hollis of Heigham: The amendment seeks to prevent any payment from the financial assistance scheme being used to cover any part of any guaranteed minimum pension that cannot be met by the scheme. I wonder whether we have a meeting of minds on how it currently operates.
  The guaranteed minimum pension is part of the system of contracting out. As the Committee will know, between 1978 and 1997, in order to take advantage of reduced national insurance contributions, an employer had to ensure the rules of his pension scheme would provide to each member a pension at least as good as a statutory minimum; i.e. the GMP. Many schemes actually provide a pension that is better than the minimum and the GMP then acts as an underpin; a floor below which pensions cannot fall.
  It was intended that at retirement the individual would receive a pension that was at least as good as the GMP and that GMP would be deducted from their entitlement to the state earnings related pension scheme—SERPS—to take account of the lower national insurance contributions.
  Of course, such a guarantee from the employer is predicated on the pension scheme remaining in existence. If a scheme winds up, whether the guarantee can be made good depends on the level of funds in the scheme.
  If the scheme cannot afford to secure the full GMP, it is permitted to secure a reduced amount. However—and this may be where the misunderstanding possibly occurs—the state does not step in and cover the balance of the GMP; nor does it, as a matter of course, restore state scheme rights. On the contrary, the full GMP is still deducted from the SERPS entitlement. That is because the individual, having paid a reduced level of NI, has not paid for his full SERPS.
  Therefore a person who has a GMP entitlement of £50 a week, although his scheme can only secure £10, will still have his SERPS reduced by the full £50. He keeps the £10 and therefore loses the £40. In this context, a provision such as that proposed by the noble Lord could actually add to the detriment of the individual. As it is generally lower-paid workers who have very little scheme benefits over and above the GMP, this amendment would effectively skew the proposed assistance towards the higher paid. If the noble Lord is saying that the financial assistance scheme should be used to compensate and make good the fall in the GMP, which has already been paid for once by the reduced NI contributions, that would disadvantage those who are better off. That is not what
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  we intend and I do not think the noble Lord would wish that. I hope that as a result of this he will withdraw his amendment.
  Lord Higgins: We need to consider very carefully the technical point the noble Baroness has just made. My reason for tabling the amendment was to some extent prompted by an article by Teresa Hunter in the Sunday Telegraph. It may be helpful if I quote exactly what it says. It states:
  "Members of occupational schemes that are contracted out of the second state pension (formerly known as Serps) qualify for a guaranteed minimum pension (GMP) from the state if the scheme fails to pay out.
  "Malcolm Wicks, the pensions minister, has admitted that victims of the 59 collapsed schemes that have so far requested payment have yet to receive a penny of their entitlement.
  "He was forced to admit to the delays in a written answer to a question tabled by David Willetts",
  and so on.
  Baroness Hollis of Heigham: I think that there is a misunderstanding.
  Lord Higgins: Fine. Just let me finish. I was anxious to establish that there was no question of that being met by payments out of the £400 million. But has there in fact been such a delay in the 59 schemes that have collapsed? If so, why have they not been paid?
  Baroness Hollis of Heigham: The Sunday Telegraph is not my usual reading and I have not read that article. I get the cuttings. I shall follow the matter up and write to the noble Lord about the particular article if he wishes. Certainly, I want to make clear that there is no second state contribution by virtue of topping up any shortfall in GMPs, which cannot be secured by the distribution of the employer's assets, because they have already been paid for once through reduced NI contributions in opting out of SERPS.
  Lord Higgins: It would certainly be helpful if the noble Baroness could write to me on what is obviously a technical point. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higgins Lord Higgins moved Amendment No. 317ZA:
  Page 207, line 27, at end insert—
  "( ) Payments made under this section shall not be subject to any form of means test."
  The noble Lord said: Amendment No. 317ZA suggests that any payments from the fund should not be subject to a means test. The Government's decision on this issue does not require a survey or anything else. The Government can clearly make a decision in principle on payments under the FAS made to people whose pension schemes have collapsed—who are likely of course, very often in a company, to have a large range of incomes from really very low to perhaps quite high—whether those people should then be subjected to a means test.
  The idea and consequences of a means test, pursued so fanatically—I think it is the right word—by the Chancellor, have apparently now been rumbled not

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  only by the Turner report but also by the Prime Minister, so we are told. Be that as it may, I should have thought this was an issue on which the Government can give an absolutely clear-cut answer: no, payments under this arrangement will not be subject to a means test. Is that so or not? I beg to move.
  Baroness Hollis of Heigham: I am happy to seek to respond to the amendment. Going back to the previous amendment, I wonder whether there was some confusion between us. Was the noble Lord referring to deemed buy-back in terms of the Sunday Telegraph article?
  Lord Higgins: It had not crossed my mind.
  Baroness Hollis of Heigham: Fine. It was possible that the article could have been alluding to that. I will make sure, when writing to the noble Lord, that I include the issue about deemed buy-back. It is a different issue which may have some relevance to the broader debate.
  The amendment seeks to ensure that persons who may be given assistance under the financial assistance scheme will not he subject to any form of means test.
  Planning work on the FAS is proceeding on the assumption that we will not determine eligibility for assistance from the scheme through an assessment of any income or capital which an individual may have, other than the pension income which they have lost through a scheme winding up under-funded. However, we are still examining ill detail various options relating to how assistance from the FAS will be paid out.
  We may wish to consider further factors. I have mentioned them already in our previous exchange, such as age, length of service or proportion of accrued rights lost. The calculation of entitlement—I repeat—is complex. We do not want to rule out anything which could compromise our ability to design a coherent scheme which will make the best possible use of available funds and which will ensure that those who have lost the most will receive the most help.
  I am going to ask your Lordships to support us during this design stage, while we seek to gather the data we need. But on the noble Lord's point, in the common-sense understanding of means test, which is a test of income and capital, our planning work is proceeding on the assumption that we will not determine eligibility for assistance for the scheme through any assessment of income or capital which the individual may have.
  Lord Higgins: I listened extremely carefully to the noble Baroness and I will have to read exactly what she said. I was a little worried about the wording in her earlier statement, although she seemed to be clear enough on her effective reprise of the answer. If that is so, can the amendment simply not be agreed? If not, how can we devise an amendment to make the position clear?
  Baroness Hollis of Heigham: I do not wish to agree to the amendment. The means test that has been produced
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  is a test of capital or income. That is not what the amendment says. It says "a means test". That could be interpreted to read, for example, as being associated with how much has been lost, what the de minimis is, and so on. The Government will not accept the amendment.
  But I have made it clear that we are not proceeding on the assumption that there will be any test of capital or income, which is actually a more accurate way of addressing the issues concerned. The means test as it stands could be read to cover other assessments, including the need to target, which we may seek to embrace, and on which we might have widespread support. I cannot possibly accept the amendment as it stands.
  Lord Higgins: We agree on what we want to achieve, so it is important that that is made clear in the Bill. Will the noble Baroness undertake to come back on Report with an amendment that implements what she has just said? If not, one is bound to view it with suspicion. It should not be beyond the wit of the government draftsmen to make it clear. I hope that she will agree to do that.
  Baroness Hollis of Heigham: No. I suspect that, on each of the issues, Members of the Committee will try to chip away and get something extra. I do not blame them. As a result, by pressing their amendments or getting the Government to bring forward amendments in lieu, they seek to put in the Bill as primary legislation something that will pre-shape or determine a great deal of the framework of the financial assistance scheme before the Government have finally produced a scheme in the round.
  I do not take issue with Members of the Committee on the policy—we probably do not disagree on it at all on this point. However, I am not willing to be a party to trying to chip away on each issue. The next one could be age. I forget some of the other amendments to which we will come but, as and when I can, I want to be able to give noble Lords a description of the entire scheme. I would have thought that the words that I have already used would give the noble Lord the assurances that he seeks, in the same way as I sought to allay concerns on the previous amendment about not going for a statutory levy. The noble Lord did not press me to put anything into the Bill; he took that assurance. I hope that he will feel able to wait until we have decided on the final scheme and its shape, and then he will see how we have balanced the different pressures on us to accommodate people's needs given our resources.
  Lord Higgins: The provision ought to form part of the overall scheme, but it is very difficult to understand how implementing an amendment that embodies what the noble Baroness has said in any way makes it more difficult at a later stage—unless, at a later stage, the overall scheme will not cover the point as we would like. It is not acceptable to take such a skeleton course—to say, "Don't worry, we'll do this and that but we won't put it in writing". One has to restore confidence. If the people affected by the scheme, who are in desperate straits at the moment, do not know for

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  certain from the Bill what will happen to them, they will be worried. They will say, "I have a pension of £30,000 a year that may or may not be tied out by the scheme. We will have to go into the basis for the payments later on". They will need to know whether or not that amount will be means tested.
  The fact that there will be an overall scheme at the end of the day does not prevent us—the noble Baroness said "chipping away"—making explicit what the scheme will do in a number of important respects. That is what we seek to do. We accept that the scheme may not be able to be devised completely before the Bill gets Royal Assent, but there is no real reason why a number of its aspects should not be clarified, with other matters then subsequently dealt with by regulation.
  6.45 p.m.
  Baroness Hollis of Heigham: I am sorry but I cannot accept that position. I can see why the noble Lord would wish to argue it, and I do not for a moment challenge his right and integrity to argue that point. But I am not in a position to start giving assurances on some aspects of the scheme but not others. I do not yet know whether we will make proposals in which those closest to retirement age, for example, and with the least capacity to build up their scheme should be treated differently from those who are further from retirement. That may be right; I do not know. Ultimately, noble Lords will decide as they wish on Report; however, I am not willing to give assurances on solvent schemes that are still underfunded and so on until I have a sense of the complete structure of the scheme.
  The noble Lord's second point was that this affects people's confidence. People's confidence in these schemes is already at flat bottom as a result of actions taken by their employers and possibly their trustees in the past. We seek to rescue that. The outcome for any individual, given the average range of incomes within the schemes, will not depend much on means-testing because the amount of capital or other income that people arc likely to have will be within a very narrow range. It will depend far more pertinently on other issues that we have not yet been able to determine because we do not have the data.
  We do not know what percentage level of compensation or assistance we will be able to give compared to the PPF, for example. We do not yet know to what extent there should be a de minimis. Nor do we know to what extent, if people have lost only a small amount, one should meet it or operate on a percentage basis. Those three items, and whether you should weight provision to those closest to retirement, will affect the outcome for any individual far more than means-testing. I assure Members of the Committee that statistically that certainly will be the case, with the odd exceptions of those at the extremes of the array of income.
  I cannot accept this series of amendments in so far as they ask us to make a pre-commitment on some aspect of the FAS which I am not in a position to give.
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  I am perfectly happy to rehearse the arguments and to listen to the arguments about why we should take such a line rather than a different one: I want consent to that scheme as far as we can get it. But I cannot on any of these amendments give assurances or indications of what the final scheme may look like until we have got to that matter. I have assured the noble Lord that it is not part of our planning assumptions at the moment. I will not agree to amendments or put provisions on the face of the Bill at this stage, because that would be inappropriate until we know what the whole scheme may look like.
  Lord Higgins: Clearly, we are not in agreement on how the matter should be handled. Its genesis arose as a result of pressure in the House of Commons. I understand that some matters cannot yet be decided, but there are a number of amendments, such as this one, which can be decided now and can be included in the Bill. Probably it would be right to move such amendments on Report. If the noble Baroness is telling me that the House of Commons will reverse an amendment which says that schemes should not be means tested, let us see what happens. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 317A:
  Page 207, line 27, at end insert—
  "( ) The Secretary of State shall publish a report annually, setting out the basis on which assistance from the financial assistance scheme will be provided over the next year either confirming that it will provide total benefits to qualifying members equivalent to those they would have received had their scheme fallen within the scope of the Pension Protection Fund, or if assistance from the financial assistance scheme will be insufficient, specifying by what percentage those benefits will fall short of benefits received under the Pension Protection Fund."
  The noble Lord said: I hope that it will be convenient to the Committee if I speak to Amendments Nos. 317A to 317D together, as they hang together. It would enable me to respond to some of the points and challenges made earlier by the noble Baroness to Members on this side of the Committee.
  As I listened to the later stages of the noble Baroness's exchange with the noble Lord, Lord Higgins, I began to think that we had developed a very novel definition of parliamentary scrutiny whereby the Government ask the Opposition a series of straight questions, some of which I am happy to play the game on and give answers, but make it clear in advance that the Government's response to any questions from the Opposition will be, "Don't know" or "Won't say". I find that an odd way of behaving.
  Baroness Hollis of Heigham: We are in the process of constructing a scheme. I do not blame the noble Lord, Lord Oakeshott, but the noble Lord, Lord Higgins, knows better. This scheme started to come to the surface five months ago, in May. I am being asked what individual bits will look like before construction is complete. It is unreasonable to ask us to make declarations at this stage. I suspect that if any

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  Members opposite were sitting at this side of the Dispatch Box they would say exactly what I am saying now.
  Lord Oakeshott of Seagrove Bay: I have listened very closely to the noble Baroness making that point several times. It is our turn now to make some points in response.
  I have been asked a series of questions, to which I shall now try to respond, before asking further questions of my own and explaining why I believe my amendments are a useful aid to parliamentary scrutiny of this Bill and why I do not think that the Government would be binding their hands by accepting some of them. They have already accepted the principle of my first amendment.
  I have already made clear in the first amendment our belief that the Government should stand behind the scheme and that it should be entirely government-funded. As set out in Amendment No. 317C, we believe that, given the great urgency that the Minister has highlighted, the FAS should come into effect within six months at the latest of the Bill's enactment. I invite the noble Baroness to say why, if there is such urgency, she cannot accept that amendment.
  We also say that, where a qualifying pension scheme was closed while the sponsoring employer was solvent, it should be treated as a qualifying scheme for the purpose of this clause. That is a very clear proposal in our amendment. We wish to know whether it is a principle.
  Our position is clear. We need to look a little at the background. We keep being told that the scheme has been in contemplation only since May. We all know that that is complete nonsense. There has been pressure for some sort of financial scheme and long discussions for many months. The problem was that the Government could not make their mind up and agonised about it for many months. Finally, in May, on one of the few occasions when the Chancellor of the Exchequer and the Prime Minister were on speaking terms, they got together and cobbled this scheme up. If it is being done in a rush, it is very much because the Government took so long to decide to do it; so that is not a satisfactory excuse.
  This is not a "menu without prices"—those who have been in politics a long time may remember that phrase. The figure of £400 million has been plucked out of the air with no data, as the Minister has made clear. We do not think that it is unreasonable to say that it is wrong to invite Parliament to sign a blank cheque for £400 million of public money. Unless we can clarify some issues of principle about how the scheme will work, that is what we are being invited to do. We are not happy to do that.
  In Amendment No. 317A I seek, not to set down any particular rate of payment, but to say that once a year the Government should make clear what the benefits will be, when they have decided that that aspect can be discussed, so that people can see the ratio of the benefits payable under the PPF. That would provide a
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  clarification that in no way ties the Government's hands to us. Even since May we have had no specific indication of how this very important scheme will work. All that we are told is that the Government are thinking and looking at the data. That is not good enough; we will not accept it. The amendments are fairly modest, but they seek to clarify how the scheme will work, without tying the Government's hands. It is really not good enough to hide behind saying, "The scheme has been going only since May, so we do not know and cannot tell". We are not prepared to accept that blank cheque on Report, unless we have much greater clarification and, indeed, a proper answer on why the amendments are not acceptable, if they are not. I beg to move.
  Lord Lea of Crondall: Without playing with words, it is quite interesting that the noble Lord twice said that he would not agree to sign a blank cheque. It is a funny sort of blank cheque if it has £400 million written on it. There is an important point here—that one has to begin from somewhere and work backwards. Not only is some £400 million not a blank cheque, but much that then has to be put into place arises from it.
  Lord Higgins: I can take up the point that the Government are not writing a blank cheque. Nowhere have we been told that the figure will be set. In particular, the figure of £400 million was bandied around to placate those in a revolting state of mind in the other place—probably quite rightly. In fact, it is not £400 million. That is a headline figure and what the press statement says. In present-value terms, the figure is only £250 million.
  More particularly, we are not clear whether that is a limit. Is it? Given the number of schemes that we are considering—250 or so have been included in the survey—we can consider, once we know that, whether it is the least bit adequate to deal with the problem. If we find, by a fairly simple arithmetical process, that it clearly is not, we need to define in the Bill itself exactly how the administration will take place.
  There are real problems here, about some of which the noble Baroness is right—we will not know until we get more data. But some can be decided now without any great problem. In her usual helpful way, she sent round a note that said that one issue that we would need to consider was whether to have an initial cut-off date for support under the FAS. We are likely to need some cut-off point, to make it administratively feasible and to give some certainty about the funding arrangements. One option that we are considering is to use April 1997 as a starting point, as that is the date of the coming into force of the Pensions Act 1995. We should take into account the schemes that started to wind up shortly before April 1997 before reaching a conclusion.
  That is not a range of issues that need to be considered in the light of the data, unless the Treasury is concerned that, whatever else happens, the figure will not be more than the present £250 million. If that is the position, fine—we know where we stand. The noble Baroness will say, "It is an absolute limit.

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  Consequently, we will have to make some decisions on that basis". But there is no reason why the kind of issue that I have just mentioned cannot be decided now or put into the Bill. I say that because the people in these schemes are desperately worried about whether they will receive any help, any significant help, under the scheme. On the basis that we have just discussed, they could be told, "So sorry. Your scheme was on the wrong date and you will not get anything. Forget it". Alternatively, the Government could say, "Your scheme was on an eligible date. We have decided to take it from there and you will get something".
  Data have nothing to do with that. It is a question of making it clear to people who are extremely worried about their personal position what they will get or whether they will get anything. There is no reason why that decision should not be taken by Report.
  7 p.m.
  Baroness Hollis of Heigham: From the sound of it, I think that we are going to have a similar debate on each set of amendments, in which case I suspect that I shall be making broadly the same response each time, which is as follows. Where I can appropriately narrow down the area of uncertainty, as with the assurance I was able to give the noble Lord, Lord Oakeshott about not introducing a statutory levy—I think he thanked me, but that is fine—I shall be happy to do so. However, it would not be prudent of me to try to give undertakings or to accept wording to go in the Bill without knowing the scale of the commitments involved. That means knowing, for example, the data.
  For example, the noble Lord put it that if I could say that there will be no more and no less than £400 million as a lump sum for the 250 schemes, we could use a simple arithmetical process to see what they would get. I was so taken aback by the noble Lord's words that I wrote them down. However, that is absolutely not the case. How many of those are deferred pensioners? What level of assets is being brought into the scheme? What size of annuity would be required to top it up? How much would that cost us in the market? It is not at all simple. It will have to be done, but in the example cited by the noble Lord, simple it is not. That is why we need to do this as fully as we can.
  All I do is to repeat time and again the assurance I have given to noble Lords, who should know by now that I try my best to honour promises and assurances. Where I can share information with noble Lords, I shall do so; where I can write to noble Lords, I will do so. But where I cannot, it is no use repeating to me, "You should be able to do this. You should be able to do that". My response will always be the same. Until we know the scale of the commitments involved and the totality of what the scheme will look like, I am not in a position to make or give undertakings on any particular dimension. I can say that it is not going to be levied on the private sector. That is clear and the Government have never suggested that it would be a statutory levy. However, on the other issues I am being pushed on, we simply do not know, and I am not going to suggest to the noble Lord that I shall be able to answer him in a short while.
  Before we all become too tired through constant repetition, perhaps I may address the amendments before us. Amendment No. 317A would require the Government to publish a report every year on whether the payments from the financial assistance scheme are running at the same level as those from the PPF. Where it falls short it should say by how much. Amendment No. 317B is more direct by seeking to prescribe the level of benefit that the financial assistance scheme will pay to ensure that it runs at the same level as the PPF.
  The noble Lord introduced his amendments with the remark that they are quite modest. However, they absolutely are not. This is a central and difficult issue. Can we have a financial assistance scheme paying a certain level of benefit, and approximately how close might that level be to the PPF? I doubt very much that we could reach PPF levels, but I do not know how far we will fall short of those levels. Moreover, given the £400 million and the lack of information on the distribution of members' pension values, their ages, the value of their accrued rights and the level of assets a scheme might hold in order to meet them, and therefore the cost of any subsequent annuity, I could not begin to answer what the noble Lord has described as minor points. They are central to the whole debate.
  Lord Oakeshott of Seagrove Bay: I stand corrected on Amendment No. 317B. However, I would welcome a proper response to Amendment No. 317A, which is in effect a transparency amendment, as well as on Amendments Nos. 317C and 317D. However, I accept that Amendment No. 317B is more a point of principle.
  Baroness Hollis of Heigham: In that case I shall go straight to Amendment No. 317B, if the noble Lord accepts that I cannot do what he seeks in Amendment No. 317A.
  Lord Oakeshott of Seagrove Bay: No, I am asking for information in response to Amendment No. 317A. That amendment seeks information rather than any substantive commitment.
  Baroness Hollis of Heigham: I was going to say in response to that that a report would be difficult to produce and probably of little value. I am not sure about usefulness, but I think that it is right and proper that the FAS should be held publicly accountable. Once the organisational structure of the scheme has been settled, I accept that it should report on its activities, and we shall ensure that it does so. We shall certainly be undertaking a review of it.
  At this stage I do not want to say that we will start doing some of the simple arithmetic suggested by the noble Lord, Lord Higgins, showing the relationship. When that scheme is established, I hope that we will have some presumptions or assumptions about what levels of final pension people should be able to take away, putting together what they already have secured and what the FAS can top it up by. At that point, people will be able to do their own sums. I do not think that the noble Lord's precise wording is appropriate.
  We do not disagree that the activities of the FAS will be extremely complicated. It will be a far more complex job than setting up the PPF, which will not happen until two years down the road. The FAS is being thrown right into the middle now. As soon as we have the information, it will obviously be available for public scrutiny. The FAS will continue to report in the usual way. I do not doubt that the substance of what the noble Lord quite legitimately calls for will be given, but not in the form in which he is calling for it. I hope that he will accept that.
  As regards Amendment No. 317C, which I did not think would be moved, again, there is very little distance between us. We are all eager to see it. No one benefits from unreasonable delay. However, I do not think it right to force the scheme to make payments within a specified period. We seek to have the scheme established by spring 2005 and to make payments as soon as practicable after that. The six-month deadline sought by the noble Lord would require the FAS to open for business possibly in a badly under-prepared state, which I do not think is right.
  We share a common interest. We want to get the scheme up and running as quickly as possible. I do not yet know whether FAS will be able to do what the noble Lord wants; that is, to be making payments within six months. I simply do not know. It would be unreasonable for me to make those commitments. It may be, for example, that we can start giving assurances to those who are close to retirement, but we cannot yet. At a later stage, we will have to deal with those who are further away from retirement. That is a sort of two, three or 17-step process that the FAS may have to go through.
  While I fully share with the noble Lord that we want the FAS up and running as quickly as we can, I cannot give him an assurance that it will be done within six months—particularly if the price of that would be the FAS would not running effectively in the members' interests in terms of the funds it would be using and disposing of, and the information that it needs. I just do not think that we can do it, or make a commitment in the timetable for which the noble Lord is asking. If we could, I would be extremely happy to do so.
  Lord MacGregor of Pulham Market: I have listened to the debate with great interest and I have a certain sympathy with the Minister in her predicament. It is not really her fault. This debate has most clearly underlined what we all suspected had happened and what my noble friend Lord Higgins said; that is, the Government resisted the scheme until the last minute. Political pressure made it necessary for them to do something. They cobbled it together at the last minute. The Treasury says that we must put an overall limit around the cost and that we must go through all the details to ensure that it is not an open cheque. It is taking a lot of time to do because some of the data are not available. That is very obvious from the discussion that we have just had.
  But we had two commitments from the Minister. I want to make a point about one of them. On the commitment about any contribution to a statutory levy or anything of that sort, we have had a very clear statement. Indeed, it would have to be in the legislation if that was going to be done. So we can he satisfied with that. I do not think that there will be any voluntary contribution from the private sector because it raises all the moral hazard issues that we have discussed elsewhere.
  I am still puzzled about the point on the means test because we are talking about two types of means test here. That is probably the difficulty about the precise wording in that means test point. As I understand it, the Minister has given us another commitment tonight, which is that the means test, as we normally understand it, will not apply to this scheme. Perhaps I can develop that a little further. I can see that some sort of means test may be needed in the scheme itself; in other words, it could be decided that a different proportion of financial assistance is given to people with a smaller income than to those with a greater one. If that is described as a means test, I fully understand the Minister's point.
  The Minister talked about the fact that no account would be taken of potential beneficiaries' other income and capital outwith the financial assistance being given. That was a very clear commitment. I began to worry that the Minister would not even contemplate some form of amendment that would encapsulate that, making me concerned about whether it was a real commitment at all. If I have understood her right, it would be of at least some comfort to some people to know that their income and capital other than that which would come from within the scheme would not be taken into account in the final payments. I am not a drafter, but I would have thought that it was not beyond the wit of man to make that clear in the Bill.
  Baroness Hollis of Heigham: The noble Lord is absolutely right in distinguishing between the two forms of assessment. We often use the word "targeted" as an alternative to "means test". I suspect that we will target in this scheme, but not necessarily in that way.
  I will repeat my words, as I chose them very carefully. Planning work on the FAS is proceeding on the assumption that we will not determine eligibility for assistance from the scheme through an assessment of any income or capital which an individual may have, other than, as the noble Lord accepts, the pension income that they have lost through a scheme winding up underfunded.
  Lord MacGregor of Pulham Market: Is that an assumption or a guarantee?
  Baroness Hollis of Heigham: Planning work is proceeding on that assumption. That is how we are setting up FAS in the work in progress.
  Lord Higgins: My suspicions about what the noble Baroness originally said have just been confirmed. We will need to look carefully at her remarks. My noble friend is right to distinguish various forms of means

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  test. We are all clear what we are talking about. I need to look again at the exact wording that the noble Baroness has just used.
  I accept that some of the calculations may be complex, but, if that is so, one is bound to ask how the Government arrived at the figure of £400 million—or, in present value terms, £250 million. One cannot help suspecting that there was a general feeling, "There is going to be a revolt. How much can we buy them off for? We need a nice clear figure", and that the answer was £400 million. If the noble Baroness is right in saying that one cannot make those calculations, then there was no basis for giving any figure at all, unless she wishes to tell us how it was calculated, however complex or simple the formula.
  I return to an important point that we ought to be able to deal with. The issue of eligibility is crucially important for companies whose schemes have collapsed. At least on the timing aspects—the points in the noble Baroness's note which I quoted earlier—there is no reason why it should not be decided before the Report stage what the cut-off dates are at either end. The Government could put that in the Bill and everyone would know where they stood. To that extent at least, members in some companies would know whether they were outside the scheme and would get nothing, or whether they were in the scheme and might get something. There is no reason why that should not be decided before the Report stage.
  Similarly, on solvent and insolvent companies, there is no reason why the Government should not take a view and include it as an amendment to the Bill, deciding whether solvent schemes are in or out. That decision does not have to wait. Unless the real problem is Treasury-driven, why cannot those decisions be taken by the Report stage? The noble Baroness is always immensely helpful. I hope that she will go back to her department, in particular to the Chancellor, and say that these aspects should be clear before the Bill passes into law.
  7.15 p.m.
  Baroness Turner of Camden: I am grateful to the noble Lord, Lord Higgins, for raising again the issue of solvent and insolvent companies. I had mentioned it earlier and I intended to raise the matter if it arose on one of the amendments further on.
  It seems to me that it is most unfortunate for people whose companies wound up their schemes before 11 June 2003, which is the time frame so far as they are concerned. Many of them have paid for a long while into schemes but now find themselves with a severely diminished pension or very little at all. I have a long paper here which was prepared by an individual who was involved in one of these schemes. He points out that the number of companies involved is quite small and the number of individuals involved is really quite small in the general scheme of things. He states that there are total of 15 schemes, and that the total number of people involved is 3,732.
  These are cases where the companies wound up their schemes before they became insolvent. They became insolvent some time later, and then the individuals concerned found themselves with no recompense at all. The writer of this paper makes the point that it is all very well saying that the companies concerned have a moral obligation, but if they are hard up financially they will probably be unable to make up the shortfall. Without legislation, how can they possibly obtain any money from the sponsoring company, even if the sponsoring company has any?
  The people who raise these issues—and I gather they will be going to the Parliamentary Ombudsman about them—have serious problems. The Government should look carefully at this before Report.
  Baroness Hollis of Heigham: I take it that we are dealing with Amendment No. 317D? The noble Lord did not move it, but we are now dealing with it.
  Lord Oakeshott of Seagrove Bay: Yes.
  Baroness Hollis of Heigham: I tried to respond to the question about solvent and insolvent companies. Under FAS, taxpayers' money is used as assistance of last resort where employers are not in a position to fulfil their promises. I mentioned earlier that we have to ensure that employers cannot simply duck out of their responsibilities, leaving the taxpayer to pick up the pieces. We do not encourage or allow employers to evade responsibility for their schemes.
  There would be an issue of moral hazard involved if we suggested that the Government were willing to pick up, as a last resort, an underfunded scheme where the employer was solvent. We have to be very aware of what we might be appearing to do in that situation.
  It must be remembered that such employers will have received taxpayers' money already on the basis of their promise to provide a pension; they have had tax relief; if the scheme is contracted out they have had a reduction in NI contributions. I do not believe that we should allow employers to take advantage of those benefits and then renege on the agreement when they are solvent and dump their responsibilities into the Government's lap. In this respect, we come back to some of the moral hazard questions that were raised earlier in the discussion.
  In some situations—this is a fresh point, which I am sure the Committee will be glad to hear as opposed to the reiteration of previous points—the structure of these companies can be complex, and although it may appear that the principal employer of a particular scheme is unable to meet the full cost of scheme liabilities, there may be connected companies that can do so. And even though there may not be a legal requirement, they can sometimes voluntarily do so.
  The obvious case in point is the Seeland pension scheme. The Committee will remember that in November 2003 Maersk announced that it was proposing to fund the deficit in the Seeland pension scheme on a full buy-out basis, despite there being no legal obligation to do so. The company said that it made the decision in recognition of the spirit of the

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  new legislation announced by the Government in June 2003 and its commitment to being a good employer in the UK. This case, which is quite significant, showed that even though there may not be a legal obligation for a company to meet the full deficit of a scheme, it can none the less—and many of them will—act to make good its moral obligations, ensuring that pension scheme members do not suffer significant losses to their pension provision. Had there been a statement that the Government would step in, I very much doubt that Maersk would have made the statement that it did.
  When one talks about moral hazard, it is not abstract vocabulary. Here was a real case where, had the Government intervened, I do not think that Maersk would have responded in the way that it did. All credit to the company that it felt able to do so.
  I am sure that the Committee will agree that we should avoid the use of funds in such cases, particularly where companies or connected companies are willing and in a position to make good the deficit.
  I have said that we are still exploring exactly how "insolvency" is to be defined in the context of FAS and we are considering the position of schemes where companies may be able to provide some additional future contributions. We are also exploring the legal issues relating to the possible provision of assistance to members of schemes sponsored by solvent employers.
  In parallel, we are requesting further information on schemes winding up underfunded with solvent employers, and we are offering those affected by the wind up of such schemes the opportunity to voice relevant issues in consultation with FAS. This will give us a strong evidence base on which to go forward with the difficult decisions that have to be taken. It would be wrong to pre-empt the outcome of this consultation process. We have got to work with stakeholders, members of the pensions industry, those affected by pension losses, and with other bodies such as the PPF and the regulator, to ensure that we get the balance right.
  What I am really saying on the question of solvent and insolvent companies is that the Government have still not determined their view. We are acquiring relevant information to see what the liabilities and consequences might be; we are seeking views on this in consultation. When I can inform the Committee how the Government's mind has formed on this and what the outcome is, I shall be happy to do so.
  But this is not a closed issue. I can tell the Committee from the various briefings that I am involved with that this matter is being worked through at the moment. I cannot give the information or the assurances that the noble Lord seeks—not because we are trying to conceal anything but because we have not yet decided how best to take this issue forward.
  Lord Oakeshott of Seagrove Bay: I apologise to the Committee if I inadvertently caused confusion by moving the four amendments together. We have had a
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  good and wide-ranging discussion, during the course of which it became apparent that some matters can be clarified but that it may not be possible with others.
  As to the four amendments, I shall read what the Minister said in reply to Amendment No. 317A, but I feel that it was a constructive response. I shall withdraw all four amendments together at the end. I accept that Amendment No. 317B is rather flying a flag. I shall withdraw it. It is what we believe but we would not expect the Government to accept it.
  However, as regards Amendments Nos. 317C and 317D, the Minister and Ministers in the other place have said that this financial assistance package must be brought in soon—the Minister has spent a great deal of time saying how urgent the matter is—and I cannot believe that we are seriously being told that it could take more than 18 months. But, if my mathematics is right, that is how long it will take; from May, when it was introduced, until six months after the Act comes into effect next spring. Are we seriously saying that it is conceivable that it could be at least 18 months before payments are made? It is a pretty shocking position if the Government are not prepared to accept an amendment to that modest effect. We shall certainly press that issue.
  So far as concerns Amendment No. 317D in relation to solvent and insolvent employers, as the noble Baroness, Lady Turner, said, this may not affect many people but they are very hard cases. I think particularly of Bradstock and Dexion, about which people have been writing to me and, no doubt, to other noble Lords.
  It identifies very much the difference between this side of the House and the other because, frankly, it is an issue of principle. It is an issue of eligibility, as the noble Lord, Lord Higgins, said, and it is also an issue of principle. It is either right or it is wrong to include people in that position in the scheme. It is not a question of how much it costs; it is a question of whether they should be in or whether they should be out. If the votes are there on Report, it will be a reasonable thing to insist on. Those issues of principle, those issues of eligibility, and the issue of the date when people are or are not eligible, are very important.
  The question of the gap is particularly important in the Turner and Newall case. Is it conceivable that there could be people who were covered when funds go into wind up but who are now, or roundabout now, covered neither by the financial assistance scheme nor by the PPF? We take the view that it is absolutely inconceivable that that should be so. Again, it is a straightforward issue of principle and eligibility.
  So the questions of date and the solvency and insolvency of employers are, in our view, perfectly proper issues of principle that need to be decided independently of detailed work on collecting data. We shall certainly be returning to those issues on Report. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 317B to 317D not moved.]
  Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 318:
  Page 208, line 16, leave out from second "the" to end of line 18 and insert "Board of the Pension Protection Fund ("the scheme manager")"
  The noble Lord said: I shall be very brief in view of the lateness of the hour. I hope that people will feel the relative simplicity of these four amendments, Amendments Nos. 318 to 321, which I shall move at the same time. They all basically try to give effect to one proposal. Although clearly the money—the £400 million or whatever comes out of the financial assistance scheme—must be ring-fenced and not mixed up with the Pension Protection Fund pot, it seems illogical effectively to set up a separate quango to administer it. It seems a practical and sensible suggestion that the Pension Protection Fund's board and administration should handle the money as well, although obviously in a parallel and separate way. That would be simpler; it would avoid duplication and ought to save on costs. I beg to move.
  The Deputy Chairman of Committees (The Countess of Mar): I point out very gently to the noble Lord that he moves the first amendment and speaks to the other three.
  Baroness Hollis of Heigham: I shall be very quick because, like everyone else, I am aware of the time. We have not ruled out the possibility that the board of the PPF may have some role in administering the scheme if, as the noble Lord said, that offers the greatest efficiency. Clause 274(3)(g) allows for regulations to do just that. However, such important details need to be worked out in consultation with those involved. Until we have completed that consultation, including with the PPF chairman, trustees and so on, it would not be sensible to require the board of the PPF to manage the affairs and to rule out all other options. What the noble Lord asks for may happen, but we are not there yet.
  Lord Oakeshott of Seagrove Bay: Given the need for speed, it would be a good idea to take that decision sooner rather than later—to rule it in and get on with using the existing structure. That would be better and quicker. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 319 to 321B not moved.]
  On Question, Whether Clause 274 shall stand part of the Bill?
  Lord Higgins: It has been a helpful, if somewhat frustrating discussion. The noble Baroness says that she can understand that. We have to consider how best to move forward. Given her reply on means-testing and subject to looking at the wording very carefully, I regret that she did not feel able to say that she would come back with an amendment on Report. That will mean that we will have to try to draft one, and
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  probably vote on it. I hope that it will go to another place and the Government can then decide how to deal with it.
  So far as the overall issues are concerned, something that really needs to be decided—it does not depend at all on the inquiries, data or anything else—is the question of eligibility, with regard both to the timing and the dates and to the solvency or insolvency point. There is no reason why the Government cannot take a decision on that. If they then table an amendment on Report, we can decide whether it is good or bad, but at least Parliament will have had some say in the matter. If the Bill goes through in this form, Parliament will have had no effective say about these matters whatever.
  My final point relates to what I have said, but it may help to clarify the situation. Are we to understand that the £400 million/£250 million is a limit or not? If we know where we are on that, some other parts of the jigsaw may fall into place.
  7.30 p.m.
  Baroness Hollis of Heigham: On the last point, the Government have decided that £400 million is the appropriate sum. Clearly, that does not rule out any government, including a government formed by the parties opposite, revisiting that issue should they be so minded. However, that is not the Government's position at the moment. Their position is that £400 million is the appropriate sum of money with which to finance the financial assistance scheme.
  On the second point about the means test, I cannot go further than I have already gone. The noble Lord can move his amendments. I have given him such assurances as I can. It would be foolish of me to try to give categorical undertakings of what may or may not happen five, 10 or 20 years down the line. If I can clarify things further as decisions become clearer and we collect more information, I shall be delighted to do so. But it is no use trying to push me into saying things that I am not in a position to say. I cannot go further than I have gone today.
  Finally, on the broader constitutional points that the noble Lord raised, I accept that the result is not a satisfactory solution. It has come up in the sense that Members of the Committee do not have the detail which I understand that they could reasonably expect to have. But if we were to follow the path that noble Lords seek—to have either a complete structure in place and be able to bring it to them or to start chipping away at contours or dimensions of the scheme—the risk would be either to ensure that other bits of the scheme that we think are appropriate cannot be resourced or funded as we think appropriate or meritorious, or that we would delay the implementation of the scheme as of April 2005.
  All of us, not just the Government, are, in that sense, to some degree in a corner. I perfectly accept that the scheme has come up at a fairly late stage as a result of the situation of the scheme members of ASW and so on being drawn very forcibly and properly to the Government's attention. As a result, we have not had the usual lead-in that goes behind such structures. In

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  my experience, it is often a couple of years before such a scheme would get off the ground. We are trying to do it infinitely more rapidly and we are trying to do trading on it.
  I cannot go beyond that. I am grateful to noble Lords, as I think that the Committee could have been harsher in some ways on the Government. Noble Lords have shown to some extent an understanding of the situation which the Government face. I am grateful for that understanding. All I want noble Lords to understand is that it is not through lack of application, work or industry, let alone cynicism or malevolence, that I cannot give the Committee the assurances that it would like today. I cannot do it. When I can, I shall be happy to do so.
  It may be that by Report the Government have got far enough in their thinking and information to be able to make some of their positions clear. I do not know. But to push government against what they feel they can do is not sensible, because ultimately the scheme must be able to deliver within its finite resources compensation or assistance. We must be able to do that as decently and as expeditiously as we can. I cannot give the Committee the assurances it seeks. I shall give the noble Lords the assurance that they seek when I can. Until that point, to try to push me to say, "One wall will be here, but we do not know where the other three walls will be. There will be a roof and we think that it will have these dimensions" is not a sensible way to ask the Government to proceed.
  I thank noble Lords for the relative courtesy that they have extended on these issues and their understanding of where we come from. I hope also that the Members opposite do not think that there are some easy issues that somehow the Government are ducking
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  out of by not answering today. Believe me; it cannot be done in the way that your Lordships would wish at this point.
  Lord Oakeshott of Seagrove Bay: I should just like to make a couple of points in response to that. We are not in any way seeking to chip away anything. There is nothing there to chip away. We seek to help lay one or two clear foundations. That is how I would put it.
  We fully understand that the Minister is not in a position to give assurances on some points today, but we hope that our arguments and the strength with which we have made them—courteously, I hope—will enable her to go back, consult and be in a position to give some commitments on Report, given parliamentary timing and the nature of the Bill.
  Lord Higgins: I am not going to ask the Minister to reply again; I merely make the plea that there is no reason why the Government could not table an amendment on eligibility on Report. The only reason they will not do so is because they have failed to take the relevant decisions. There is no lack of data or anything else. We are not asking the Government for a completely tied-up scheme in every respect. But to the extent that it can be clarified by the Government taking decisions, there is no reason why it should not be done.
  I very much hope that the noble Baroness will go back to the department and say that this is something where Parliament believes a clear decision by the Government should be made and not left to an arbitrary decision by regulation some time after the Bill is passed.
  Clause 274 agreed to.
  The Deputy Chairman of Committees: The Committee stands adjourned until Monday 18 October at 3.30 p.m.
  The Committee adjourned at twenty three minutes before eight o'clock.

  Royal Courts of Justice, Belfast
  Royal Courts of Justice, Belfast
  Questions for Written Answer
  Questions for Written Answer
  Insurance Premiums
  Insurance Premiums
  Depleted Uranium
  Depleted Uranium
  Air Quality
  Air Quality

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

  The UK will commit at least £100 million next year for humanitarian and development assistance for Sudan provided there is early signature of a comprehensive peace agreement and the Government of Sudan live up to their commitments on Darfur. The £100 million for next year will enable us to maintain our significant response to support for the humanitarian crisis in Darfur. It will also enable the UK to contribute to other humanitarian, recovery and reintegration needs in Sudan. We look forward to the signing of a comprehensive peace agreement before the end of the year and to working with the new administrations in Sudan to establish a development programme that contributes to eradicating poverty and building a safer Sudan for all.

  Palace of Westminster: External Security
  The Minister of State, Home Office (Baroness Scotland of Asthal)
  The House will be aware of the review by the Security Service and Metropolitan Police of the security of the Palace of Westminster. This report is, of course, a matter for Mr Speaker, for the Lord Chairman and for the House authorities. However, it may be helpful if I update the House on the steps we have been taking to enhance the external security of Parliament and the surrounding area.

  The Government have always set out clearly the nature of the threats that we face and the importance of keeping all our security measures and contingency planning under constant review. Therefore, alongside this formal review, my right honourable friend the Home Secretary asked the Intelligence and Security Co-ordinator, Sir David Omand, earlier this year to gather a small team to provide advice on protective

  Title

  Details

  Target

  KT 1a—Provision of Available Force Element Days

  The measurement of the number of days when the material condition of a vessel enables it to perform its scheduled task on that day.

  To provide Commander-In-Chief Fleet (CINCFLEET) with the target level of available force element days agreed in the CINCFLEET/Defence logistics organisation (DLO) customer supplier agreement (CSA).

  KT 1b—Provision of Ready Force Element Days

  The measurement of the number of days when the material state of a vessel enables it to meet its required readiness category.

  To provide CINCFLEET with the target level of the ready force element days agreed in the CINCFLEET/DLO customer supplier agreement (CSA).

  WS 22
  security measures outside the Houses of Parliament and more generally in the central Westminster area.

  As the House would expect, the Commissioner of the Metropolitan Police constantly reviews policing activities around the Whitehall and Westminster area. Operational police deployments have already been increased to counter the potential threat of vehicle bombs. In addition, we have already agreed further enhancements to the support for operational policing of the area including work on a new control room and CCTV.

  We will also be discussing with Westminster City Council, the Mayor, Transport for London and other relevant authorities whether any further physical measures are required to provide additional protection around the Palace of Westminster. The Government recently tabled an amendment to the Civil Contingencies Bill, which will allow highway authorities to make an anti-terrorist traffic regulation order, on the application of the Chief Constable. As we indicated in laying the amendment, this is not specifically intended to control vehicle access around Parliament but it will make it easier for the police to respond to particular threats by further controlling traffic.

  While there are no plans for any major programme of road closures, we are determined that we should avoid a situation in which a series of steps, which may be sensible in themselves, has a wider impact on traffic and public access to this important part of London. We therefore believe that it would be helpful to undertake a wider process of consultation with the Mayor, Transport for London and other authorities and interested parties of the consequences of and options for changes to management of traffic around Parliament should further restrictions become necessary. We believe that this is essential if we are to safeguard and enhance not just the security of the area but also its economic and social well-being.

  Warship Support Agency: Targets 2004–05
  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.

  Key targets have been set for the chief executive of the WSA for financial year 2004–05 as follows:

  WS 23

  Title

  Details

  Target

  KT 2—Timely Completion of Upkeep Periods.

  The measurement of the amount by which the upkeep periods overrun.

  To meet the planned delivery dates for vessels undergoing deep maintenance and repair within the agreed upkeep factor tolerance.

  KT 3—Timely Completion of the High Priority Capability Improvement Programme

  The measurement of the number of high priority upgrades Implemented in accordance with the agreed and published installation plan.

  To fit 87 per cent. of the high priority, type A capability improvements (alterations and Additions—A and A) selected by the equipment capability customer (ECC).

  KT 4—Provision of Single Living Accommodation

  The measurement of the increase in available single living accommodation (SLA).

  To provide CINCFLEET, 2SL/CNH and naval base lodger units with the required quantity and quality of single living accommodation for their entitled personnel as articulated in DLO CSA.

  KT 5—Provision of Operational Support Services at the Naval Bases.

  The measurement of the delivery of operational support services to a satisfactory standard.

  To provide CINCFLEET with the operational support services articulated in DLO customer supplier agreements (CSA) at the agreed ISO 9000 quality management standard.

  KT 6—Maintenance of WSA Capacity to Support the Naval Force Generation Plan

  The assurance that the agency has the capacity to contribute to the naval force generation plan.

  To achieve a satisfactory assessment against all elements of the agency's contribution to the naval force generation plan.

  KT 7—Delivering Planned Efficiencies

  The measurement of the delivery of planned efficiencies.

  To ensure delivery of 90 per cent. of the planned efficiency savings in the DLO benefits tracking tool that are scheduled to be achieved this financial year.

  BBC Digital Television Services: Independent Review
  The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
  My right honourable friend the Secretary of State for Culture, Media and Sport has today made the following Written Ministerial Statement.

  I have today placed the independent review of the BBC's digital television services by Professor Patrick
  WS 24
  Barwise in the Libraries of both Houses. The report is also available electronically on the department's website www.culture.gov.uk, together with a copy of the supporting report from Ofcom Assessment of the Market Impact of the BBC's New Digital TV and Radio Services.

  In response to the review, I have asked the BBC to give me its initial response to the report by the end of November. I will then consider whether further action is needed in the context of Charter review.

  I will publish the independent review of the BBC's digital radio services shortly.