Sitting of 10 February 2005

Preamble
The House met at eleven of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Oxford): The LORD CHANCELLOR on the Woolsack.

Small Business Service
Lord Harrisonasked Her Majesty's Government:
What plans they have to develop the Small Business Service.
Lord Davies of Oldham: My Lords, the Small Business Service will halve in size from its current complement of 400 to 200 staff by April 2006. It will have less direct involvement in the delivery of programmes. It will focus increasingly on providing a centre of expertise, leadership and challenge on small business matters within government and across the regions. It will influence policies and behaviour in pursuit of the Government's enterprise agenda.
Lord Harrison: My Lords, I thank my noble friend for that Answer. What more can the Government and the SBS do to promote SME formation among women, ethnic minorities and in the 15 per cent of regional areas of Britain that are most deprived? According to the recent SBS report, there have been hardly any increases in the numbers of SMEs among those groups and in those areas.
Secondly, given that the Labour Party is now the party of small business, will my noble friend take this opportunity to repudiate the proposal in the James report to abolish—indeed, to kill—the Small Business Service?
Lord Davies of Oldham: My Lords, my noble friend is quite right: the Labour Party is indeed the party of small business. It will be noted on all sides of the House that the James report indicates that the Opposition have a proposal to remove this service. Our intention with the devolving of Business Link to the regional development agencies is of course to strengthen the regional aspect to which my noble friend made reference. We are aware that particular sections of the community need support in these terms and we will extend and continue to provide that.
Lord Razzall: My Lords, does the Minister accept that, whether or not the Labour Party is the party of small business, it is certainly not the party of small government? Does he not agree that his own Answer demonstrates that perhaps the moment has come for the Government to demonstrate a movement towards being the party of smaller government by abolishing the Small Business Service and spending the money helping small businesses in many of the other ways
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with which I am sure your Lordships could help the Minister? The obvious example would be raising the threshold at which small businesses pay business rates.
Lord Davies of Oldham: My Lords, the House will know that the noble Lord has put a most modest gloss on the Liberal Democrat proposals, which are of course to abolish the DTI entirely, with all the consequent ramifications for the valuable work done by that department. I emphasise that the Small Business Service is valued by small businesses. The increased use of its website and the increased indication of small business customer satisfaction with the provision of the service is testimony to that. It should be recognised that, among many sections of our community, setting up a small business involves a very great risk indeed, and that help, advice and guidance are welcomed. We intend to continue providing that service.
The Countess of Mar: My Lords, with the decline of agriculture and farming in rural communities, what is the Small Business Service doing to encourage people to open businesses in order to keep the rural communities intact?
Lord Davies of Oldham: My Lords, that is a very important point indeed. We are conscious that often the strategy for people who are in occupations where significant change is taking place—obviously farming is one of those—are in need of help and advice on how resources can be redeployed. They may even need access to a certain amount of capital support to get them started. It is the role of the Small Business Service to provide that support, often to individuals who have limited experience of setting up such a business. We recognise the strength of the noble Countess's point.
Baroness Miller of Hendon: My Lords, what is the Government's response to the report by the Small Business Network—the very people that the Small Business Service is supposed to help? The report states that,
"the SBS is a bureaucratic waste of time and money-.
Lord Davies of Oldham: My Lords, we have had many other communications from those who use the service which show how well valued it is. There have been 5 million visits to the information website over the past year. We have responded to the needs of small businesses. I will single out one obvious area that is often referred to by the Opposition and other parts of the House—the need to control regulation and the extent to which small businesses have to keep up with the necessary regulation imposed on them. In consultation with them, we have agreed to limit the dates on which regulations come into force each year. We have brought a whole new area of regulation within that framework so that instead of small businesses being anxious about regulations coming in severally on dates throughout the year, everything is

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concentrated in one period. We are able then to give them advice and support on how to comply with those regulations.
Lord Taylor of Blackburn: My Lords, does my noble friend agree that, unless the economic competitive climate is right in rural areas, no matter what the Government do people will not take up the initiative?
Lord Davies of Oldham: My Lords, that is absolutely right. Small businesses have as much need as any other part of our society for a strong, vigorous and competitive economy. My noble friend will recognise the Government's achievements in terms of this broader framework which is leading to the establishment of greater numbers of small businesses than we have ever seen before.
Lord Patel of Blackburn: My Lords, I totally agree that the Government have an excellent policy for small and medium-sized businesses. At the same time, however, I am sure that the Minister will agree that ethnic minority businesses have a different culture. For that reason, they are not in a position to take advantage of what is offered to them. What steps are the Government taking to ensure that ethnic minority businesses are also benefiting from our policies?
Lord Davies of Oldham: My Lords, my noble friend makes an exceedingly important point. We are all conscious that many in the ethnic communities prove to be enormously successful in the development of small businesses. But we can always extend services, especially against a background where some of our ethnic communities are concentrated in areas where other opportunities for work are fewer. We are keen to expand the service in those areas. That is why the emphasis from Business Link and the regional development agencies is an attempt to bring the whole strategy closer to people so that the areas can in fact meet discrete needs such as my noble friend indicated.

Anti-terrorism Measures
11.8 a.m.
Lord Holme of Cheltenhamasked Her Majesty's Government:
Whether the advice of the Lord Chancellor was explicitly sought on the implications for the rule of law of the proposed new anti-terrorism measures.
The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): My Lords, the Lord Chancellor has a constitutional role to protect the rule of law. That role has been recognised in the Constitutional Reform Bill. Decisions on new anti-terrorism measures are being taken collectively by the Government. I am explicitly involved in that
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process. I will discharge my duty to protect the rule of law. This Government are committed to the Human Rights Act 1998 and the rule of law.
Lord Holme of Cheltenham: My Lords, I thank the noble and learned Lord for that outstandingly uninformative Answer. I wonder whether he could help us a little further. Given that he has reiterated his residual role, albeit an important one, as the guarantor of the rule of law and given that it was widely reported that the Attorney-General had expressed the view that the new anti-terrorism measures involving house arrest without trial for suspected terrorists might fall foul of the courts, while I accept that he cannot tell us what was said and to whom, can he confirm whether the Lord Chancellor was in the loop? Did the Lord Chancellor share the Attorney-General's concerns? Was the Lord Chancellor an active participant in that debate in government, or did he confine his role to a reassuring interview with David Frost?
Lord Falconer of Thoroton: My Lords, I cannot repeat what was discussed between Ministers or the Attorney-General, but I can confirm that the Lord Chancellor was in the loop. In his Statement about the Law Lords' judgment, the Home Secretary made it clear that because the Law Lords had ruled that Part 4 was incompatible with the Human Rights Act, it would be replaced with something compatible. I can think of no clearer demonstration of this Government's commitment to the rule of law.
Lord Henley: My Lords, as the noble and learned Lord was in the loop, as he puts it, can he assist the House by outlining where the Government are on this legislation, which the Home Secretary announced would be brought forward as soon as possible? We have heard nothing in the two weeks or so since that announcement. Before we adjourn for this brief Recess, perhaps the noble and learned Lord could tell us when the legislation is to be brought forward.
Lord Falconer of Thoroton: My Lords, I cannot give a running commentary on the timing of the legislation. The Home Secretary will bring it forward when it is ready.
Lord Goodhart: My Lords, whoever gives legal advice to the Government, whether it is the noble and learned Lord the Lord Chancellor or the noble and learned Lord the Attorney-General, should not disclosure of that advice be subject to the public interest test and not to absolute exemption under the Freedom of Information Act, as it is now? After all, it is we as taxpayers who have paid for that advice.
Lord Falconer of Thoroton: My Lords, in relation to the advice from the Law Lords, there can be no institution in the world that does not seek advice from its lawyers and keep it private. That is the right approach. On the Iraq issue, the Attorney-General set out in legal terms the lawful basis of the war. On

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everything else, the norm should be that such information is not disclosed. That is the view taken by every other institution and it is the right one.
Lord Thomas of Gresford: My Lords, does the noble and learned Lord the Lord Chancellor consider that control orders decided by the Home Secretary on reasonable suspicion are compliant with the European Convention on Human Rights?
Lord Falconer of Thoroton: My Lords, when it is brought forward, the detail of the Bill will determine compliance with the Human Rights Act. We should wait until the Bill is before us before we consider the detail.

European Union: Taxation
11.12 a.m.
Lord Pearson of Rannochasked Her Majesty's Government:
Whether under European Union single market legislation the United Kingdom has potentially ceded control of direct taxation to the European Union.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): No, my Lords. As the European Court of Justice repeatedly acknowledges, direct taxation is a matter of member states' competence. That competence must be exercised in accordance with Community law, which includes the provisions of the European Communities treaty and any legislation adopted by the Community. The Government successfully defended unanimity for EU tax measures at the Inter-Governmental Conference last June, and there will therefore be no change to the position under the new EU constitutional treaty.
Lord Pearson of Rannoch: My Lords, I thank the noble Lord for that reply, which reminds us of the Prime Minister's red herring in his negotiations on the constitution, when he assured us that he was keeping control of our borders. As we now discover, it has swum off into the tentacles of Brussels.
On taxation, first, can the noble Lord now estimate, perhaps to the nearest few billion, the loss to the Exchequer resulting from the EU's invasion of our corporation tax, which is a direct tax? Secondly, why should not the EU use the same or other clauses in the treaties—I am thinking particularly of Clauses 43 and 44 of the TEC—to bring the rest of our direct taxation system into line? Is this not already happening to Estonia and the other new countries of the European Union? Why not us?
Lord McIntosh of Haringey: My Lords, if the noble Lord cares to table a Question about borders, that
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Question will of course be answered. As for losses due to EU control of corporation tax, there is no such control on the part of the EU over that tax.
Lord Tomlinson: My Lords, does my noble friend agree that the statement from the noble Lord, Lord Pearson, is a totally unwarranted attack on the work of the noble Baroness, Lady Thatcher, and her excellent European Commissioner, the noble Lord, Lord Cockfield, in creating the European single market? That was work they did in the days when the Conservative Party was enthusiastically pro-European, as was shown in the degree to which it surrendered national vetoes in the Maastricht Treaty. Does my noble friend not further agree that the statement from the noble Lord, Lord Pearson, is merely him peddling yet again his usual brand of Euro-nonsense?
Lord McIntosh of Haringey: My Lords, chat is a totally unjustified attack on the noble Lord, Lord Pearson, who does not, I understand, take the Conservative Whip.
Baroness Royall of Blaisdon: My Lords, does my noble friend agree that there is still huge potential to be exploited from our membership of the single market, especially by business? Can he estimate the benefits that have accrued to average families living in the United Kingdom as a result of our membership of the single market?
Lord McIntosh of Haringey: My Lords, my noble friend's question is closely related to the role of the European Court of Justice. It has an essential role to play in maintaining the four fundamental freedoms: the right to free movement for workers; the freedom of establishment; the freedom to supply services; and the free movement of capital. As my noble friend Lady Royall has rightly implied. these are of huge benefit both to business and to individuals in this country.
Lord Howell of Guildford: My Lords, I am grateful for all the praise for past Conservative efforts. II makes a slight change from the usual chorus from the Benches opposite. However, does the Minister recall, first, that a directive is coming up on 1 July this year to hannonise all tax treatment of savings income? Secondly, does he recall an article in the Economist last August—I am sure that he does because he is extremely well read—which pointed out that, whatever governments may be doing, the ECJ and the European courts are driving forward the harmonisation of all forms of taxation and will continue to do so? Moreover, under the proposed constitution, the European Court of Justice will move right into the driving seat. In the light of those points, would the Minister like to modify what he has just said?
Lord McIntosh of Haringey: My Lords, I am afraid that, unusually for him, the noble Lord, Lord Howell, is confusing the perfectly legitimate provisions for enhanced co-operation between member states who choose to co-operate in tax matters and directives that

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apply to all member states. Any legislation on direct taxes and any move towards qualified majority voting would need not only unanimity among the member states but ratification by parliaments.
Lord Taverne: My Lords, does not the emptiness of the Question asked by the noble Lord, Lord Pearson illustrate the fact that there really is no doubt whatever now that, on tax, unanimity must prevail? Should that not be accepted in all parts of the House?
Lord McIntosh of Haringey: My Lords, this is called bracketing, in artillery terms. We have the noble Lord, Lord Pearson, who wants us to have nothing to do with the European Union and the noble Lord, Lord Taverne, who represents the federalist view.
Noble Lords: Oh!
Lord McIntosh of Haringey: If the noble Lord is saying that taxation should be a Community matter—I apologise if I have misunderstood him.
Lord Taverne: My Lords, I was saying that, surely, there should be agreement that, on taxation, sovereignty is not being infringed; the rule of unanimity must apply. That is not exactly a federalist viewpoint.
Lord McIntosh of Haringey: My Lords, I apologise deeply for having misunderstood the noble Lord. Of course, he is right to point out that co-operation in dealing with harmful tax differences is valuable. He is entirely right to say that the unanimity rule must apply.
Lord Pearson of Rannoch: My Lords, since we have a few minutes on the clock, would the Minister be good enough to answer the question I put to him about corporation tax? I did not ask him whether the European Union already controlled it, but whether the Commission and the European Court of Justice had already invaded it.
In his answer to my noble friend Lady Noakes on 20 October last, the noble Lord agreed about that situation, but said that he could not estimate the damage to the economy at that time. I have asked him whether he can now estimate the damage done to the British economy by some 100 judgments in the European Court of Justice against national exchequers and in favour of international business. To the nearest few billion, what sums are we talking about, and how is the Treasury going to replenish that black hole?
Lord McIntosh of Haringey: My Lords, as last October, I deny that there is a black hole. There is no question of estimating losses to the Treasury. The role of the European Court of Justice is unchanged; it is in interpreting European Union law, not in legislating.

Middle East
11.20 a.m.
Lord Hogg of Cumbernauldasked Her Majesty's Government:
What is their response to the announcements that followed the Middle East summit in Sharm el-Sheikh, Egypt, on 8 February.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, the announcement of a ceasefire following Tuesday's meeting between Prime Minister Sharon and President Abbas in Sharm el-Sheikh is excellent news. I pay tribute to Prime Minister Sharon and President Abbas for their courage in seizing this opportunity not only to improve the security situation but also to commit themselves to the road map. While no one should underestimate the difficulties ahead, this is an important step. We hope that the London meeting on 1 March will build on the forward momentum.
Lord Hogg of Cumbernauld: My Lords, I thank my noble friend for that characteristically helpful and informative reply. Does she agree that as regards the Middle East as a region we have to be careful with our optimism, and that that optimism should be tempered with caution because experience in the past has shown that hopes for peace have been dashed by the actions of ruthless terrorist groups? Does she further agree that we should greet the Sharm-el-Sheikh discussions as offering the best opportunity for a negotiated settlement in the Middle East and that Her Majesty's Government should take positive action to assist the parties to resolve the matters of conflict?
Baroness Symons of Vernham Dean: My Lords, while acknowledging that this is an excellent step very much in the right direction, we have to temper that with realism about the amount of ground and the difficulties that still lie ahead. It has taken enormous courage on the side of both the Israeli and Palestinian leaderships to go forward together as they did at Sharm el-Sheikh. Like my noble friend, I have no illusions that there will be many enemies of this process who will want to do everything they can to disrupt it. Certainly we have now got the best chance for peace that we are likely to see for a number of years. For our part, the United Kingdom Government have a responsibility, with our partners in the quartet, to do what we can to help the process. Of course, the London meeting with the Palestinians is an important part of what we are trying to do.
Baroness Northover: My Lords, the meeting in Sharm el-Sheikh is clearly very welcome and one hopes that it is a real breakthrough. As regards the London conference to which the Minister has just referred, can she confirm whether President Abbas will be willing to attend given that the Israelis will not be there? Does

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she agree, as she has certainly indicated, that a return to the road map is the way forward? Does the quartet now have any plans to redraw its timetable?
Baroness Symons of Vernham Dean: My Lords, we have had a number of meetings with Palestinians here in London over the past few days—most recently at the beginning of this week with Salem Fayed, who is taking a leading role on this issue. President Abbas will decide in the light of the meeting in Sharm el-Sheikh—as I am sure your Lordships are aware, other important meetings are going on in the Palestinian Authority areas today—who should attend the London meeting. As soon as we have any definitive news, it will be made available. We have received a very positive response from a number of countries and delegations to come to London.
The question of the road map is now open to be pursued. It is a quite different question and should not be confused with the London meeting, which was never designed as a peace conference. But, given that both sides have now recommitted themselves to the road map, like the noble Baroness I hope that we will see some real movement forward on that.
Lord Janner of Braunstone: My Lords, can my noble friend assure the House that she will do everything in her power and Her Majesty's Government will do all they can to support Abu Mazen in his efforts to dismantle the terror groups and preserve the ceasefire, and the Israeli Prime Minister, Ariel Sharon, in his determination to dismantle settlements and relocate the settlers within Israel?
Baroness Symons of Vernham Dean: My Lords, I can give an unequivocal assurance to my noble friend Lord Janner that we will do everything we can to support both sides in that endeavour. At Sharm el-Sheikh this week, the Palestinians undertook to do everything they can to stop the attacks against Israelis everywhere. I indicated that there were meetings going on today with Hamas and Islamic Jihad, who have said that they were unwilling to make such a commitment before they saw President Abbas today. For their side, the Israelis have talked about stopping all military activities against the Palestinians, prisoner release and their commitment to the road map—which, your Lordships will recall, states that in phase one there should be a freezing of all settlement activity.
I do not want to go further than where we are at the moment. We have an opportunity to find a way forward on this seemingly intractable difficulty. It is the best opportunity that we have had for a long time. Indeed, it is the best opportunity that we are likely to have for a number of years to come.
Lord Howell of Guildford: My Lords, does the Minister accept that the Sharm el-Sheikh outcome is very welcome indeed—as long it is not undermined—particularly as it was achieved without the outside powers breathing down the participants' necks? That is a real gain and is very encouraging. Would it not be right to now see whether Israel could be invited to be
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included in the London meeting on 1 March as the new Palestine state will depend very heavily on Israel's support? Without that support, it will be very difficult to make it viable.
Baroness Symons of Vernham Dean: My Lords, I am grateful to the noble Lord for what he said about the outcome of Sharm el-Sheikh. I am very glad that his assessment is so like my own. I agree with him, too, that it is very important that it was, very obviously, a meeting between two leaders who were themselves committed without necessarily having the supporting cast there. I took that as a positive indication.
Israeli participation in London would change the whole nature of the meeting that we have in mind and which has been carefully negotiated and set up between the parties. I assure the noble Lord that the Israelis have been consulted on the way in which the meeting is being put together and on the substance of the meeting. But if the Israelis were to be participants in that meeting it would justify some of the speculation about us trying to undertake some kind of peace conference. That is not what this is about. It is about trying to help the Palestinians with the process of moving towards statehood and finding those institutions of statehood—socially, economically, politically and, of course, in security terms—which will be so vital.
Lord Ahmed: My Lords, what kind of support can Her Majesty's Government give to President Abbas and his government in rebuilding the institutions to which she has just referred?
Baroness Symons of Vernham Dean: My Lords, we have been working very hard on these issues for well over a year now. We have worked hard on the question of the institutions around security. But I want to stress that this is not only a question of security as it affects the borders and the abutting of the state of Israel: it is also the all-important question of internal security within a future state of Palestine. It is a question of law and order. It is all very well calling on the Palestinians to improve their security, but they need the capacity to do so. In order to have that capacity, they must have support, and that is what we have been giving over the past year or so.
We will also be engaged in a follow-up in the political and economic areas. We want to see some agreement coming out of the London meeting for a pledging conference later this year. We also want to ensure that there is agreement to hold a private sector business event to identify investment opportunities in Gaza and the West Bank.
There are three major areas—political reform, the economic programme and security reforms—and I can assure your Lordships that Her Majesty's Government are working very hard on all three levels.
Baroness Miller of Hendon: My Lords, this has been an historic agreement, welcomed by Members all around the House and by the countries involved. As everyone knows, Hamas announced within a few minutes of the agreement being made that it would not

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be bound by it. What advice can the Government give to try to help both sides to deal with this in a mature way so that it does not cause anything to break down?
Baroness Symons of Vernham Dean: My Lords, the noble Baroness has raised what is probably the most important question here. Let us be clear: Hamas is meeting today with Abu Mazen—President Abbas—who is also meeting with Hezbollah. Hamas has not ruled out participating in a ceasefire altogether; it said that it would not be bound by it until it had had the opportunity to discuss it with the new Palestinian president. So let us hope that it reaches the right decision today. We must always keep at the back of our minds the possibility that the enemies of this process—and they will be numerous, on both sides—will at some point try to perpetrate a terrorist outrage in order to provoke a response. That is the history of recent years. I have said to our colleagues in the Middle East that we have to think about how that sort of crisis is handled. It is enormously important, in this period of relative quiet, to think through what should be done if that sort of horror comes to pass and the ways in which people will respond. I think that there is an opportunity to do some forward planning on the matter.

Companies Act 1985 (Operating and Financial Review and Directors' Report etc.) Regulations 2005
11.31 a.m.
Lord Grocott: My Lords, on behalf of my noble friend the Lord President of the Council, I beg to move the first Motion standing in her name on the Order Paper.
Moved, That the draft regulations be referred to a Grand Committee.—(Lord Grocott.)
On Question, Motion agreed to.

Government Resources and Accounts Act 2000 Order (Audit of Public Bodies) 2005
Lord Grocott: My Lords, on behalf of my noble friend the Lord President of the Council, I beg to move the second Motion standing in her name on the Order Paper.
Moved, That the order be referred to a Grand Committee.—(Lord Grocott.)
On Question, Motion agreed to.

Education Bill [H.L.]
Baroness Andrews: My Lords, on behalf of my noble friend Lord Filkin, I beg to move the Motion standing in his name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clause 1,

Schedule 1,

Clauses 2 to 18,

Schedule 2,

Clauses 19 to 26,

Schedule 3,

Clause 27,

Schedule 4,

Clauses 28 to 45,

Schedule 5,

Clauses 46 to 49,

Schedule 6,

Clauses 50 to 52,

Schedule 7,

Clause 53,

Schedule 8,

Clauses 54 to 60,

Schedule 9,

Clauses 61 to 65,

Schedule 10,

Clause 66,

Schedule 11,

Clauses 67 to 69,

Schedule 12,

Clauses 70 to 74,

Schedule 13,

Clauses 75 to 95,

Schedule 14,

Clause 96,

Schedule 15,

Clauses 97 and 98,

Schedule 16,

Clauses 99 to 103,

Schedule 17,

Clauses 104 to 113,

Schedule 18,

Clauses 114 to 119,

Schedule 19,

Clauses 120 to 124.—(Baroness Andrews.)

On Question, Motion agreed to.

Public Services Ombudsman (Wales) Bill [H.L.]
11.32 a.m.
Report received.
Schedule 1 [Public Services Ombudsman for Wales: appointment etc.]
Lord Roberts of Conwymoved Amendment No. 1:
Page 27, line 6, at end insert "after prior consultation with the Assembly"
The noble Lord said: My Lords, I should like to say at the outset that the majority of the amendments in my name and that of my noble friend are simply to remind us of issues raised in Grand Committee to which either the Minister or I promised to return after giving the matters further consideration. The Minister

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has needed no reminder; he has put down his own amendments and written to us about them. We are most grateful to him.
With regard to Amendment No. 1, we are all aware of the issues involved in this all-important Crown appointment on the nomination of the Secretary of State. The ombudsman must be independent, particularly of those whom he has the power to investigate, and that includes the Assembly. Nevertheless, some of us feel that the Assembly should have some say, but not the final say, in his appointment. He is its servant and it is his paymaster. In practice, we understand that the Secretary of State informally consults the party leaders in the Assembly. In Committee, some doubt was expressed on when this informal consultation should take place. My amendment makes it clear that it should be prior to the Secretary of State's formal nomination.
The Minister agreed that the Assembly should be consulted, and he has put down an admirable amendment to this effect. I shall move my amendment only to hear the Minister speak to his. I beg to move.
Lord Evans of Temple Guiting: My Lords, in Grand Committee we listened very carefully to the arguments put forward for making it a requirement that the Secretary of State consults the Assembly before recommending to Her Majesty the appointment of an ombudsman or acting ombudsman. On hearing these arguments, I undertook to bring forward amendments to that effect at Report.
Government Amendment No. 2 puts it beyond doubt that the Secretary of State can recommend an appointment to Her Majesty only after consulting the Assembly. In the light of that, I hope that the noble Lord, Lord Roberts, will withdraw Amendment No. 1, which is intended to have the same effect in relation to the appointment of an ombudsman although not, I note, in respect of an acting appointment, for which no equivalent amendment has been tabled.
Lord Livsey of Talgarth: My Lords, I thank the Minister and the noble Lord, Lord Roberts, for putting down these amendments. They are certainly desirable in terms of the appointment of the ombudsman. It is clear that the Assembly has to be involved, but it has to be involved in the correct sequence, and this appears to have been resolved in Amendment No. 2.
Lord Roberts of Conwy: My Lords, as I have already indicated, I am totally satisfied with the Government's amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Evans of Temple Guitingmoved Amendment No. 2:
Page 27, line 6, at end insert—
"(2) The Secretary of State may recommend that a person be appointed as the Ombudsman only after consulting the Assembly."
On Question, amendment agreed to.
Lord Evans of Temple Guitingmoved Amendment No. 3:
Page 27, line 16, leave out "ten" and insert "seven"
The noble Lord said: My Lords, it was clear from the amendments that your Lordships proposed in Grand Committee and the level of debate that followed that a considerable amount of thought had been given to the tenure of the ombudsman's appointment. I do not wish to repeat that discussion here, but I shall repeat the basis on which the Government have brought forward an amendment that will provide for a single fixed-term appointment of seven, instead of 10, years, as opposed to a five-year renewable appointment that has been proposed a second time.
The key consideration is maintaining the independence of the office, free from any possible influence or pressure on behalf of the Executive. That is why, under existing provisions, ombudsman appointments are permanent to age 65. Furthermore, it is imperative that the tenure of office is such that it can attract top-quality candidates. In that respect, five years is too short a period, and your Lordships clearly felt that 10 years was too long. A seven-year appointment, we feel, strikes the balance.
However, I am afraid that the Government cannot support the proposal that the appointment should be renewable. It is imperative that the ombudsman is, and is perceived to be, wholly independent of government. An ombudsman who may have to seek reappointment is at risk of having that independence questioned. Also, as my noble friend Lord Rowlands said in Grand Committee, what would be the criteria for renewal? Who would do the renewing, and what would be involved?
In summary, the proposal advanced by the noble Lords, Lord Roberts of Conwy and Lord Luke, represents a break with previous practice, which we feel could have very serious disadvantages. I invite them not to press Amendments Nos. 4 and 5. I beg to move.
Lord Roberts of Conwy: My Lords, I shall speak to Amendments Nos. 4 and 5. Since Committee, I have been able to do a little more research into ombudsmen's appointments across the United Kingdom, with the assistance of the Library. Generally speaking, they are appointed for no fixed term and, subject to good behaviour, continue until retirement at 65 or voluntary resignation. The basic pattern appears to have been set by the appointment of the Parliamentary Commissioner for Administration under the 1967 Act.
There was a break in that practice with the appointment of the Legal Services Commissioner under the 1990 Act. He was appointed for three years, with the possibility of reappointment thereafter. There followed the appointment of the Scottish Public Services Ombudsman under the 2002 Act. That appointment is for a period of up to five years, to be determined by the Scottish Parliamentary Corporation. He can be reappointed for a second term. Indeed, he can be reappointed for a third term, but only if,
"by reason of special circumstances, such reappointment is desirable in the public interest".

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It is a Crown appointment on the nomination of the Scottish Parliament.
I believe that the Scottish appointment bears the hallmark of sound thinking and I would like the same procedure to apply to the appointment of the Welsh ombudsman. The Bill originally went too far in proposing a 10-year term, and the Minister accepted the compromise of a non-renewable seven-year term. I do not think that that is quite right either and, therefore, I have no hesitation in asking the Minister to think again.
The advantage of my proposal for a five-year term, renewable for a further five years, is that it allows for the Government's initial wish for a 10-year appointment, but provides a checkpoint at the halfway stage. I suspect that the Government were attracted to the 10-year appointment by their justifiable faith in the present incumbent, Mr Adam Peat. I share that faith, but we must look beyond his tenure and set an acceptable pattern for the future. Nevertheless, I regard a seven-year period as an improvement on the original 10-year period.
Lord Livsey of Talgarth: My Lords, I am pleased that the Minister has proposed a seven-year period of tenure. Having lived in Scotland for seven years and being married to a Scot, I am a great admirer of the Scottish legal system. In this instance, we have to look at the devolution settlement as it affects Wales. We do not have primary legislative powers and, at the present time, our situation is exposed.
As the Minister said, we must have a truly independent ombudsman. In that context, it is important that the Welsh ombudsman has one term only. A seven-year term fits the bill, because it would cover almost two elected Assemblies in the four-year cycle. I am sure that the Minister's amendment is the correct amendment, however seductive the amendment of the noble Lord, Lord Roberts of Conwy, allowing two periods of five years, is. I accept the Minister's arguments against that amendment.
Lord Prys-Davies: My Lords, having listened to this interesting discussion, I conclude that there may be no perfect solution. But a seven-year term of office provides a sound basis that will attract top-quality candidates to the post, without offering life tenure. I am grateful to the Government for tabling Amendment No. 3.
11.45 a.m.
Lord Evans of Temple Guiting: My Lords, I am grateful to the noble Lord, Lord Roberts, for sending me a copy of the research done by the Library on ombudsmen throughout the British Isles, if not the world. The noble Lord picked out the Scottish Parliamentary Commissioner for Administration to support his case. That is a matter for the Scottish Parliament. It would not be appropriate for me to make any comment. All I can say is that this Government consider a five-year term to be too short and renewability to be a factor casting doubt on the ombudsman's independence.
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The noble Lord, Lord Roberts, asked us to think again, but we have all been thinking again on this issue. The noble Lord clearly has been because in Committee on 25 January (at col. GC 372) he accepted that a seven-year period was a sensible compromise, given that the Government were suggesting a 10-year period and that there were other suggestions.
We have had a full discussion of this issue. I think that the consensus is that a seven-year period is correct. I hope that the noble Lord will not move his amendment.
On Question, amendment agreed to.
[Amendments Nos. 4 and 5 not moved.]
Lord Evans of Temple Guitingmoved Amendment No. 6:
Page 28, line 4, at end insert—
"( ) The Secretary of State may recommend that a person be appointed to act as the Ombudsman only after consulting the Assembly."
The noble Lord said: My Lords, we have already considered amendments that provide for consultation with the Assembly about the appointment of an ombudsman. This government amendment will align the appointment process for an acting ombudsman with that for the ombudsman. I am sure that your Lordships will be able to support it.
Noble Lords have heard the Government's arguments about why we cannot accept any amendment that would allow ombudsmen to serve a second term of office. At the risk of repeating myself, any proposal that an appointment should be renewable is not one that the Government can support. It is imperative that the ombudsman is, and is perceived to be, wholly independent of government. The proposal advanced by the noble Lord, Lord Roberts of Conwy, would allow for an acting ombudsman to be appointed as the ombudsman, even if he or she has previously held that office. It is not a proposal that the Government can support. I beg to move.
Lord Roberts of Conwy: My Lords, I tabled Amendment No. 7 in the wake of my Amendment No. 4 setting a renewable five-year term of appointment. Amendment No. 7 would allow the ombudsman to be an acting ombudsman where there was a hiatus between his first five-year appointment and the second. Nevertheless, in the context of the improved Bill, I feel that the amendment is superfluous and I shall not be moving it.
On Question, amendment agreed to.
[Amendment No. 7 not moved.]
Lord Evans of Temple Guitingmoved Amendment No. 8:
Page 29, line 3, at end insert—
"( ) A person is not disqualified under sub-paragraph (1) from being a member of the Assembly."

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The noble Lord said: My Lords, in moving Amendment No. 8 I shall speak also to Amendment No. 9, which has been tabled by the Government and by the noble Lords, Lord Roberts of Conwy and Lord Luke.
In Committee, an amendment proposed by the noble Lord, Lord Roberts of Conwy, drew our attention to fact that the provisions in the Bill about disqualification were ambiguous and so we have looked at them again. The case covered by the amendment before the House is where somebody holding the office of ombudsman decides to stand for election to the Assembly and is successful in the election.
Amendment No. 8 removes from the Bill the question of whether holding the office of ombudsman disqualifies a person from being an Assembly Member. Instead, the question is left to be governed by the Section 12(1)(c) of the Government of Wales Act 1998, as inserted by the Bill, which will make membership of the Assembly incompatible with holding the office of ombudsman. Section 13(3) of the 1998 Act allows the Assembly to disregard that incompatibility if the ombudsman, having been elected, resigns from the office of ombudsman, and if the Assembly thinks it proper to do so.
I hope that your Lordships can support these Government amendments as, when read together with the relevant provisions in the Government of Wales Act 1998, they allow a serving ombudsman to become an Assembly Member, provided he or she relinquishes office as ombudsman following a successful election. I beg to move.
Lord Roberts of Conwy: My Lords, I am delighted to see that the Minister has put his name to Amendment No. 9, which proposes to leave out sub-paragraph (2). That subsection allows the Assembly to resolve that the disqualification of the ombudsman from being an Assembly Member can be disregarded.
The Minister explained the intention behind the provision in Committee, telling us that it was meant to address a situation where an ombudsman was elected as an Assembly Member and intended to relinquish his office. He promised to give the matter further consideration, and he has done so. I am delighted that the Government have agreed to delete this mischievous subsection. I hope that the government amendment that precedes it achieves its stated purpose. 1 shall move Amendment No. 9 when we come to it, because the Government support it.
Lord Livsey of Talgarth: My Lords, this is obviously a large improvement on what we considered in Committee, where it was clearly not on for the ombudsman to be a sitting Member of the Assembly. This has now rectified that. It still means, however, that the ombudsman can stand for election and would obviously have to resign if he or she became a Member of the Assembly.
What worries me a little—perhaps the Minister can comment on it—is what the ombudsman does about his election campaign if he is sitting prior to an
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election. He could, if somebody else was in the running, be in a privileged position in wanting to be a Member of the Assembly. Alternatively, he could be in a position where he could not campaign at all. There is an issue that needs resolving. Maybe he would have to resign one month before the election, or something like that. That stands out as a problem to me, and it could be easily resolved. If that is clarified. I can support the amendment.
Lord Evans of Temple Guiting: My Lords, that is an extremely good question. I do not know the answer to it. Obviously, there must be an answer, which I hope is wending its way from the Box. 1 will return to that a little later.
I said I would return to it a little later, and here I am. An ombudsman standing for election would be in the same position as all other candidates. I do not think that answers the question of the noble Lord, Lord Livsey of Talgarth. The question is whether he can stand as a candidate if he remains the ombudsman. Will his election campaign be conducted with him, or her, as the ombudsman, rather than a candidate trying for a seat in the Assembly? I will have to come back to the noble Lord, and all other noble Lords who are interested in that question.
Lord Livsey of Talgarth: My Lords, I thank the Minister for that answer, which I am sure will ultimately be resolved. Having stood in some elections myself, I know that one can find it extremely awkward to get time off—temporarily resigning from a position, and all kinds of things of that nature. I would not wish the ombudsman to be in a position where his salary was still funded by the Crown, which might assist him in his election campaign.
On Question, amendment agreed to.
Lord Roberts of Conwymoved Amendment No. 9:
Page 29, line 4, leave out sub-paragraph (2).
On Question, amendment agreed to.
Lord Roberts of Conwymoved Amendment No. 10:
Page 31, line 21, after "Assembly" insert "and both Houses of Parliament for their information only"
The noble Lord said: My Lords, your Lordships will be aware of how keenly I feel on this point. Both Houses should be kept well informed about the activities of devolved government and, in this case, we should receive the reports of the ombudsman for Wales.
I made the point at Second Reading, and again in Committee. I return to the charge yet again, hopefully not to the annoyance of your Lordships. My amendment would ensure that both Houses got to see copies of the ombudsman's annual and other reports, which are provided to the Assembly. The amendments make it clear that it is for information only. I am well aware that the statutory laying of a report before Parliament normally implies an acknowledgment of the ultimate supremacy and authority of that body. The purpose behind my amendment, however, is more practical and mundane. It is to ensure that the documents are readily

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available to us in the Printed Paper Offices and the Libraries of each House. There have been difficulties in the past, which we now seek to end.
We are interested in the ombudsman and his activities, and we are entitled to know just how he deals with cases. We have received some welcome assurances from the Minister, but I make no apology for raising the matter again. I do so to ensure that those who should take action to realise those assurances are left in no doubt that they should do so. I beg to move.
Lord Livsey of Talgarth: My Lords, we strongly support the amendment, not only in this place, but in the other place, where a constituency MP might have a difficult situation being resolved by the ombudsman. It might affect a local authority, a school, or possibly the water company or something of that nature, on which the Member in the other place may have been working for a great length of time. The information ought to be made available to Members of both Houses for those sorts of reasons.
Lord Prys-Davies: My Lords, the noble Lord, Lord Roberts of Conwy, has explained that the amendment has been prompted by the difficulties that he has experienced in obtaining copies of reports and information published or received by the Assembly. I have experienced similar difficulties in the past—although I must hasten to add that the staff of our Library have always gone out of their way to trace the copy documents or reports that I have requested.
The noble Lord, Lord Roberts, and the noble Lord, Lord Livsey of Talgarth, have raised an important issue. If we, in this House, are to do our best to scrutinise legislation and policies in the devolved fields, it is vital that we should know to what extent the proposed legislation or polices fulfil the Assembly's requirements. I believe that to be the critical point.
I agree with the reasoning behind the amendment—I agree with one half of the amendment—but I have strong reservations about the constitutional undesirability of placing a duty on the Welsh ombudsman formally to lay his report before both Houses of Parliament. His report is not a parliamentary document. Moreover, to place such a formal obligation before the Houses of Parliament could be seen as inimical to the authority and the responsibility of the National Assembly for Wales. So I believe that another way must urgently be found to produce the results that the noble Lord, Lord Roberts of Conwy, seeks to achieve by his amendments.
Noon
Baroness Gale: My Lords, I agree with my noble friend Lord Prys-Davies. It is true that we have difficulties in obtaining copies of documents that we want from the Welsh Assembly, though it is not impossible. There are ways in which to get those documents, but you have to be proactive. When Rhodri Morgan, the First Minister, met noble Lords not long ago, we told him of our problems, and he was very receptive and said that he would be willing to look at the matter. Perhaps we should pursue the matter
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further with the First Minister. We are all asking for better communication and better ways in which to get documents from the Welsh Assembly, rather than individuals having to go to the Printed Paper Office or ring the Welsh Assembly. If we could achieve that, it would resolve all our problems.
Lord Evans of Temple Guiting: My Lords, I am particularly grateful to my noble friends Lord Prys-Davies and Lady Gale for saying that we should find another route to arrive where we all want to be and to have a good exchange between the Assembly and the two Houses of Parliament. We all agree on the matter; it is a question of how we achieve what we all want.
The noble Lord, Lord Roberts of Conwy, tabled similar amendments in Grand Committee, but those amendments were not qualified by the words, "for their information only". I accept that there are many in this House and in the other place who have an interest in seeing the ombudsman's reports. As I said in Grand Committee, I am sure that the ombudsman designate will note the purpose of these amendments, which is to ensure that your Lordships and those in the other place who are interested should have access to these reports. Once again, I would encourage him to be proactive in providing copies of these reports to the Libraries of both Houses. Where we disagree is on the need for a statutory requirement for the reports to be laid before both Houses of Parliament. No such provision is in effect in relation to the existing Welsh ombudsmen, and I am not aware of that having been a concern or having caused difficulties for Parliament.
Again, as I indicated in Grand Committee, if there were difficulties and it transpired that there was a need for a formal requirement for annual reports to be sent to both Houses of Parliament, the Assembly may wish to use its power under paragraph 14(6) of Schedule 1 to give directions to the ombudsman in relation to the annual report. But I am absolutely confident that that will not be necessary. The ombudsman must publish his reports, so it is not difficult for Members of either House to obtain the information. They do not have to go to the Assembly; they can go direct to the ombudsman or the Libraries here.
The access to information issue was one that came up in Committee and, as my noble friend Lady Gale, said, when we met the First Minister. We are all aware of the importance of smooth and efficient communication between the Assembly and the Houses of Parliament.
Lord Roberts of Conwy: My Lords, I am very grateful for the support for the spirit of these amendments expressed by the noble Lords who have spoken, and to the Minister for his concluding remarks and further assurances. I accept that to make this request a statutory requirement would be excessive. In the belief that nevertheless the substance of the amendment, and the desire of Members of your Lordships' House and the other place to know the content of annual and other reports produced by the ombudsman, have been taken on board, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 [Other excluded matters]:
Lord Roberts of Conwymoved Amendment No. 12:
Page 5, line 22, at end insert—
"after consultation with the Ombudsman"
The noble Lord said: My Lords, in moving the amendment, I shall also speak to Amendment No. 25.
Clause 10 deals with matters that the ombudsman may not investigate, which are specified in Schedule 2. Subsection (2) enables the Assembly by order to add, remove or change an entry in the schedule. In Committee, the noble Lord, Lord Rowlands, argued that it was inconceivable that the Assembly should do that without consultation with, and the agreement of, the ombudsman. I support his contention, but my amendment does not take it quite as far as did the noble Lord, as it provides for consultation only. But that is essential, as any change of entry is bound to affect the ombudsman's work pattern, for which he may have to take on extra staff.
Amendment No. 25 relates to Clause 27, which deals with listed authorities in Schedule 3 and provides for consultation before a change is made with such persons as the Assembly "thinks appropriate". My amendment ensures that the ombudsman is included among such persons. The amendment is not superfluous, as it is not inconceivable that the ombudsman would not be consulted. But the Minister has conceded the substance of both my amendments and spelt out the ombudsman's limited role, too, in education, by being specific in his amendments about excluded matters. I beg to move.
Lord Livsey of Talgarth: My Lords, I found the notes that the Minister sent around in relation to these matters very helpful, and I agree with the noble Lord, Lord Roberts, that we are going in the right direction.
Lord Evans of Temple Guiting: My Lords, I shall speak to government Amendments Nos. 13, 14, 15 and 24 and respond to the interesting comments that have just been made.
The Government are once again indebted to the noble Lord, Lord Roberts of Conwy, as without his probing amendments in Grand Committee we might never have identified the possible unintended consequences at paragraph 6 of Schedule 2. The Government's intention behind the provision was as follows. The particular educational matters set out in paragraph 6 are to be excluded from the ombudsman's jurisdiction and not subject to investigation, just as those matters are now excluded from the jurisdiction of the local government ombudsman. The equivalent exclusion from the jurisdiction of the Local Government Ombudsmen is to be found in paragraph 5 of Schedule 5 to the Local Government Act 1974.
It was not the Government's intention to narrow the ombudsman's jurisdiction in relation to education-related bodies such as Her Majesty's Inspectorate for Education and Training in Wales or the Higher Education Funding Council for Wales. Those bodies are currently within the remit of the Welsh Administration Ombudsman, and there is no exclusion in Schedule 9 to
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the Government of Wales Act 1998 which is equivalent to paragraph 6 of Schedule 2 to the Bill. The Government, therefore, wish to put beyond doubt our policy intention through the amendments that we have proposed to that paragraph in Schedule 2.
Clauses 10 and 27 provide that the Assembly can, by order, amend the entries for the time being appearing in Schedules 2 and 3 respectively. Your Lordships will recall that in Grand Committee I undertook to give consideration, arising out of an amendment tabled by my noble friend Lord Rowlands, to the possibility of requiring the Assembly to consult the ombudsman if planning to amend, by order, the entries in Schedule 2.
In practice, the Government would expect that to happen, as the ombudsman might well have to plan and prepare for the effect that a change to the schedule may have on delivering the functions of his office, both in operational and resource terms. Amendment No. 13, to Clause 10, will, therefore, make it a requirement that the Assembly consults the ombudsman before making an order amending an entry in Schedule 2 to this Bill. Similarly, the Government's amendment to Clause 27 will make it a requirement that the Assembly consult the ombudsman and any other person it thinks appropriate, if wishing to add, omit or change the description of a listed authority for the purposes of the Bill in Schedule 3.
In the light of the proposed government amendments, I invite the noble Lord, Lord Roberts of Conwy, to withdraw the amendment.
Lord Roberts of Conwy: My Lords, I am perfectly content that the government amendments achieve the purposes behind Amendments Nos. 12 and 25. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Evans of Temple Guitingmoved Amendment No. 13:
Page 5, line 22, at end insert—
"( ) Before making an order under subsection (2), the Assembly must consult the Ombudsman."
On Question, amendment agreed to.
Schedule 2 [Excluded Mutters]:
Lord Evans of Temple Guitingmoved Amendments Nos. 14 and 15:
Page 34, line 38, after "Action" insert "taken by an authority specified in sub-paragraph (2) and"
Page 35, line 2, at end insert—
"(2) The authorities are—

(a) a local authority in Wales;

(b) an admission appeal panel;

(c) the governing body of a community, foundation or voluntary school;

(d) an exclusion appeal panel."

On Question, amendments agreed to.
Clause 17 [Publicising reports]:
Lord Roberts of Conwymoved Amendment No. 16:
Page 9, line 24, leave out "three- and insert "four"
The noble Lord said: My Lords, Clauses 17 and 18 and the amendments deal with the duty of a listed authority to publicise an ombudsman's report by making it available at the authority's offices and website for a period of "at least three weeks". I remain of the view that three weeks is a short time for an ombudsman's report to be publicly available locally—bearing in mind the time that may have elapsed since the complaint was first made and the time taken by the ombudsman to investigate and prepare his report. We could be talking about a year or more.
The report could also be of considerable public interest after the appearance of the local press notice issued under subsection (3). Of course, the ombudsman has some discretion under subsection (5) and could, presumably, give a direction to a listed body to extend the period when the report is to be available. I understand that the Minister, in his letter to us, said that he could extend the period, but I would have thought that he would find it difficult, bearing in mind that the three-week period is specifically stated in the Bill. Perhaps he would give us an assurance and confirmation that the ombudsman could use his discretion to extend the period beyond three weeks. I beg to move.
12.15 p.m.
Lord Evans of Temple Guiting: My Lords, as we have heard, the amendments to Clauses 17 and 18 that the noble Lord, Lord Roberts of Conwy, has tabled, reflect amendments that he tabled in Grand Committee. We had a full discussion at that time. The amendments would increase from three to four weeks the period for which a report under Clause 16 must be made available for inspection by the public.
I set out the Government's view on this in Grand Committee. Essentially, no problems appear to have arisen as a result of the three-week publicity period. The three weeks cannot start until a notice has been placed in a local newspaper informing the public of their right to view the report and where they can view it. There is precedent for the three-week publicity period. It applies in the cases of both the Commissioner for Local Administration in Wales and the Scottish Public Services Ombudsman.
Crucially, it is also worth noting that Clause 17 contains some flexibility for the ombudsman to issue directions on how authorities should discharge their functions. There could be general directions or directions to a particular authority in respect of a specific case. Such directions can relate to the discharge of any of the functions of listed authorities under the clause. For example, if the ombudsman is not satisfied with the three-week publicity period in a particular case for any reason—perhaps, if it were an
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incredibly complicated case—he could direct that the period be extended. However, he could not direct that it be made shorter, as the clause provides that the period must be at least three weeks.
It is important to stress that the three-week period is a minimum. The ombudsman, as I have explained, can direct a longer period. The Government are satisfied that the three-week publicity period is appropriate and are content that the ombudsman should have some discretion to issue directions on how authorities should discharge their functions under the clause. For those reasons, we cannot accept the noble Lord's amendments to Clauses 17 and 18. I invite the noble Lord, in the light of my explanation, to withdraw the amendment.
Lord Roberts of Conwy: My Lords, I am content with the assurance given by the Minister. I have now found the copy of a letter sent by the Minister to the noble Lord, Lord Prys-Davies, where he states that this means that if the ombudsman considered that in a particular case, or generally, reports should be made available for more than three weeks, he could issue directions to that effect. He would of course have to exercise that power reasonably. Having read that into the record, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 17 not moved.]
Clause 18 [Publicising reports: health care providers]:
[Amendment No. 18 not moved.]
Lord Roberts of Conwymoved Amendment No. 19:
After Clause 19, insert the following new clause—
"NON-ACTION FOLLOWING RECEIPT OF A REPORT

(1) If the ombudsman is satisfied that the condition in subsection (2) is met in relation to a listed authority, he may issue a certificate to that effect to the High Court.

(2) The condition is that the listed authority has wilfully disregarded his report without lawful excuse."

The noble Lord said: My Lords, we had some discussion of the proposed new clause in Committee. Its purpose is clearly to give the ombudsman the support of the judiciary, in the event that a listed body refuses to carry out his recommendations. He is safeguarded in relation to the Assembly, in that he can prepare a special report if the Assembly has failed to satisfy him. His recommendations in that report must be the subject of a Motion, which the Assembly itself must approve or disapprove. With the Assembly First Minister obliged to submit the Motion, the ombudsman's recommendations are very likely to be upheld.
But that procedure applies only where the Assembly itself as a corporate body is the listed body complained against. A whole string of other listed bodies appears in Schedule 3, and the question arises of what happens if the ombudsman is dissatisfied with any of them. It seems to me that all he can do is produce a special report naming and shaming the body concerned.

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I do not think that that is a satisfactory conclusion or remedy where an individual has suffered an injustice or hardship and the requirements of Clause 21 have not been met. The new clause provides that in circumstances where a listed authority has wilfully disregarded the ombudsman's report without lawful excuse, he may issue a certificate to that effect to the High Court, which would consider the appropriate action to take.
In Committee, the Minister told us:
"The Government do not believe that it is either necessary or desirable to give powers to the ombudsman to enforce his recommendations through any of the methods envisaged in these amendments. The Government are satisfied that the naming and shaming of listed authorities, including the Assembly, is effective in ensuring that the ombudsman's recommendations are acted upon. This is reinforced by the excellent record of authorities in Wales when it comes to complying with the existing Welsh ombudsman's recommendations. However, I see"—
said the Minister—
"that the noble Lord, Lord Livsey, is shaking his head".—[Official Report, 25/1/05; col. GC 408.]
It is true that over the past five years Welsh authorities have accepted the ombudsman's findings and acted upon them. But they have not always been so compliant and there is no guarantee that they will be in future. The dissenting head shake by the noble Lord, Lord Livsey of Talgarth, suggests that their record has not been as eximious as the Minister may have been led to believe. I checked on the matter this week with the local government ombudsman for England and his office gave me a string of authorities which have declined to provide the remedy recommended by the ombudsman. Some reports dating back to 1999 have still not been acted upon.
Nevertheless, I am prepared to accept that a reference to the High Court would be the last resort and, it is to be hoped, one that would never prove necessary in Wales. At the same time, I think that we would be foolish not to provide against such an eventuality because one recalcitrant authority intent on proving that the ombudsman had no teeth could well undermine the entire system.
There is also the other side of this coin. A listed authority may feel very strongly, and possibly rightly, that the ombudsman has come to a wrong conclusion. It should have the right of appeal—the right to seek a totally independent view. I realise that the new clause is probably imperfect, given that it should spell out the High Court's jurisdiction in this area, but I am sure that the government draftsman could soon remedy that defect. I beg to move.
Lord Richard: My Lords, I have not until now said anything during the proceedings on the Bill but I am bound to say that what the noble Lord, Lord Roberts, is proposing in his amendment is somewhat revolutionary. First, as I understand it, he is saying that if an ombudsman comes to a certain conclusion against a listed authority, the authority should somehow have a right of appeal to an independent adjudicator or arbitrator before the ombudsman makes his report to the Assembly. That seems to me totally to defeat the purpose of the ombudsman.
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Surely the object of the ombudsman is that he should hear the complaint and report to the Assembly and the Assembly should then decide what it should do about it.
Secondly, it seems to me to be revolutionary because of the notion of an appeal to the High Court. I am not sure what conceivable jurisdiction the High Court would have unless the person aggrieved by the decision of the listed authority went to court using the ombudsman's report as part of the evidence in the action. But the idea that somehow the ombudsman should have the power to refer things directly to the High Court in circumstances which, frankly. at present are a little obscure, invoking a jurisdiction that the High Court does not have, seems to be rather revolutionary and rather difficult.
Lord Roberts of Conwy: My Lords, perhaps I may speak across the noble Lord on his first point concerning the reference to the Assembly. There is an entire procedure here for the ombudsman to deal with a listed authority. He produces a report and, in certain circumstances, he can go further and produce an additional special report. The Assembly does not really come into it except where the complaint is against the Assembly itself as a corporate body. In the case of another listed authority—
Baroness Farrington of Ribbleton: My Lords—
Lord Roberts of Conwy: My Lords, may I finish?
Baroness Farrington of Ribbleton: My Lords, unfortunately there is a procedure here too. At this stage, the noble Lord can intervene to make a single point of clarification but at the end of the debate, after the Minister has spoken, the noble Lord, Lord Roberts of Conwy, and only the noble Lord, Lord Roberts of Conwy, may speak. However, I think that we are in danger of entering a slight dialogue and noble Lords who are speaking seem to be very keen on accurate procedure.
Lord Thomas of Gresford: My Lords, I agree with the noble Lord, Lord Richard, that at present there is no procedure for the High Court to take any action if a certificate of this kind is sent to it. But I also think that the noble Lord pointed the way—that is, it would be for the complainant who had initially made the complaint to the ombudsman to take proceedings for an injunction or order against the listed authority and, in so doing, a certificate from the ombudsman that the listed authority had simply refused to act upon his report could be a very useful piece of evidence in those proceedings. I understood the noble Lord, Lord Roberts of Conwy, to be moving in that direction. It may be a little unusual to use a certificate of this kind in evidence; nevertheless, it would be a perfectly rational and proper way of enforcing the ombudsman's report.
Lord Livsey of Talgarth: My Lords, I see this in the context of citizens' rights. I accept many of the points made by the noble Lord, Lord Roberts, about a listed

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authority, but what does a citizen do if he has been wronged, the ombudsman has made his report and the report has not been acted upon? There must be more force behind the ombudsman's report for the listed authority to take action.
Sadly, in Grand Committee—the noble Lord, Lord Roberts of Conwy, referred to this—I did not agree that everything in the garden was exactly rosy when one looks at the listed authorities and the areas that they cover. For example, there could be problems with the Environment Agency or even a flood defence committee, which might have been investigated by the ombudsman. Unfortunately, I have had experience of severe flooding. I can think of one place in the Neath Valley where promises were made by the Environment Agency to solve the problem but no action was taken, even though the residents were continually flooded by water polluted by sewage. That was a very serious situation. Police authorities, health boards, trusts managing hospitals are all in this listed area. There are many controversial areas where citizens feel that they have been wronged, with cases appearing in newspapers every day. This amendment gives some force should the complainant wish to take the matter to the High Court. Rightly, lawyers are getting involved in this debate. I am not a lawyer but I feel that a complainant must surely have some power to obtain redress against a listed authority which has ignored an ombudsman's report. To leave this unresolved would be very serious.
Lord Prys-Davies: My Lords, in Grand Committee it seemed to me that the Minister relied heavily on the past excellent compliance record of the listed authorities. That is all very well but it may not be the case in the future. If a listed body should say to the ombudsman, "No, we will not agree your findings. We will not implement your recommendations", then in those circumstances, unless the complainant can take it further, it appears to me that the findings of the ombudsman are almost worthless. If that is the position, then it is unsatisfactory.
Baroness Finlay of Llandaff: My Lords, the noble Lords, Lord Prys-Davies and Lord Livsey, have put their finger on it in terms of the population in Wales. They need to have faith that an ombudsman's report will have teeth. The amendment before us now is a means of providing that reassurance to those who may be aggrieved and who may feel that the lives of themselves or others are potentially in danger through inactivity. By the time the ombudsman gets involved the situation almost certainly will be potentially quite serious. The thought of an ombudsman's report gathering dust will bring the whole ombudsman system into disrepute. We have to consider very carefully any mechanism to ensure that no ombudsman's report can be ignored by the authority to which it relates.
Lord Evans of Temple Guiting: My Lords, I am fully aware of the strength of feeling on this issue. As the
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noble Lord, Lord Roberts of Conwy, explained, these amendments concern the enforceability of the ombudsman's recommendation and of compensation payments by listed authorities to aggrieved persons. I have to say at the outset that the Government's general views on the issue of enforceability have not changed and are the same as I outlined at Grand Committee. I hope that I shall be able to convince your Lordships that that is the correct view.
We do not believe that it is necessary or desirable to give powers to the ombudsman to enforce his recommendations through any of the methods envisaged in these amendments. As I said previously, the Government are satisfied that the naming and shaming of listed Authorities, including the Assembly, is effective in ensuring that the ombudsman's recommendations are acted upon. I know that some of your Lordships are concerned that listed authorities might drag their feet when responding to the ombudsman's recommendation. The noble Lord, Lord Livsey, referred in Committee to some cases where complaints were put before an ombudsman and was frustrated by their progress. The noble Lord, Lord Roberts of Conwy, is also very concerned that there might be some recalcitrant authorities which will not heed the ombudsman's recommendation.
The noble Lord, Lord Roberts, did some research into complaints to the Local Government Ombudsman in England, but we are not talking about England, we are talking about Wales. The position in Wales is infinitely more encouraging. My officials have researched the record of authorities in Wales in complying with the existing Welsh ombudsman's recommendation. This research has shown that all recommendations of the Health Service Commissioner for Wales and the Welsh Administration Ombudsman have been complied with.
Since 1991 there have been only two occasions when the recommendations of the Local Government Ombudsman for Wales have not been complied with. Since the reorganisation of local government in Wales in 1996, all of the Local Government Ombudsman's recommendations have been complied with.
The Government's position on the issue of enforceability of the ombudsman's recommendations was set out in our joint consultation with the Assembly on the powers and jurisdiction of the ombudsman, issued in October 2003. No-one responding to the consultation thought that the ombudsman should have the power to enforce his recommendations. Indeed, the Parliamentary Commissioner, Ann Abraham, and the Public Services Ombudsman for Wales designate, Adam Peat, supported the Government's position on this.
I should like to read a little of the evidence that Ms Abraham gave to the Commons Welsh Affairs Select Committee. As your Lordships know, she is the Parliamentary Ombudsman. When asked,
"If there were a statutory enforcement provision, other than the naming and shaming approach, would this be a good thing?"
She said,
"The present situation is working well and there is nothing to be achieved by making a significant shift."

923
There is, she goes on to say,
"A tendency to go for a much more legalistic and formal approach to the whole question of investigations. I think this is dangerous territory. What Adam Peat said about this legislation is squarely in the tradition of British ombudsmen and it is exactly how I see it. It is based on the benefit of experience so it is an opportunity to improve and modernise but it is not a dramatic, radical shift away from that tradition which has worked very well for many years."
Amendment No. 19 would insert a new clause after Clause 19 of the Bill. The effect would be to enable the ombudsman to certify to the High Court that a listed authority has wilfully disregarded the ombudsman's report without lawful excuse. I cannot agree to the amendment for the reasons I have already outlined.
Amendment No. 23 amends Clause 23, which makes provision in the case of a special report issued by the ombudsman in relation to a complaint against the Assembly. The intended effect of this amendment is to ensure that the First Minister's Motion, as provided for under this clause, must ask the Assembly to approve the ombudsman's recommendations as set out in the special report. In other words, the Motion itself could not ask the Assembly to approve anything other than the full set of the ombudsman's recommendations, without any amendments to those recommendations.
In the Government's view, Clause 23(2)(b) already achieves this. The Motion must relate to all the recommendations in the special report, otherwise it will not comply with Clause 23(2)(b).
Amendment No. 26 amends Clause 33. The effect of this amendment is to make it a requirement that the listed authority pays compensation as recommended by the ombudsman. In other words, this gives the ombudsman a power to order a listed authority to make a compensation payment. We cannot accept this amendment, as again it would have the effect of making the ombudsman's recommendations, in this case in relation to compensation payments, enforceable.
It may be helpful if I explain the reason for the inclusion of Clause 33(2) in the Bill, as the noble Lord, Lord Roberts described it in Committee as "curious". The provision is included in the Bill to ensure that all listed authorities will have the power to make compensation payments to a person aggrieved. Otherwise, some authorities may not have that power, except where a court or similar authority orders payment. The Government want to ensure that there are no technical barriers to the swift progression of redress—albeit voluntary redress—for an aggrieved person.
We do not intend that the ombudsman should be able to order a listed authority to make payment. That would be inconsistent with our overall policy on enforcement and, indeed, with the very concept of an ombudsman. The value of an ombudsman to the citizen is that she or he can help that citizen to obtain justice much more quickly and cheaply than through the courts and can do so where the courts would be powerless because there is no cause of action as such.
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It is worth taking a moment to consider what would happen if we made ombudsmen's orders enforceable. If we did so, we would assimilate the ombudsman to a court, with all that that implies for procedural rights. For example, what powers of enforcement of the orders should apply? Should not the authority concerned have the power to appeal against the order? Should not the person aggrieved also have a power of appeal, if he or she thinks that the ombudsman has ordered too little redress?
I am grateful to my noble friend Lord Richard for highlighting some of the problems of the route taken by the amendments. If we go down that route, we will undermine the very purpose of an ombudsman, and the Government are unwilling to do that. Those who have a claim at law can assert it in the courts if they so choose. If they do not so choose and the ombudsman considers it reasonable to assist them, they have chosen a quicker and less expensive route in preference to a slower, more expensive but enforceable route. It is good that the citizen has that choice. Claims that the law does not recognise but which the ombudsman can pursue should not be the subject of an enforceable order.
I strongly urge your Lordships not to accept the amendment. It would insert a provision that has no teeth. It does not provide for what the High Court is expected to do if the matter comes before it. The noble Lord, Lord Roberts, is concerned about the enforceability of the ombudsman's recommendations. A provision without teeth such as this would not take the Bill any further forward in that respect.
Lord Roberts of Conwy: My Lords, I am grateful to the Minister for saying a few words about Amendments Nos. 23 and 26, to which I neglected to speak—perhaps in my enthusiasm for Amendment No. 19. I am also grateful to other noble Lords who participated in the debate.
It is worth pointing out that Amendment No. 26 highlights again the weakness of the ombudsman's position. Although the listed authority has power to make compensation where injustice or hardship has occurred, the ombudsman is left out of the clause and out of the picture altogether. He has no power of enforcement, although it is clearly true that a claimant who has a recommendation made by the ombudsman for compensation will be well armed, should he take the matter to court.
We are dealing primarily with enforceability. The noble Lord, Lord Richard, was wrong to say that the listed authority or the ombudsman could take the matter to the Assembly. That is not provided for in the Bill. So the ombudsman is in a weak position and can be defied by a listed authority, as has happened in England. I have before me a list of authorities in England that have defied the Local Government Ombudsman and left a very unsatisfactory situation with no action taken. That is no answer where injustice or hardship has occurred. Therefore, on the issue of enforceability, I beg to test the opinion of the House.
12.45 p.m.
On Question, Whether the said amendment (No. 19) shall be agreed to?
Their Lordships divided: Contents, 91; Not-Contents, 86.

Division No. 1

CONTENTS

Addington, L.

Liverpool, E.

Allenby of Megiddo, V.

Livsey of Talgarth, L. [Teller]

Alliance, L.

Luke, L.

Ampthill, L.

Maclennan of Rogart, L.

Astor, V.

McNally, L.

Attlee, E.

Maddock, B.

Barker, B.

Maginnis of Drumglass, L.

Beaumont of Whitley, L.

Mar and Kellie, E.

Biffen, L.

Masham of Ilton, B.

Blaker, L.

Mayhew of Twysden, L.

Bonham-Carter of Yarnbury, B.

Miller of Hendon, B.

Bridgeman, V.

Montrose, D.

Brooke of Sutton Mandeville, L.

Mowbray and Stourton, L.

Brougham and Vaux, L.

Murton of Lindisfarne, L.

Carnegy of Lour, B

Neuberger, B.

Chalker of Wallasey, B.

Northbrook, L.

Cope of Berkeley, L. [Teller]

Northesk, E.

Craig of Radley, L.

Northover, B.

Dean of Harptree, L.

Norton of Louth, L.

Dholakia, L.

Oakeshott of Seagrove Bay, L.

Dixon-Smith, L.

Park of Monmouth, B.

Dykes, L.

Plummer of St. Marylebone, L.

Elliott of Morpeth, L.

Roberts of Conwy, L.

Elton, L.

Roberts of Llandudno, L.

Ferrers, E.

Rogan, L.

Flather, B.

Roper, L.

Garden, L.

Rotherwick, L.

Gardner of Parkes, B.

Russell-Johnston, L.

Geddes, L.

Sandberg, L.

Glasgow, E.

Scott of Needham Market, B.

Goodhart, L.

Seccombe, B.

Hamwee, B

Selborne, E.

Hanham, B

Sharp of Guildford, B.

Hanningfield, L.

Shrewsbury, E.

Harris of Richmond, B.

Shutt of Greetland, L.

Higgins, L.

Skelmersdale, L.

Hodgson of Astley Abbotts, L.

Soulsby of Swaffham Prior, L.

Hooper, B.

Taverne, L.

Hooson, L.

Thomas of Gresford, L.

Howard of Rising, L.

Thomas of Swynnerton, L.

Howe, E.

Thomas of Walliswood, B.

Kingsland, L.

Thomson of Monifieth, L.

Laidlaw, L.

Trumpington, B.

Lawson of Blaby, L.

Ullswater, V.

Lewis of Newnham, L.

Walmsley, B.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Christopher, L.

Ahmed, L.

Clinton-Davis, L.

Andrews, B

Condon, L.

Bassam of Brighton, L.

Craigavon, V.

Berkeley, L.

David, B.

Bhattacharyya, L.

Davies of Oldham, L. [>Teller]

Boothroyd, B.

Dean of Thornton-le-Fylde, B.

Borrie, L.

Desai, L.

Brett, L.

Donoughue, L.

Brooke of Alverthorpe, L.

Dubs, L.

Brookman, L.

Elder, L.

Burlison, L.

Evans of Temple Guiting, L.

Campbell-Savours, L.

Falconer of Thoroton, L. (Lord

Carter, L.

Chancellor)

Carter of Coles, L.

Farrington of Ribbleton, B.

926

Faulkner of Worcester, L.

Morris of Manchester, L.

Finlay of Llandaff, B.

Ponsonby of Shulbrede, L.

Gale, B.

Puttnam, L.

Golding, B.

Ramsay of Cartvale, B.

Goldsmith, L.

Rees-Mogg, L.

Graham of Edmonton, L.

Rendell of Babergh, B.

Greengross, B.

Richard, L.

Grocott, L. [Teller]

Rooker, L.

Harris of Haringey, L.

Rosser, L.

Haworth, L.

St. John of Bletso, L.

Henig, B.

Scotland of Asthal, B.

Hollis of Heigham, B.

Simon, V.

Howells of St. Davids, B.

Stone of Blackheath, L.

Howie of Troon, L.

Symons of Vernham Dean, B.

Hylton, L.

Taylor of Blackburn, L.

Janner of Braunstone, L.

Tenby, V.

Jordan, L.

Tomlinson, L.

King of West Bromwich, L.

Triesman, L.

Macdonald of Tradeston, L.

Truscott, L.

McIntosh of Haringey, L.

Tunnicliffe, L.

McIntosh of Hudnall, B.

Turner of Camden, B.

MacKenzie of Culkein, L.

Uddin, B.

Mackenzie of Framwellgate, L.

Walpole, L.

McKenzie of Luton, L.

Warner, L.

Marsh, L.

Wedderburn of Charlton, L.

Massey of Darwen, B.

Whitaker, B.

Merlyn-Rees, L.

Wilkins, B.

Morgan of Drefelin, B.

Williams of Elvel, L.

Williamson of Horton, L.

Resolved in the affirmative, and amendment agreed to accordingly.
12.55 p.m.
Clause 20 [Reports: alternative procedure]:
Lord Evans of Temple Guitingmoved Amendment No. 20:
Page 11, line 28, leave out "an agreed" and insert "the permitted"
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 21 and 22.
In Grand Committee, the noble Lord, Lord Roberts of Conwy, tabled an amendment to Clause 20, which deals with the alternative procedure for reports. The amendment sought to clarify the parties who would agree the period within which listed authorities would implement the ombudsman's recommendations. The noble Lord, together with the noble Lord, Lord Luke, has tabled an identical amendment, Amendment No. 21, on Report.
The amendment tabled by the noble Lord in Grand Committee caused the Government to reconsider the provision in this clause. Our intention has always been that the period would be agreed between the ombudsman, the person aggrieved and the listed authority. As that was not specified in the Bill, we saw that it could lead to some confusion.
As a result, I have tabled Amendments Nos. 20 and 22, which make the parties involved in agreeing the period clear in the Bill. Amendment No. 22 also makes provision for a situation where the three parties cannot agree on the length of the period. If the ombudsman thinks that agreement cannot be reached, he can specify the period in writing.

927
I believe that the noble Lord, Lord Roberts of Conwy, was concerned to ensure that the person aggrieved would have a part in agreeing the period. Bearing that in mind, I hope that he will be able to accept the amendments that I have tabled, as they make it clear that the person aggrieved would be involved in agreeing the period.
It follows from that that I cannot accept Amendment No. 21, tabled by the noble Lord, Lord Roberts of Conwy. However, as I have explained, I hope that the amendments that I have tabled deal with the point of principle that the noble Lords are concerned about. I invite the noble Lord not to move his amendment. I beg to move.
Lord Roberts of Conwy: My Lords, I shall not move Amendment No. 21. The Government have explained clearly that Amendments Nos. 20 and 22 will achieve the objective that we were after in Committee. I am glad to say that the Government have seen the light and accepted the substance of our amendments in Committee. They have tabled an excellent pair of amendments that achieve our purpose.
On Question, amendment agreed to.
[Amendment No. 21 not moved.]
Lord Evans of Temple Guitingmoved Amendment No. 22:
Page 11, line 31, at end insert—
"( ) The permitted period is—

(a) a period agreed between the Ombudsman, the listed authority and the person who made the complaint, or

(b) if the Ombudsman thinks that no such agreement can be reached, the period specified by him in writing."

On Question, amendment agreed to.
Clause 23 [Special reports relating to the Assembly]:
[Amendment No. 23 not moved.]
Clause 27 [Listed authorities]:
Lord Evans of Temple Guitingmoved Amendment No. 24:
Page 17, line 13, leave out "such persons as" and insert "the Ombudsman and any other persons"
On Question, amendment agreed to.
[Amendment No. 25 not moved.]
Clause 33 [Compensation for the person aggrieved]:
[Amendment No. 26 not moved.]

Railways Bill
1 p.m.
Lord Davies of Oldham: My Lords, I beg to move that this Bill be now read a second time.
The railway network is a vital part of our public transport system. It is important that trains provide a fast, reliable and efficient service for the benefit of passengers and freight.
When the railway industry was privatised in the mid-1990s there was a widespread view that rail travel was in decline. Privatisation was based on that
928
assumption, as was investment. History has proved that assumption wrong. As the economy has grown and demand for travel has increased, rail has played an important role in meeting that demand.
The number of journeys by rail has grown by over 27 per cent since 1997. More than 1 billion journeys were made in 2003—the first time that that milestone has been reached since the early 1960s. We expect that the number of journeys will have continued to rise in 2004. Trains are also carrying 45 per cent more freight than in 1995, helping to stop lorries clogging up our motorways. We want to see that success continuing.
To help tackle the longstanding problems that the railways face, the Government have put in place record levels of investment over a long period. That is starting to have an impact, but it will take time to mitigate the effect of underinvestment that has blighted the railways for decades.
But even with this commitment to long-term investment, the structures and organisations put in place at the time of privatisation have proved inadequate to meet the demands of a growing railway. That is why in January last year the Secretary of State for Transport announced a wide-ranging review of the railway industry. On 15 July 2004, the conclusions of that review were published in a White Paper, The Future of Rail. The White Paper outlined a new blueprint for the railways on which the Government had worked closely with the industry to develop over the preceding months.
The new structure was based on the principle of public and private partnership. It recognised rail's status as a public service, with strategy set by government and delivery executed by the private sector. The Railways Bill puts in place the legislation necessary to make those changes. It will put the Government in charge of setting the strategy for the railways; increase the role of Scottish Ministers, the National Assembly for Wales and the London Mayor and promote more local decision-making in England; and rationalise the regulation of the rail industry, transferring safety regulation from the Health and Safety Commission to the Office of Rail Regulation.
Although the Bill takes forward the legislative elements of the changes that we are making to the rail industry, other reforms outlined in the White Paper do not require legislation. Those reforms are no less important than the changes in the Bill, and the legislation should be viewed in the context of all the work under way. That includes giving Network Rail clear responsibility for operating the network and for performance; ensuring that track and train companies work more closely together, assisted by reducing the number of franchises and aligning them more closely with Network Rail's regional structure; and delivering a better deal for freight to enable the industry and its customers to invest for the long term.
I should now like to go through the legislative and non-legislative changes in more detail and explain the benefits that those reforms will bring to the rail industry and the public.

929
There has been some criticism in another place that there is nothing explicit in the Bill that says that the Government must set strategies for the railway. I should like to explain why the Bill is drafted as it is. The entire thrust of the Government's policy on rail is about taking responsibility and setting the strategy. The Secretary of State already has strategies on the future of transport, rail and aviation. He does not need a statutory duty to be put on him to do that. He is accountable to the British public, and no Government could get away with not having a strategy for rail.
In that respect, Ministers will have an advantage over the Strategic Rail Authority. Since Ministers are responsible for all forms of transport, they will be able to produce strategies that are joined up across the piece. They will also be able to take into account the wider government agenda, such as regeneration and growth areas. The Strategic Rail Authority, responsible for only one form of transport, was never well placed to do that.
The railways are largely funded by the public purse. Over £73 million is spent every week to improve the railways in this country. Therefore it must be for Ministers, accountable to Parliament and the electorate, to take responsibility. That was a fundamental principle behind the rail White Paper. The White Paper summarised the problems caused by the fragmentation of responsibility between Ministers, the SRA and the ORR. That is why the Government propose to abolish the SRA and redefine the relationship between Ministers and the ORR.
The winding up of the Strategic Rail Authority (SRA) means that its strategic and financial obligations will pass to the Government. It will be for Ministers to set the strategic direction and to decide how much money is available and the size and shape of the network.
As part of the access charges review process, the Secretary of State and Scottish Ministers will be required to provide the regulator, the Office of Rail Regulation (ORR), with information on what they want the railways to achieve and how much public funding will be available.
As the independent economic regulator, the Office of Rail Regulation would then price those outputs and satisfy itself that they are reasonable. Network Rail would then be responsible for delivery. If a future Secretary of State's ambitions go beyond his purse then the regulator will say so and the Secretary of State will have the opportunity to think again. That will ensure that the railway industry has clear and timely information about the strategic outputs that government want the railway to deliver in exchange for the public funds that they are prepared to make available. The process will be open and transparent.
Network Rail, working within the framework set by the Office of Rail Regulation, and train operators will have increased freedom to make the day-to-day operational decisions on how to use these resources to deliver the strategy and how to run the railway. Ministers and civil servants should not, and will not, get involved in those day-to-day decisions. That is far more meaningful than putting an obligation in the Bill
930
for the Secretary of State to produce a glossy strategy annually, for instance, which is a concept that has been canvassed in some quarters. The last thing that the rail industry wants is ever-changing strategies. Stability and a long-term approach are needed.
The Department for Transport is now working to create a new DfT rail group to take on the new role. The structure of the new group has been announced and recruitment has begun. The new group will combine considerable expertise from the department, the SRA and other sources.
Another central element of the White Paper was that it was only right that a greater role be given to the devolved administrations. The devolution to Scotland and Wales under the Bill is not identical. Scottish Ministers are to be given virtually the same role in relation to railways in Scotland as the Secretary of State for Transport will have in England and Wales.
The Railways Bill would devolve to Scottish Ministers additional powers and functions to determine railway strategies; to let, monitor and manage the ScotRail franchise; to specify rail infrastructure needs in Scotland, and to support rail freight. They will also be able to set fares and fund improvements to the railway. Only some functions—principally, safety and the licensing of railway operators—will remain reserved to UK Ministers. As part of that devolution of executive functions, which is the largest transfer of responsibility since the 1998 devolution settlement, Scottish and UK Ministers recently announced a long-term funding agreement to put Scotland's railways on a stable footing.
The Bill will give the National Assembly for Wales the right to be a co-signatory to the Wales & Borders franchise with the Secretary of State. The Secretary of State will be able to enter into a franchise that provides services wholly within Wales only if the Assembly joins him as a party to the agreement. The Assembly will also be given broad powers to provide financial assistance to improve the provision of railway services for Wales. That could include assistance to other franchise operators, Network Rail and freight operators.
The Assembly's new role will enable it to specify the local and regional passenger services that it wants for Wales under the Wales & Borders franchise and to make decisions about funding the franchise. That is similar to the current role of the Scottish Executive in relation to the ScotRail franchise.
The difference between how powers are devolved to the Scottish and Welsh administrations reflects the more discrete nature of railway services in Scotland. The Welsh network is much less discrete, with a number of shared routes, inside and outside Wales. Some Wales & Borders services operate wholly within England. These factors make it difficult to devolve more to the Welsh Assembly.
The Bill also proposes changes to the current arrangements in England. The passenger transport executives in our major urban areas and Transport for London will be put on an even footing. That will help to promote more integrated transport solutions in our urban centres. The role of PTEs will be modified so

931
that they may, subject to the Secretary of State's approval, enter into agreements with train operating companies. This could include being party to franchise agreements.
The Secretary of State will also have a duty to consult PTEs when preparing to let a franchise that involves services to, from or within the area covered by the passenger transport executive. The Government have set out a future strategy for rail which has at its heart a set of clear and consistent principles. One of these is that responsibility for decision-making must be tied together with clear financial accountability. The problem is that the current procurement arrangements for PTEs give responsibility without the commensurate accountability.
We are committed to devolution of responsibility but this can happen only where there is clear financial accountability so that decisions are made on a level basis. The new financial accountability within the structure means that we are able to give PTEs greater flexibility to make genuine choices about the balance of public transport in their areas.
The PTEs will have the right to buy additional rail services or to reduce rail services in their areas and retain the savings to invest in other local priorities. The measures in the Bill do not mean that PTEs can never be co-signatories to franchise agreements.
Earl Ferrers: My Lords, will the Minister be kind enough to explain that point again? He keeps talking in acronyms. I do not know whether he is saying PTEs, PTAs or what; I do not understand them either.
Lord Davies of Oldham: My Lords, I apologise to the noble Earl. There is a great danger in the interests of making the speech in the time that I am allowed to use those symbols familiar to all of us involved with the industry. I recognise that I owe the House the courtesy of explaining the acronym. I am talking now about the passenger transport executives. I am referring to PTEs, and I am sorry if my enunciation is not as precise as it should have been. I hope that the noble Earl will forgive me.
The measures in the Bill do not mean that the passenger transport executives can never be co- signatories to franchise agreements or that they will be immediately removed from the current franchises. However, it is right that PTEs should be co-signatories only where their role clearly contributes to the White Paper aims of driving up performance and controlling costs.
In relation to London, the Bill will give the Mayor a greater role. It replaces the Mayor's ability to issue directions and guidance to the Strategic Rail Authority with a duty on the Secretary of State to consult Transport for London before issuing an invitation to tender. As with the passenger transport executives, Transport for London would be able enter into agreements with franchised train operators, subject to the Secretary of State's agreement. This could include being party to franchise agreements.
London has by far the most extensive and complex public transport network in Britain. There is potentially much to gain from better integration
932
within and between different forms of transport. That is why the White Paper also identified some specific London issues. The Government have set up a working group to explore these issues, including rationalising fare structures and ticketing technology across different forms of transport; and whether the Mayor should be given a greater role in relation to services and infrastructure that operate only within London. These issues are being considered and no decision has been taken.
We are also looking at the options in terms of giving Transport for London a role on the rail network in an area slightly beyond the Greater London Authority boundary. Passenger transport executives already have a role up to 25 miles outside their area. I assure your Lordships that no decision will be taken on the matter without full consultation with the Greater London Authority and neighbouring local and regional bodies.
However, if it is decided that Transport for London should have a role outside London, the Bill includes provision to require the Mayor to appoint two additional members to the TfL board to represent the interests of rail passengers outside Greater London.
I turn to the parts of the Bill that move safety regulation from the Health and Safety Commission to the Office of Rail Regulation. The proposal has been warmly welcomed by those in the industry, stakeholder groups and in the other place. I would like to make a commitment that there will be no reduction in safety standards or loss of expertise as a result of the move. I know that that is a most important issue with regard to the railways.
The board of the Office of Rail Regulation has begun thinking about how the organisation should be structured when it becomes both safety and economic regulator. The ORR has published its initial thoughts: copies are available in the Library; and it will begin wider consultation shortly.
I would now like to touch on an issue to which I have not so far referred: the reform of the Rail Passengers' Council. Under the Bill the RPC would be established as a single national body reporting to the Secretary of State and the federal structure of the regional committees would be dissolved. The railway industry has changed and we want to see a strong voice within industry representing passengers. We want the Rail Passengers' Council to provide this, but currently there is very little public awareness of its work.
More than 90 per cent of passengers do not know that the RPC exists. The changes proposed in the Bill will allow the Rail Passengers' Council to address this and create a more effective organisation. The current chair, Stewart Francis, has announced plans to reform the structure of the council. The Government support his proposals and he is currently working to deliver them. But he continues to welcome the views of interested parties on the future direction of the new organisation.
Around a third of the clauses in the Bill refer to network modifications. That aspect of the Bill has led to cries in some places of "Beeching mark 2" and

933
suspicion that there is a hidden agenda for widespread closures. I should like to reassure the House that that is simply not the case. There is no secret agenda of closures and it is certainly difficult to hide 22 clauses in the Bill.
The changes to the current closure procedures set out in the Bill are mostly a result of the other changes to organisations and structures that I have already discussed. Under the current system the Strategic Rail Authority has an important role to play. With its abolition, and the greater level of devolution in relation to rail, changes have to be made. The dissolution of the rail passengers' committees also means that changes are needed.
As part of these we are moving away from a test based on passenger hardship towards an appraisal taking account of a broader range of factors, similar to other transport appraisals. Guidance on this will be produced by the Secretary of State and Scottish Ministers. The Bill does not set out the contents of the guidance. However, we have indicated that it is intended that proposers of closure will be required to undertake an assessment based on the standard approach for assessing value for money for transport projects and policies, covering environmental, economic and safety issues, accessibility and integration. The effects on passengers will be a key part. Compliance with the guidance will be assessed by the independent regulator.
The Bill ensures that people's rights to be consulted if a proposal affects them will be maintained. That would include train and freight operators and there continues to be a strong role for the passenger voice, since the Rail Passengers' Council will be a statutory consultee. Ministers have provided the House with their initial views of what could be included in the guidance and, as required by the Bill, there will be full consultation before it is finalised.
I should now like to talk briefly about the aspect of the Bill that refers to buses. Under the Bill we are increasing the scope for passenger transport authorities to introduce bus franchising in their areas. Under the current legislation PTAs can introduce bus quality contracts only as a means of implementing their bus strategy. The Bill widens this to allow them to consider bus franchising for the substitution of rail services.
This will give the passenger transport authorities greater flexibility to make choices about the balance of local transport provision in their area. They will have the right to buy additional rail services or reduce rail services in their areas and retain the savings to invest in other priorities.
There is one element of the work underway to encourage local transport authorities to develop quality contract schemes. For instance, from March the minimum time between making a scheme and bringing it into force will be reduced from 21 months to six months.
I mentioned that Network Rail will become more directly responsible for the day-to-day running of the railway, including operating the network, and for its performance.
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This is not in the Bill, but it is important to see the Bill in the context of the wider work that is under way in this respect. Network Rail is starting to work more closely with train operators to deliver a more reliable service for passengers. It has set up a number of joint control centres together with train operators, in order to work more closely together to improve day-to-day operations and quickly recover normal services following disruption.
Network Rail is a private company, but it operates in the public interest in accordance with the terms of its network licence and of its contracts with train operators. In particular, condition 7 of its licence requires Network Rail to operate, maintain, renew and enhance the network in a timely, efficient and economical manner so as to satisfy the reasonable requirements of its customers and funders. Network Rail's delivery of those requirements is monitored, and where necessary enforced, by the Office of Rail Regulation.
As part of the reforms set out in the rail White Paper, Network Rail will be taking over responsibility for preparing route utilisation strategies which are currently produced by the SRA. The purpose of these strategies is to study those parts of the network where capacity is currently under pressure, or may come under pressure in the future, and to identify how to make the best possible use of the available capacity in the public interest. The strategies look around 10 years ahead. The Office of Rail Regulation intends to bring forward an amendment to Network Rail's licence, in order to ensure proper governance of this crucial new role.
As I said in my opening remarks, the railways are not just about passengers. The transport of freight by rail can bring real benefits. Efficient freight transport is essential to our economy and to our prosperity. There is not a huge amount in the Bill about freight, but there does not need to be. Freight is rightly a matter for the private sector. Nothing in this Bill overrides the contractual rights of freight operators. The Government's role is to ensure that the right environment exists for freight operators and their customers to be confident about investing in rail freight. The Government have worked closely with the industry and the regulator to agree the basis for long-term access contracts and greater certainty about rights of access to the network.
The Office of Rail Regulation is now consulting on proposals for access contracts for freight operators of up to 10 years. That will help to provide the increased stability and certainty that rail freight needs in order to continue to thrive in the future.
Taken together, the changes laid out in this Bill and the other steps outside legislation that the Government are taking to implement the rail White Paper will deliver a robust structure that will stand the test of time. Ultimately, the increased investment and improved structures will deliver stability for all those involved in the industry. That in turn will deliver what people really want—improved performance. Passengers should come

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first. We believe that these are the right changes and that they will lead to better performance and a better service for all rail users. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)
1.22 p.m.
Lord Rotherwick: My Lords, I thank the Minister for introducing the Bill. It is a Bill that has been the subject of lively debate in another place and I am sure that we will see some continuation of that in your Lordships' House.
It has been suggested that the Bill has been introduced to put right aspects of privatisation. I would like to reiterate the point already made in another place that that is not so. The Bill has had to be introduced to put right one of Her Majesty's Government's own blunders in the past seven years—the creation of the Strategic Rail Authority. Five years ago, the Deputy Prime Minister said:
"The Strategic Rail Authority will put railways at the centre of an integrated transport system".
Today we are witnessing a U-turn as the Government destroy their own creation—a creation that has cost the taxpayer £250 million and provided failure in return. Twice as many trains now run late as in 1997.
We welcome the abolition of the SRA. It is an organisation that has been too top-heavy. However, I would like to point out to the Minister that representatives of the Local Government Association state that they,
"remain to be convinced that the Department for Transport will be any more adept than the SRA at identifying the need for investment in, and enhancement of, the network".
On a more conciliatory note, we on these Benches accept the transfer of the functions of the Health and Safety Executive to the Office of the Rail Regulator. I am sure that your Lordships have heard the same horror stories of rolling stock being confined to a siding because a light bulb needs changing. I understand that the HSE has been too heavy-handed and we welcome this change. However, that is as far as we go. There are various parts of this Bill—some may argue the majority of it—to which we have strong objections. This Bill gives politicians and bureaucrats far too much say in the running of our railways.
We believe that railways should be run without political interference to make life better for the passengers: something that the Bill arguably does not do. An example is the clauses relating to London and the passing of powers to the Lord Mayor. With more than two out of three of all train journeys beginning or ending in London, giving the Mayor a direct say in the running of trains in the Greater London area in Clause 15 (7) will have serious—
Lord Faulkner of Worcester: My Lords, I apologise for interrupting the noble Lord, but I think he means the Mayor of London and not the Lord Mayor of London, who does not run any trains anywhere.
Lord Rotherwick: My Lords, I am grateful to the noble Lord and 1 am sure that he will see that everything
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becomes clear later on, particularly regarding accountability. There will be serious and unconsidered consequences, especially in accountability. As I understand it, we can hold a Minister in this House accountable—or at least try to—for trains or railways in England and Wales, but not Scotland or Greater London, if this Bill is passed.
I am puzzled by the contradiction in Her Majesty's Government's policies. In the Traffic Management Bill, as he will remember, the Minister argued for the management of strategic roads by an overseeing body, not local authorities. Now he is trying to persuade us that the Mayor of London—only one authority within the UK—should have a say over the main strategic rail routes. Will the Minister please explain why one option is acceptable for rail and not for road?
We are also concerned about the results of restricting the jurisdiction of the Office of the Rail Regulator under new Schedule 4 introduced in Clause 4, which relates to,
"use of access charges reviews".
This clause and schedule appear to allow the long arm of the Treasury to cap budgets and pass the buck on network repair, maintenance and enhancement. In the mean time, Network Rail is gaining responsibilities, but it remains unclear exactly to whom it is accountable. In response to a question on this issue posed by Which?magazine, the Secretary of State said:
"Yes. [they will hold Network Rail to account] In addition, the Office of Rail Regulation has a duty to enforce the conditions of Network Rail's licence".
This is in fact flawed and I will probe the matter more in Committee.
We are also particularly concerned with what appears to be a stealth agenda of rail closure, or as the Minister said, a secret agenda. He also said that it was a "second Beeching". I take that as a sign that financial constraints will come before passengers and freight demands because this Bill not only makes it easier to close local and regional services but, in practice, passes the responsibility for potentially difficult decisions about cuts to local and regional government. I expect that stretched budgets, not passenger wishes, will sway their decisions. I fear that unless funds are raised to meet the gap between what is allocated and the cost, we will see the demise of many rural and small railways, affecting both passenger and freight services. This is an issue that we will scrutinise carefully in Committee.
We will also address two smaller but not insignificant points raised in the other place. I refer first to the issue of unused assets belonging to the railways, such as unused sidings that may be well suited for conversion into safe car parks. That would encourage the greater use of trains. Secondly, and closer to my heart because of my children and on behalf of many Harry Potter fans, there is the possible end of the Hogwarts Express. I understand that there is a call for black boxes to be installed in heritage rail vehicles at a cost of £55,000 per engine. Rail specialists fear that it could mark the end of heritage rail services, something with which Members on these Benches strongly disagree.

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I have but touched on a wide range of issues that we intend to look at in depth in Committee. We want to ensure that the travelling public and the British economy will not have to pay the price of the Government's rail policy, one that puts,
"closures and cost cutting above serving passenger needs".
1.31 p.m.
The Earl of Mar and Kellie: My Lords, I am glad that we have the chance to debate the place of the railways in our society and economy and hence to measure the Railways Bill against that environment. In so doing, we want to find out how much strategic significance there is in the Bill.
Members on these Benches believe in the railways. Throughout the world, rail should do all that it can to move people and freight, thereby removing them from the road, sea and air networks wherever possible. The benefits of such rail substitution are: decongestion, particularly on the road network; reduction in air pollution and fuel consumption; increased safety and comfort; and what an O-level economist might call "greater utility". Does the Bill seriously advance that global strategy?
I regret that my noble friend Lord Bradshaw is not present for this Second Reading debate. However, given where he is, I doubt whether he regrets not being in London today. I am grateful to my noble friend Lady Scott of Needham Market for returning to the transport Bench, momentarily diverting herself from scrutiny of the Office of the Deputy Prime Minister. I also welcome my noble friend Lord Glasgow back to the speakers' list and to the transport Bench. I strongly suspect that his long-standing criticism of railway privatisation will drive his interventions.
The Bill brings welcome constitutional change. The devolution of most railway activity in Scotland is the first major modification to Schedule 5 to the Scotland Act 1998. I am very pleased about that, and I welcome the complicated and lesser devolution of the rail passenger franchise to the National Assembly for Wales.
In Scotland, the rail network is given considerable priority by the Scottish Executive, aided by the disproportionately generous grant that Gordon Brown sends north each year. Although I believe that ultimately the policy will fail, that largesse, for as long as it lasts, will secure the Union as we know it.
The Bill is loud on rail closures—or "Network modifications etc."; I love euphemisms. As the Minister pointed out, those provisions take up 22 clauses out of a total of 59. I looked with interest for a mention of railway openings and reopenings, but found the Bill silent on those.
My interest in 12-inch to the foot scale railways started in 1964. I recall being at the Grange Road level crossing in Alloa and seeing a Gresley J38 lifting a coal train out of the new Alloa marshalling yard, and then making its way to the Kincardine-on-Forth power station. I think it was a class 65924. That railway
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closed in 1972. Next year, thanks to the determination of Clackmannanshire Council and the Scottish Executive, along with the blessing of an Act of the Scottish Parliament, I look forward to being back in Grange Road to see coal trains making their way from Hunterston through Alloa to Longannet power station just beyond Kincardine-on-Forth; only this time it will be a class 66 providing the head end power.
Returning from future anecdote to the Bill, after the Scottish and Welsh devolutions, we have the other new relationships between the Department for Transport and London and with the passenger transport executives. Clause 15, which provides for the,
"Duty of the Secretary of State and Transport for London to co-operate",
sounds like a need for marriage counselling, while the PTEs seem to have been sent divorce papers, about which they are smarting and wondering what is wrong with the current situation. Perhaps there is a need for awareness counselling or, to be more serious, the answer to the substantial question of why the Secretary of State seeks to be devolutionary for Scotland, Wales and London but reservationist towards the rest of England. Will the centralisation be wise or efficient?
On the subject of the PTEs, I have been lobbied by Strathclyde PTE. Instinctively, I want to be of help to the executive, especially after having turned down its tram scheme. But this Parliament must not devolve control of the railway to the Scottish Parliament while dictating how the Scottish Executive must do the job. We have to confine ourselves to recognising that SPTE runs the second largest suburban rail network in Britain; that rail history has left some empty tunnels in Glasgow that could be filled with trains; and that SPTE must negotiate its new relationship with the Scottish Executive. We should wish it well.
I also want to speak about economic regulation, Network Rail and strategies. The railway privatisation was different from the other privatisations. Whereas the normal set-up is that the producers are on one side and the consumers are on the other with an economic regulator in between to ensure fairness to both sides, the privatisation of the railways had two different types of consumer; that is, passengers and freight customers, and the Government. The latter do not like being told by the regulator how much they should pay into the industry. The Bill seeks to alter the arrangement, allowing the Secretary of State to dictate how much the Department for Transport will pay. No doubt the Secretary of State and the Minister will plead the sovereignty of Parliament and get away with it, but if rail passengers and freight customers pled the sovereignty of the people, the whole edifice of economic regulation would collapse: sauce for the proverbial goose.
Network Rail is to be given control over timetables, but the Bill is silent about the strategy that it should maintain. Although we want maximum usage of the network up to its viable capacity, Network Rail's instinct could be to preserve the track by reducing usage and providing only the bare minimum. We must be assured that that will not happen.

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There is no requirement on the Secretary of State to publish a strategy, or even to have one, but at least Clause 5 states that Scottish Ministers may have a strategy and that, if they do, they must publish it. Why does the Secretary of State seek to be excused from having a strategy? I suspect that my noble friend Lord Bradshaw and the noble Lord, Lord Berkeley, will table amendments to remedy that omission. Perhaps we will hear a little more about that later in the debate.
Among the issues that the Secretary of State might put into a published strategy would be the good sense promoted by Transport for London concerning the greater use of suburban interchanges. Transport for London has drawn my attention in particular to Clapham Junction and Stratford. Requiring long-distance trains to stop at those stations could speed up commuting journeys. In the case of the Great Eastern service, a commuter from Norwich to Canary Wharf could save 30 minutes by changing at Stratford rather than going into Liverpool Street. The latter is the kind of issue that the Railway Grouping Act 1922 was intended to sort out. Why do we still have to talk about it some 83 years later?
I conclude by saying that the Bill may well rebalance the rail industry so far as the Government are concerned, but as always the acid test is the delivery of the most viable rail network giving the greatest user and non-user benefits. I look forward to closer and more detailed debates in Grand Committee.
1.40 p.m.
Lord Beaumont of Whitley: My Lords, on the whole, the Green Party very much welcomes the Bill. I thank the Minister for his clear exposition of what is in it. I do not think he would expect me to let him get away with all the statements he made. He said at one time that no government could get away with not having a rail strategy. In 36 years in your Lordships' House I have seen governments, in one way or another, get away with not having strategies for practically everything that they should have had one for. This Government seem to be particularly good at getting away with things.
Rail is a preferred form of transport for greens. I suppose the ultimate green form of transport is to stay exactly where you are. Going one up from that, you then move on to horse-drawn barges on the canals—and the canals, of course, are a very important form of transport—and sailing ships on the oceans.
But trains are very important—not only for passengers but for freight—and, in considering the Bill, it is essential that we ensure that freight is heavily emphasised. The SRA has a duty to promote the railways for both passengers and freight. This duty is not to be transferred to any other body when the SRA is abolished. It should be transferred to the most obvious body—that is, the Department for Transport and the Secretary of State.
The Bill makes line and station closures easier and removes some of the safeguards that have kept lesser-used stations open. These safeguards should be retained. It would be a great pity if they were to be taken away.
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Powers are taken away from the passenger transport executives. They should, on the whole, retain them—certainly in metropolitan areas—and Transport for London should gain equivalent powers in London.
There seems to be encouragement in the Bill for bus substitution for rail services. This is not a good idea and should be opposed. Such bus services usually prove to be unattractive to users and are often withdrawn after a few years, which isolates communities. A reliable train service with reliable timetables is much the most attractive system for isolated communities.
The SRA has a duty to protect potential rail freight depot sites adjacent to rail lines and to prevent their sale for non-rail development. Some body—possibly the Office of Rail Regulation—should take over this function.
There should be a duty to expand the rail network, both in extent and capacity, for passengers and freight services. The public sector should be allowed to operate passenger franchises. Currently the SRA is running South Eastern Trains. A publicly owned body should be able to continue to operate franchises after the SRA is scrapped.
During the later stages of the Bill we shall be looking carefully at many of its details. Basically it is a good Bill and we certainly give it a warm welcome.
1.44 p.m.
Lord Morris of Manchester: My Lords, I congratulate my noble friend on both the manner and content of his presentation of the Bill. He was as ever reasonable in tone and phrase, lenient to the listener in length and spoke with all his customary candour. By common consent and for the reasons he gave, the Bill is one of very considerable importance to the economic and social life of this country.
To say the very least, our rail industry has had a chequered recent history and this measure is about putting in place a legislative framework which, together with the wider rail review and able leadership, can give the focus needed to deliver rail services of a standard that those who work in the industry and use its services want and deserve.
When I first came to Westminster 41 years ago—from which it might be deduced that I am now beginning to get the hang of things—the timetabling of Bills in the House of Commons was extremely rare, strictly limited in scope, condemned as "gagging" and widely abhorred. Now it is almost as much the order of the day as the Order Paper itself.
Here in this House there is no timetabling and my principal purpose today is to draw your Lordships' attention to the concerns of passenger transport executives—not least those of Greater Manchester PTE—about provisions of the Bill, all amendments to which were unceremoniously guillotined in the House of Commons on 27 January.
Nothing could explain more succinctly, or more starkly, the importance of the role of this House vis-à-vis this Bill.

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I applaud the Government's declared intention to devolve responsibilities to the PTEs, which was clearly stated in last year's White Paper and repeated in ministerial Statements on many occasions since then. For local decision-making is the key to providing high quality public transport services. Who is best placed to understand the needs of Manchester? Ministers and officials in Whitehall, or the people who live and work there and know most about its highly complex transport requirements?
I pose that rhetorical question today because PTEs are concerned that Clauses 13 and 14 of the Bill appear to take power away from them by removing their right to specify what levels of services should go into a rail franchise.
Under the new "streamlined" franchising process, that is to say when the process is wholly driven by the Department for Transport after the abolition of the Strategic Rail Authority, the department would consult the relevant PTE when a franchise is proposed. But the PTEs understand that, under the Bill as now drafted, there would be no requirement on DfT to adopt the results of consultation with them, in which case any recommendations made about specifications would not find their way into the contract.
I take but one example. Where a PTE had quite genuine concerns about the level of service being proposed and asked for clarification of the passenger forecast being used, there would be nothing to compel the proposed franchisee to engage with the PTE. So in order for a PTE to press its case, it would have to negotiate with the prospective train operator via DfT officials acting for the Secretary of State.
How would that be a more straightforward process than the one that exists now, which allows a PTE to negotiate as a partner to the contract? How could PTEs be expected to plan and integrate transport services within their area with any confidence? Again, how would what is proposed fit with ministerial Statements made about the importance of local decision-making when it would mean power being centralised rather than devolved? I know my noble friend will want to address these concerns in replying to the debate.
The powers bestowed in 1968 upon the PTEs by my late ministerial colleague Barbara Castle, as she then was, have stood the test of time in the protection of services and investment in the rail network to the benefit of millions of people in local communities. My noble friend will recall, as a former Greater Manchester MP, that it was in the face of scepticism by British Rail and the DfT that Greater Manchester pioneered a rail link to Manchester airport and beyond that has built and refurbished 34 rail stations. Who now would argue that our airport rail link was unnecessary, carrying, as it does, 1.5 million passengers a year and sustaining the prosperity of Greater Manchester and the wider region? Indeed, as my noble friend will know, it is planned to extend the airport rail facility.
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The Bill as drafted would also remove the right of PTEs to be co-signatories to rail franchise agreements. In future, as my noble friend said, a PTE would be a co-signatory to a franchise only with the consent of the Secretary of State. This also is an issue of concern, since it is the statutory right to be co-signatory partners to rail franchises in their area that has given PTEs the continuity and certainty to develop railway services there as successfully as they have.
Future Secretaries of State may not be as enlightened as my good friend Alistair Darling, and there is fear among the PTEs that consent to co-sign future franchises may not always be forthcoming. Inevitably, this would undermine their ability to invest and develop services with any confidence.
In another place, it was suggested that one of the reasons for proposing to diminish the powers of PTEs was that an unnamed PTE somewhere had, at some stage, used its negotiating position to increase public expenditure. Yet Ministers seemed unable to offer any hard evidence of the case, or where or when it happened. Most certainly, it was not in Greater Manchester; and I hope that my noble friend can tell us whether any evidence of what is alleged to have happened has yet been uncovered.
It was also suggested in another place that one PTE had delayed a franchise being let by holding up the co-signatory process. However, after investigation, it was discovered that the PTE in question, Strathclyde, had negotiated on service specifications which had not resulted in any delay to the franchise. No other evidence has been identified of a PTE being alleged to have misused its negotiating powers. Here again, I know that my noble friend will inform the House if any evidence has yet been found of misuse, for without such evidence, the whole raison d'être for the proposed change disappears.
There is one further issue causing concern about the provisions of the Bill as they affect PTEs: namely, that they could pave the way for the railways to be closed, or services withdrawn, more easily than is now the case. I have no wish to get involved in debate about the technical aspects of railway closures but, like the PTEs, I note that the Bill would enable local authorities to enter into bus quality contracts to substitute bus services where a rail service has been withdrawn.
This could perhaps be described, but disingenuously, as "integration" because it would allow passengers still to undertake their journey by public transport, albeit by bus rather than train; but that, although better than nothing at all, would prompt more and more people to reach for their car keys and make a mockery of integration, properly so-called.
Finally, I pay warm tribute to the achievements of the Greater Manchester Passenger Transport Executive. Listen to any Mancunian and they will tell you that no one contributed more to the huge success of the Commonwealth Games held in Manchester than the men and women who now, as they did then, lead our PTE. I am sure that my noble friend will want to do all he can to respond positively and helpfully in addressing their concerns on this important Bill, just as

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I know that he will seek to respond in the same way, when he can, to the concerns that I have raised with him today on behalf of the Royal National Institute of the Blind, details of which I have drawn urgently to the attention of the department.
1.54 p.m.
The Earl of Glasgow: My Lords, it seems to me that the Bill is another step in the process of trying to repair the damage done by the previous Conservative government's act of vandalism—that ill conceived and iniquitous Railways Act 1993, in which British Rail was privatised, and privatised in the most clumsy and destructive way imaginable. Of course, British Rail had become very rundown and was in dire need of capital investment. But for all its shortcomings. it was, at least, a fully integrated network. It was cheap and it was customer friendly.
However, as noble Lords may remember, in the 1990s, "privatisation" was the answer to all the country's problems. When the 1993 Act was debated in this House, the majority of speakers, including many on the Conservative Benches, could see that the fragmentation of the rail network into a hundred private companies was a recipe for disaster—a bonanza for lawyers and chaos for the travelling public.
Well, the present Government cannot be blamed for the mess they have inherited. Renationalisation in any form would have been impossibly expensive and, besides, this is not a Government who like to be seen as going backwards. So their only recourse is to try to repair as much of the damage as possible. If they have made mistakes, as the noble Lord, Lord Rotherwick, implied, they are at least excusable ones.
Because the rail network will always have to be an integral part of any government's transport policy—and, thus, the Government's responsibility anyway—bringing as much as possible back under direct government control seems only sensible. The Bill, then, is a step in the right direction, and it certainly has my support.
I am a passionate believer in the railways. It is surely time they were given a higher political profile. They should be right up there with health, education, law and order and asylum seekers. Many European countries are judged on the quality of their railway services. An efficient railway network can make you feel better about your country. It is the only civilised way of travelling—potentially, anyway. The hassle and frustration of travelling by car or aeroplane will only get worse. And, most importantly, railways are the only relatively non-polluting means of travel—the only one that is not accelerating the speed of global warming.
So far, we are told that only 6 per cent of the population go by train. We must aim at least to double that number. But in order to sell railways to a society which cannot bear to be separated from its car for one moment, we need a railway service that is not only reliable but also convenient and, above all, relatively cheap. There are hopeful signs that railways are gradually becoming more reliable. There is a growing awareness that they will have to become more
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convenient—by that, of course, we mean frequency of trains, adequate parking at railway stations, and so on. However, there is no sign and certainly no indication in the Bill, that train travel will get any cheaper. In fact, the implication is that a safe and reliable service can be bought only with increased fares.
Unless rail travel can be perceived as better value for money, the vast majority of our countrymen will still prefer to suffer motorway congestion and waiting in soulless airport lounges for their delayed cut-price aeroplane to arrive, than the relative comfort and relaxation of a journey on the train.
Incidentally, when I came to London from Scotland the day before yesterday, on the supposedly more reliable British Airways, my flight was cancelled. The next aircraft, to which I was transferred, was grounded for an hour and a half because of an unidentified piece of luggage in the hold. By the time that had been sorted out, we had missed our take-off slot, so I got to London more than three hours late. However, your Lordships will be pleased to hear that British Airways apologised for any inconvenience. I do not know why I did not take my own advice and come by train.
I welcome the Bill as a necessary step towards the reintegration of a still unnecessarily fragmented railway network. But the Government must make plans to make rail travel cheaper. If that can be achieved only by more government subsidies, then that is the way it must be done. It will be money far better spent than building more new roads or, more absurd still, widening existing motorways to encourage more motorists. The Government need the courage to resist the powerful and vociferous road lobby. Their transport budget must favour the railways: high-speed trains, local trains, commuter trains, freight trains, underground trains and even, perhaps, trams. They must seriously consider the expensive business of reopening some of the old railway lines. There really is only one way forward if we are to solve Britain's transport problems and that, I hope the Government agree, lies in the efficient management of the railways.
2 p.m.
Lord Bhattacharyya: My Lords, the Railways Bill is an important piece of legislation. Even for those of us who use the railways infrequently, their future in Britain is of great importance. There is no doubt that, as the most environmentally friendly mode of transport, they should play a growing role in satisfying Britain's economic and transport needs.
At the risk of sounding like a train spotter, I must say, as an engineer, that the names of the great British railway engineers were very familiar. I knew the work of Oliver Bulleid of the Southern, Charles Collett and George Churchwood of the Great Western, and the two great railway knights, William Stanier of the London, Midland and Scottish and Nigel Gresley of the London and North Eastern. There is no doubt that the major routes of the empire were covered in railway infrastructure engineered in Derby, Swindon, Glasgow or York. As far as I was concerned, Britain was the home of railway engineering.

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My view was to change when I travelled to Japan in 1964, the year of the Tokyo Olympics. A technological marvel of railway engineering—the Tokaido Shinkansen—demonstrated the birth of modern Japan. It has become known as the "bullet train". I am sure that that was part of the spur for the electrification of the West Coast Main Line in the late sixties. Meanwhile, Japan has taken the technological lead from us.
Japan had some advantages in railway investment. Its railways did not initially face the competition from road transport that railways faced in Britain. None the less, the year that saw the birth of the bullet train also saw Japanese national railways sinking into the red for the first time. Japan may have been 10 years behind us in facing competition between road and rail but, once the effect was felt, it had a dramatic impact. By 1987, Japan Railways had a debt of 25 trillion yen. Clearly, something had to be done.
In choosing privatisation, Japan went from 10 years behind to 10 years ahead. They did so with vigour, dividing the railways into six passenger companies and a freight company. Today, that structure is still bedding down. Privatisation in Japan has proved to be a success. Managers liberated from the dead hand of the national bureaucracy have been able to innovate and to improve services. As noble Lords know, Japanese companies and the Japanese Government have a very fuzzy relationship. There is little transparency. The number of Japanese rail passengers is up, rail companies are profitable and fares have been held down.
There are challenges associated with large-scale infrastructure that, as in all countries, cannot be solved without a long-term transport plan from the national government. In this country, we are schizophrenic about privatisation and the railways. There is great nostalgia for the pre-war private companies that ran the railways. Sadly for their shareholders, they never made any money and, despite the high-profile express trains, services were always underinvested. In 1947, when the railways were taken into public ownership, it was because they were clapped out. The government did not prove to be a particularly good owner. The railways struggled for investment, but at least they were run as a public service. In that environment, industrial relations became politicised.
In the right circumstances, I support privatisation and liberalisation. Governments are not good at running businesses and at being responsive to consumers. However, privatisation is not a magic process. It cannot turn a pig's ear into a silk purse. The present Secretary of State for Transport has acknowledged that decades of underinvestment reduced the railways to the state that they were in at privatisation.
Immediately post-privatisation, a combination of imaginative marketing by the new private railway companies, general economic growth and road congestion led to an increase in passenger numbers. That turned out to be a mixed blessing. Increased wear and tear on the infrastructure at a time of reduced maintenance had the inevitable consequence, a process
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known as, "flogging a dead horse". It has taken years to recover from that collapse in the infrastructure. An improvement in reliability and punctuality is only now being seen, following a massive increase in investment.
Reliability is only partly a function of business structure. After all, the old BR structure was often inefficient, complicated and bureaucratic. Reliability is a function of technology: we should consider the reliability that is being achieved in the modern automotive and aerospace industries. In the airline industry, that reliability has been driven by tough international regulation. Reliability is determined by the quality of the rolling stock, the track and the line-side equipment and is a function of the quality of investment in engineering.
It requires skilled people to make the quality investment decisions and, once they are made, it needs skilled technicians to ensure that the details of products and processes are taken care of. There has been a threefold increase in investment in the railways in recent years, but the skills that we need are in short supply. For all the faults in British Rail, railwaymen had a certain pride and passion about the railway. It is not the MBAs in smart suits in head office, following the latest management fads, who deliver the service; it is skilled technicians at every level. We know to our cost the price of a flaw in any link in the chain. Skills are an important issue that must be addressed. We must get the blend right, and there is no quick fix. It must also have the degree of external validation that other sectors in transport have.
Despite the lessons of the Japanese experience, the privatisation of British Rail was based on a misconception. It was envisaged that there could be competition between operators on the same track. That has proved to be impossible in practice. It would require penalty and performance regimes that are far too difficult and expensive to administer. It is not even in the management books; it was just an excuse to privatise. The separation of infrastructure and rolling stock was implemented to facilitate mythical competition, thereby leading to the fragmentation of BR into almost 100 companies. Railtrack, the infrastructure manager, was segregated from the 25 train-operating companies and three freight operating companies. The rest of British Rail was divided up into three rolling stock-leasing companies; an extensive supply chain behind Railtrack that included 13 infrastructure service companies; and many other support organisations: TOCs, Roscos and Iscos—a whole new disaggregated language. The Japanese went for a vertically integrated organisation, and our decision to move away from such an approach, not privatisation, has left us with the failings of the system.
The separation of infrastructure and rolling stock, done to facilitate non-existing competition, has proved fatally flawed. The interface is so crucial for safety and reliability. Those, after all, are crucial issues for the rail user. People travelling from my home city of Birmingham to London are not much bothered if the journey time is 90 or 110 minutes. What they care about is whether the train leaves New Street at its appointed time and arrives at Euston as per the

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timetable. What drives travellers on the railways around the twist is an erratic service. Messed-up connections and missed business meetings do not make for satisfied customers.
The liberalisation of supply and service contracts has also proved to be a difficult process to manage. The effective subcontracting of rail, rolling stock and track maintenance and renewal requires a significantly large number of technically skilled managers. At the time of privatisation, they simply did not exist. Continuity in the local management of local areas is vital for track maintenance. Knowledge of the true state of the network is essential—knowledge that was lost at privatisation. The current framework blurs responsibility and accountability for policy and services and is not fit for purpose. So you can see where I am looking for improvements to the structure and processes of the industry from the Bill.
There is another problem, however. Much as I would want to propose yet another dramatic restructuring, there is no doubt that further change would be disruptive. We have to face the fact that freight carriers and passengers have had about as much disruption as they can take. The Bill addresses a number of my concerns. It is important that we do not lose what we have learnt along the way. I welcome the fact that the Government are taking charge of setting the overall strategy for the railways. Wherever the Government have not done so, the strategy has been doomed and has failed.
Rail policy cannot be divorced from decisions about overall public spending, which is the clear responsibility of the Government. It cannot be passed off to a regulatory body. I am pleased that the number of rail franchises is to he reduced and the overall responsibility for the network will be passed to Network Rail. I have met some of the managers for Network Rail, and they are excellent.
Economic regulation to protect investors, railway customers and the Government remains with the Office of the Rail Regulator. That is wonderful. It is a good thing that decisions on support for commuter routes will be taken at a local level.
I am pleased to see that rail freight is specifically addressed in the Bill. Where rail freight works, it works very well. For example, one train takes 260 BMW Minis from Cowley to Portishead for export every day. Seventy-five per cent of all Jaguars built are moved to the ports by rail for export. Some 900,000 tonnes of steel pass through Wolverhampton steel terminal every year, for use in the Black Country. Those operations take a huge number of trucks off our already overcrowded roads. It is essential, however, that we ensure that rail freight operators get long-term access agreements and that routes are identified on which freight operators are assured rights of access.
The Bill is a smaller step than many would want. Given the impact of yet more disruption, however, it is a pragmatic step in the right direction. There is always the possibility that railways will never be profitable in the private sector, and the Government will have to have a watching brief on the industry.
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Our railway engineering is first class. The quality can already be seen in the Channel Tunnel and its rail link. The modernisation of the West Coast Main Line, while keeping it in action, has been and continues to be a terrific feat of engineering. In a way, this highlights part of the problem. In the short term, while improvements and modernisation are taking place, they add to disruption and unreliability before any benefits are felt.
I am confident that, given a continuity of investment and a simplified structure in which to exercise their engineering skills, our engineers will give us a world-class railway that we can all be proud of, driving up efficiency at appropriate cost. As soon as the words "minimum cost" are mentioned, then, although efficiency can be achieved in the short term, it will be jeopardised in the long term.
I hope that, as in the past, the engineers will become household names and no longer be subject to the whims and fancies of lawyers and management consultants peddling the latest management wheezes, when all they want to do is build a better railway. That is what the Government are supporting with their transport policy and with this Bill.
2.14 p.m.
Lord Faulkner of Worcester: My Lords, I am conscious that the conventions of the House do not allow me to congratulate the noble Earl, Lord Glasgow, on a maiden speech, but as someone who agreed with every single word of it I must say how pleased I am that he is back among us and contributing to debates on railways. I hope that there will be many other opportunities to hear the sort of wisdom that we heard from him this afternoon.
I should declare my three unpaid interests. I am a vice-president of Transport 2000, the environmental public transport campaigning group. I am a non-executive director of the West Somerset Railway, winner of the 2004 heritage railway of the year award, which I can assure the noble Lord Rotherwick, has every intention of running steam trains for the indefinite future. Since the beginning of December, I have been the chairman of the Railway Heritage Committee.
As many noble Lords are aware, I have been an unashamed supporter of the railways all my life. In the 27 years in which I have been involved with transport policy issues, I have lost count of the number of Secretaries of State and Ministers who have come and gone. At one point, I counted 12 former Ministers on the Conservative Benches alone who have occupied that job, and policy has changed numerous times as well. However, despite all that upheaval, the setbacks and the difficulties, the relationship between the British public and the railways has endured.
The public have demonstrated year after year their wish to maintain the railway network and to use it. The Association of Train Operating Companies says that last year—and I believe that I have more up-to-date figures than the Minister used—1.05 billion journeys were made on the railways. That is the highest figure since 1959, when the network was almost twice as large as it is today.

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ATOC also tells us that ours is the fastest growing railway in Europe. We are a long way from the low point in the 1980s when, as some of my noble friends will recall, a senior civil servant from the department joined the British Railways Board as a member and told everyone that his remit was to preside over the orderly rundown of the railways. By contrast, the background against which the Government have introduced this Bill is one of growth, some success and modest optimism.
As no one else has given any credit today to the work of the Strategic Rail Authority and its former chairman Richard Bowker, I at least would like to put on record my appreciation of the way in which, under his leadership, the SRA got the West Coast Main Line modernisation programme back under control with regard to budget and timescale. I also welcome the Secretary of State's decision last week to pick up the SRA's original proposal for a new north-south high-speed line, operating at the same speeds as the Channel Tunnel rail link. A journey time of under three hours to Scotland and 90 minutes to Manchester is a really attractive proposition. I hope that that study goes well and that it will include the benefits that would flow from the transfer of passenger traffic from the airlines to the high-speed line, particularly in terms of the environmental savings that would flow from more people taking the trains and fewer flying.
I also support wholeheartedly the community railways initiative undertaken by the SRA under the direction of Mr Chris Austin who, for many of us, is the epitome of the dedicated public service railwayman. I have no problem with the SRA's objectives of reducing the running costs of the services, of encouraging volunteer involvement or of attracting support from local authorities and others, or with all the other measures to increase usage and secure a long-term future for them. We have moved on from the original Beeching report and from Beeching mark 2, as well as the Serpell report and all the other various attempts over the past 30 years to reduce the size of the railway network.
When I worked at the British Railways Board, a ridiculous amount of time was wasted in dreaming up unworkable and unpopular bus substitution proposals. All of them came to nothing, for two reasons. One was the public outrage at the proposed closures; the other was political prudence on the part of Ministers, who could see the aggravation that would be caused by trying to go ahead with them and the fact that that would outweigh any potential cost savings. These, as the SRA has repeatedly pointed out, are always far less than expected because of residual liabilities to maintain the infrastructure.
The test that we should apply to this Bill today is whether it will encourage continued growth in the use of the railways and facilitate higher levels of investment in new services and rolling stock. Of course, I accept completely the assurance given by my noble friend that there is no secret agenda on closures contained in the Bill. Yet there are concerns, inside the industry, that some of the centralisation of the finances within the Department
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for Transport could allow for a closure programme to take place under a Secretary of State less enlightened and progressive than the present one.
I suggest that there are two amendments which the Minister might like to consider in Committee. I am not asking for it to be required of him to produce what he calls a glossy strategy for the railway. There is no need for that. It would do no harm, however, for the Government to restate their commitment to promote the use and development of the railways. That was contained in the Railways Act 1993—not a piece of legislation of which I am particularly fond—which imposed such a duty on the Secretary of State and the regulator, in these words,
"to promote the use of the railway network in Great Britain for the carriage of passengers and goods, and the development of that railway network, to the greatest extent that he considers …practicable".
That was reconfirmed in the Transport Act 2000, when the duty was taken on by the Strategic Rail Authority. It would be a huge reassurance if a restatement of the duty to promote the use and development of the railway were to be incorporated into the Bill.
My noble friend should also be aware that there are concerns about the provisions in Clause 4, relating to the reviews by the Office of the Rail Regulator, of access charges and licence conditions. I received a letter this week from George Muir, the director general of ATOC, whose concerns may be summed up in this sentence:
"The risk to train operators is that a cash-constrained ORR Periodic Review will lead to a less effective railway—closures, reduced line speeds, less reliability, etc. If this happens, passengers would be pushed"—
the grammar is a little strange—
"(and) put off travelling by rail, revenue would fall and operators would lose money".
I hope the Government will address and reply to that concern.
The third difficult area concerns the passenger transport executives. I will not attempt to repeat any of the arguments used by my noble friend Lord Morris of Manchester, who spoke so eloquently about Greater Manchester. There is much concern that the PTEs are losing the right to be co-signatories on local rail franchises, and that the Bill provides that they will no longer be able to specify service levels, service quality requirements and fares. I am certainly one who takes the view that the PTEs are one of the most enduring and successful legacies of Barbara Castle's 1968 Act. They have facilitated the opening of new lines and stations in all conurbations where they exist. They have encouraged some huge increases in passenger numbers—for example, up by 40 per cent in West Yorkshire since 1997.
What PTEs have also done is to recreate a travelling by rail culture. That was important, particularly in the 1970s and 1980s, when cutback and retrenchment was the pattern elsewhere on the railway system. So we shall need to look at the future of the PTEs and their relationship again when we consider the Bill in its later stages.

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Finally, I turn to a much less controversial area. That is the future of the Railway Heritage Committee, which I have the honour to chair. As a child of the SRA, the Railway Heritage Committee would have been left an orphan after the SRA's abolition. I am delighted that the Minister, Mr. McNulty, met me and two colleagues on Monday to discuss these matters. As a result of that meeting, I hope I can express some confidence that my noble friend will be able to present a formula in Committee which will allow the RHC to continue its work of safeguarding the nation's railway heritage through its transformation into a non-departmental public body. Perhaps, when winding up, the Minister will indicate that the Government are intending to bring forward amendments in Committee.
This is an important Bill, much of which I welcome as it is positive. Yet there are a number of issues which we will need to look at in Committee. I hope that we can all be reassured that there is nothing in the Bill that will damage the continued growth and popularity of our railways, and the contribution they make to our transport system.
2.24 p.m.
Lord Harris of Haringey: My Lords, first, I declare an interest as an adviser to the board of Transport for London. Perhaps I should preface my remarks by making it clear that, unlike some of your Lordships here today, I did not, as a boy, have the fascination with rolling stock and the arrangements of the railway system that has clearly motivated some of the interests and expressions of view that we have heard during the course of this debate.
However, looking at the Bill and the implications that it has for the way in which transport services are operated in London, I am able to say that it demonstrates that there is a commitment to offer an opportunity to create a genuinely integrated transport system in the London area and one that is fully equipped to meet the demands of London's growing population and workforce.
I think that the Bill will lead towards the delivery of much-needed improvements. In particular, enabling the Mayor of London and Transport for London to have greater influence over national rail services in and around the capital through the ability to specify rail services, fares and station standards within a defined area and the freedom to fund additional improvements will be an enormous step forward.
The noble Lord, Lord Rotherwick, believes that the possible transfer of responsibility for some of these matters to the Mayor of London—I assume that he did not wish to see Ken Livingstone ennobled, as he seemed to imply during the course of his speech—is causing concern in some quarters. I find that a surprising position for anyone to take, for a number of reasons.
First, giving the Mayor of London clear responsibilities in this way demonstrates a line of accountability that will be clear and apparent to all Londoners and to all who use the transport networks in the London area. That line of accountability is one
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about which I would have expected Conservative Members of this House to be enthusiastic. Only today, the Leader of the Opposition has been talking about the importance of directly electing accountable people to be responsible for the police service. Surely there should be similar accountability for transport services and so I am surprised at the position being taken. I suspect that there is also concern about London appearing to have some kind of special treatment. I shall turn to that in a moment.
The second reason why it is important that the Mayor of London should have these responsibilities is that over the past five years, as a result of the direct election of the Mayor of London and the creation of Transport for London, we have seen significant improvements in the areas for which Transport for London has a responsibility. We have seen a real and genuine expansion of the bus network, and that is reflected in the number of people using the buses. We have also seen the successful implementation of the central London congestion charge, which demonstrates that Transport for London can deliver complex projects and sustained service improvements. The five-year investment programme now put forward by Transport for London sets out a clear programme to upgrade London's transport infrastructure through current organisational structures, and that means that, unfortunately, its scope is relatively limited on London's national rail network. Through this Bill, there is the possibility of changing that.
Why, then, should London have this slightly different status in the Bill? It is my contention that efficient and affordable rail services are vital for London and its future development. Because of London's pivotal importance in the national economy, they are also vital for the well-being of that national economy. Already more than 30 per cent of all rail journeys made in the United Kingdom are made wholly within London. People living or working in the city make seven times more rail journeys than those in other UK cities. Londoners account for more than 50 per cent of all UK rail journeys, but they have been the recipients of only part of the total subsidy of £1.3 billion over the past financial year. London's rail passengers received only £73 million, or less than 6 per cent of the subsidy.
I appreciate that that is another example of the grotesque way in which people who live in rural areas in this country are subsidised by the rest of us. I suppose that that is not likely to change as a consequence of this piece of legislation or anything else, but I simply note it as another example of the way in which London suffers in order to fund those who live in rural areas. All those people who live in rural areas who perhaps feel I am being derogatory about them ought to remember that London contributes £160 billion a year to the United Kingdom's gross domestic product and supports four million jobs. Delays in transport systems cost an estimated £140 million annually. Therefore anything we can do to mitigate that and improve those services is important.

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There is another reason why the emphasis on London in the Bill is so important. We need to recognise that within perhaps 11 years an extra 800,000 people will be living in the London area and there will be up to 650,000 additional jobs. With so many travellers dependent on rail services, the proposals in the Bill to increase the capacity and reliability of the national rail network are clearly important. Without any real influence over national rail services in the capital, control of transport is fragmented and the ability of the Mayor and Transport for London to make long-term improvements is limited.
The case for integration and regional control of rail services in London has been properly recognised in the Bill. The Railways Bill should remove legislative barriers to Transport for London assuming additional responsibilities for those services. Specific London responsibilities are to be addressed in a memorandum of understanding between the Secretary of State and the Mayor for London. Perhaps when my noble friend responds to the debate he will be able to give some indication of the timetable for agreeing and finalising such a memorandum of understanding.
Giving Transport for London greater influence over national rail services would create a more co-ordinated transport system. Closer integration between different forms of transport is an important objective as half of national rail passengers interchange with Transport for London modes as part of their journey. Thirty-six per cent transfer to the Underground and 15 per cent to bus services.
In that context anomalies are created if the Mayor and Transport for London do not have a role in the national rail network. The first element of this is in respect of the need for a simpler fares structure. Discrepancies would be removed in fares for journeys of a similar type by bringing rail fares fully within the integrated TfL zone one to six fare structure.
Depending on where people live in London, they may be disadvantaged by the fact that they can only complete their journeys on the national rail system and, as a consequence, they tend to pay more. Extending Oyster card ticketing to London rail services would provide passengers with the benefit of cash-free through ticketing on public transport and speed up ticket-buying at stations.
Transport for London is currently developing detailed proposals to ensure that using an Oyster card and pre-paying would be capped, so that the cost would be no more than the cheapest set of routes and the cheapest price available through the course of the day. This would mean a decision does not have to be made at the beginning of the day whether or not to buy a Travelcard or use an Oyster card. Currently, this is made more difficult by the refusal of many of the train operating companies to see the Oyster card system extended to their part of the network. I believe that is retrograde and unhelpful. Control of fares would enable innovative fare pricing to relieve peak-time congestion and encourage off-peak travel.
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The other area I wish to speak about is the importance of station and security enhancements. By bringing responsibility for transport together under one authority, it will be easier to improve stations and maintain consistently high standards of security, cleanliness and accessibility for mobility-impaired passengers.
Improving the amenities of stations, particularly for vulnerable groups, has been a key priority for TfL and there has been significant progress. Expenditure has focused on passenger security, with specific improvements to CCTV, passenger help points and improved lighting on platforms, subways and entrances and improvements to station buildings. In addition, about £500,000 is being made available to provide the equivalent of 30 extra British Transport Police officers on the Silverlink Metro network. Until last June, I represented an area that was highly dependent on the Silverlink network: what used to be part of the Bakerloo line and the London Underground was some time ago transferred to Silverlink services from Queen's Park through to Harrow and Wealdstone and on to Watford. Those stations were noticeably in a worse state of repair and less secure because of the failure of integration. The possibilities made available by the Bill will enable improvements to take place.
It is also important that we see improvements to interchange stations in outer London, such as Stratford and Clapham Junction, to encourage orbital journeys, so that fewer passengers have to travel through busy central London stations. Additional capacity for up to 6,000 people per hour could be created by stopping longer-distance South West Trains services at Clapham Junction during peak periods. As well as relieving overcrowding, interchange opportunities to Victoria and West London Line services would be increased. Similar benefits could accrue from more longer-distance services calling at Stratford. That would also improve access to Docklands and the Stratford regeneration area and remove the need for workers in those places to travel to Liverpool Street and back out again, with considerable time savings.
It is possible by simplifying services, stopping patterns and timetables on the suburban network to increase capacity as by as much as 5 per cent on some routes. That is where the investment that will be possible under the Bill will be important. Few rail services are self-contained within London and many extend a short distance beyond the Greater London Authority boundary to terminate at places such as Watford and Dartford. Those services form an integral part of London's rail network, as well as providing important links for people travelling between London and the home counties.
Therefore, any extension of Transport for London's responsibility for rail services operating a short distance outside Greater London would be welcome, so I am pleased to see those provisions in the Bill. Obviously, that will be subject to consultation. I appreciate that some may be fearful about the implications of that, but it is about the sensible planning of an integrated service. I understand that proposals in the Bill would provide additional board

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members for Transport for London, so that they could advise on the needs of passengers who travel to the capital from areas beyond the Greater London boundary.
If we acknowledge that many rail facilities are shared between local London services and longer-distance services, then mechanisms to ensure that longer-distance services are not unnecessarily disadvantaged by Transport for London's proposals will be essential. The Bill provides the opportunity to improve London's rail services and to integrate them more effectively with other forms of public transport. In turn, that will ensure that rail passengers indeed, all passengers—get a better deal. That will be good not only for London but the national economy.
2.37 p.m.
Lord Berkeley: My Lords, I declare an interest as chairman of the Rail Freight Group. In doing so, I very much welcome the Bill and especially the opening remarks of my noble friend Lord Davies of Oldham about freight. I am very grateful for them.
It is great to see the noble Earl, Lord Glasgow, back with us, but I worry about his statement that the railways need to be high profile, like asylum, because the only time that rail freight got a high profile was caused by the asylum seekers almost wrecking the service through the Channel Tunnel due to the complete lack of action by the British and French governments, who tried to suggest that all railway workers become frontier guards overnight. So one must be very careful about that, but the noble Earl's intentions are laudable.
One important aspect of the Bill concerns getting rail expenditure more under control. Many noble Lords may have seen a report in the Guardian today about alleged threats by the Strategic Rail Authority two or three years ago that much of the network would have to be closed if the Government did not drastically increase the amount of money available. I recall that that is the kind of thing that British Rail used to do but, as other noble Lords have said, it got quite efficient towards its end.
Occasionally, we need reminding about expenditure by the Government on the railways. There is a variety of figures but the noble Earl, Lord Glasgow, and the noble Lord, Lord Bhattacharya, both said that it is high. I think that it is about four times as high as it was under British Rail. Many good things have been done but they have certainly not been freight-friendly. It was a shame that the SRA did not take more action on cost. It appointed a chief engineer—an excellent one—only four years after its creation. After he was appointed, he and his colleagues did a great deal to challenge Network Rail's costs and their causes, but that is a failure which we have not got over today.
The causes of costs are some of the things that I continue to worry about. The transfer of safety responsibility to the Rail Regulator should help, but I worry about the continuing behind-the-scenes activities of the Health and Safety Commission and Executive, who appear to be trying to undermine government intentions.
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The latest report I have seen is in the Railway Magazine of March 2005 about the Health and Safety Executive's attitude to the Rail Accident Investigation Branch. Many noble Lords will remember debating this two or three years ago. The key of the RAIB is that it can collect evidence quickly while memories are still fresh and can give absolute assurance that any evidence and witness statements will not be used in evidence against people in subsequent prosecutions.
That was accepted, both by the British Transport Police and the Health and Safety Executive. But now I see a letter in the magazine from the Health and Safety Executive chairman, Mr Callaghan who has said to the RAIB:
"In the interests of criminal justice, HSE will need to make an application on every occasion when legal proceedings are under consideration"
to the court for such evidence to be made public. I am sure noble Lords will agree that this was not the intention at all. I hope my noble friend will take action to reign in the excitement of the HSE, because it is going to lose responsibility for safety to the ORR. It will have nothing to do with the HSE in future and I hope that the HSE is told that because otherwise it will prevent the RAIB doing its job and will restrict measures to keep costs down.
The new structure within the Department of Transport looks good. But it must be an informed buyer and keep up the pressure on the railway industry towards greater efficiency. There are still some in the industry who think that the Government owe the railways a living. We all love the railway, we all want it to grow and be more successful, but it must be on the basis that it has its costs under control. That applies equally to the HSE and to other activities which I shall move on to. I hope that to do that the Government will take on some of the expertise currently with the Strategic Rail Authority, which in many ways has done a good job.
If the Government had not liked what the SRA was doing, one option would have been to have got rid of the senior management and issue directions and guidance. But we are where we are and I accept that the restructuring is a good idea. Let us hope that it works. I very much hope that it does.
One of the consequences of the restructuring, as my noble friend said, is that Network Rail is taking on more responsibility. It must continue to ensure that it does not remain risk averse. One often gets the feeling that it does not want to do anything at all. Its objective should be to follow government strategies, which I shall come to. It is important that the independent regulator continues in his independent role.
I have listened carefully to many speeches about devolution, be it Scotland, PTEs or London. It is essential that there are common standards, capability and access rights right across the network—not only for freight, but for open access passenger operators. It is also reasonable to accept that local delivery should be allowed to develop with local responsibility.
I was in Scotland talking railways last Friday and I thought, "Isn't it nice in Scotland? They have responsibility. They have quite a few devolved powers.

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And they have plans and strategies." There are tweaks that have to be made, but they are doing well. We, and central government, must be cautious about the general assumption that everything that central government do is good and everything that anybody else does is unreliable and spendthrift. There may be cases where it is true, but in others it may be untrue.
I remind my noble friend, in the nicest possible way, of Transport Direct's new, helpful website, which tells users how to get from one place to another. Modern Railways says that, when it tried to get from Greenock to Gourock in Scotland, it was sent by one ferry and two air journeys, when there is a perfectly good bus service. That lovely system has so far cost £30 million, whereas Transport for London operates a similar system that works extremely well and costs £2. That is one example of where local and regional organisations can do better. Perhaps we should reflect on that when debating what the PTEs, London and Scotland should do.
Many noble Lords have spoken about duties and strategies. The Minister said that strategies must be set by government; in that case, why are they frightened of writing them down? As many noble Lords have said, it was one of the fundamental principles of the 1994 Act. The Rail Freight Group, of which I am now chairman—I was not at that time—fought very hard to have the words "and freight" included. I will need a lot of convincing that those words are no longer necessary, because I think that they are as necessary now as everything else.
Many other strategies resulted from the 2000 Act, including the promotion of the use of the Channel Tunnel for passengers and freight. The SRA and the Government have singularly failed to do that, but it is still a good strategy. The open access directives, which relate mainly to the Channel Tunnel, are two years late; they should have been transposed into domestic legislation by March 2003. Next month will be the second anniversary of that failure. In three months' time, at the end of April, rail freight through the tunnel could stop unless there is an agreement between the Government, Eurotunnel and EWS Railway to continue the minimum usage charge payment while everything else is resolved. It does not give much long-term comfort to investors looking three months ahead, when everything could stop completely.
A lot could be done through strategies. One of those is an extension of what my noble friend Lord Harris of Haringey said about interoperability of ticketing. Mersey Travel is keen to have an ITSO-standard interoperable smart media ticket, which Chiltern has. I am sure that my noble friend will be able to correct me if I am wrong. Interoperable tickets are vital to encourage passengers to use trains. It is a small contribution.
I shall study my noble friend's comments, both before and after this speech. I shall now talk about assurances, strategies and so on. Another problem with not having a strategy is the uncertainty about what the railways are for. My noble friend Lord Harris quoted persuasive statistics about how important the
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railways are for London, and the noble Earl, Lord Glasgow, talked about flying down from Scotland. But do we need to spend £10 billion getting to Glasgow half an hour quicker by train, which would cost £100, when you can fly for £10? We need a debate on that. I always got the impression that the SRA was keener to develop intercity travel than it was to encourage regional and local travel. That debate ought to be held. A government strategy or consultation is needed to get that message across.
Getting rid of the strategies will send all the wrong messages to private-sector industry. If strategies, of which the SRA has nine, are suddenly cancelled and no more are created, what will industry think about long-term planning? Local authorities and regional authorities also need strategies to provide an input to their thinking.
What happens if the Secretary of State and the Rail Regulator cannot agree on how much money Network Rail needs to keep the network going to the level that the Secretary of State would like? As the Bill stands the regulator will decide which parts of the network to cut. It may mean branch lines or putting a 50 mph speed limit on all the intercity lines to save money.
The Bill says that the regulator makes the decision, but noble Lords will remember that this started three or four years ago when the then Secretary of State—I think it was Mr Byers—said that it was unacceptable for an unelected body to make decisions about what happened to the network. To me that is what is in the Bill today. It would be better if the regulator made an appraisal of what could or could not be delivered and recommended it to the Secretary of State, so that he took the political decision on whether to close the West Coast Main Line or the East Coast Main Line or whether to give more money. I leave that for future debate.
Those who suffer as a result of changes to the network input or output such as speed limits on main lines—which may be the freight companies or open access passenger operators—will be looking for compensation if their business is seriously affected by changes in legislation. I am grateful to the Minister and his colleagues and officials for our discussions. This is an important issue to which I shall try to return in Committee, I hope with something nearly resolved.
In conclusion, I support the Bill. It will bring more clarity and transparency to the structure of the railways. I hope that it will enable the Government to have a greater grip on costs. A few areas will need amendments to improve the Bill in its later stages. I pay tribute to the support and assistance that I have received from Ministers and officials in my discussions. My noble friend has one of the best teams of officials on a Bill that I have ever come across. I thank him.
2.52 p.m.
Lord Rosser: My Lords, I declare an interest as a beneficiary of a railway trade union pension fund.
The railway industry has a potentially bright future, provided that it avoids scoring own goals and sooner rather than later there is stability in organisational

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structure. Running a successful railway requires all involved to be singing from the same hymn sheet. The fragmentation of the industry in the mid-1990s was an act of crass stupidity because the architects of that nonsense did not understand that basic point.
The common objective for the railway industry should be the provision of safe, reliable services operated within a sound financial framework with timetable schedules and fares and pricing policies that encourage, not discourage, the use of passenger and freight services. That means people carrying out a wide range of activities, co-operating and working together to deliver that common objective. There also needs to be someone in overall charge to make decisions in line with the common objective, where there appear to be actual or potential conflicting priorities.
The fragmentation of the industry created a large number of separate independent companies whose priority was not the overriding objective of the provision of quality rail services but rather the interests of each company and its shareholders. Normally, one might argue that with able people the defects of an inadequate organisation structure could be overcome. However, the fragmented contract-based railway organisation structure introduced in the mid-1990s was so alien to the basis on which a successful railway operates that it promoted conflict; created a climate where what counted was what the contract said rather than what was needed; and resulted in a blame culture and narrow short-term thinking designed to protect backsides.
The situation was made worse by the fact that there was no one in overall charge able to bang heads together. The company with responsibility for the infrastructure—Railtrack—decided to contract out to other firms all responsibility for maintenance of the infrastructure for which it was responsible. The result was that Railtrack slowly lost the in-house knowledge and expertise to deal on equal terms with its contractors and became too reliant on their views and opinions about the state of the infrastructure, when and what work should be done and the costs involved.
What we have been seeing since the late 1990s is the industry slowly being put back together again. The Strategic Rail Authority was created, as the fragmentation of the 1990s did not envisage any requirement for a medium-or long-term strategy for the industry. There was certainly no hope of the numerous individual companies getting together and producing an agreed strategy, as they were too busy trying to resolve differences of opinion between themselves and competing with each other for contracts or franchises.
The inability of the multitude of different companies to work together in harmony is perhaps best illustrated by the failure to develop a powerful railway industry lobby to match the roads lobby. If there was one thing that privatisation of the industry should have guaranteed it was the ability of the industry, now out of the public sector, to campaign and argue its case in public and raise its public profile. It has failed to do that. Indeed, the body that has done most to make the case for rail has been the Strategic Rail Authority.
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Railtrack has disappeared and been replaced by Network Rail. Network Rail has recognised the problems of contracting out responsibility for maintenance and has taken the work back in-house. It is achieving reductions in inflated costs as a result of putting part of the railway industry together again. The number of different train operating franchises is being cut, which is a further step in the right direction of reducing the number of different players involved. In future, the Department for Transport will make decisions on franchises. Doing that effectively will involve a knowledge of the issues associated with operating rail services, the costs involved and the scope for running a franchise more efficiently and more imaginatively for the benefit of the travelling public.
Network Rail was clearly aware of the difficulties involved with the maintenance of the infrastructure when the detailed knowledge was with their contractors and not in Network Rail as well. Some feel that the Department for Transport would be in a better position to assess the merits of bids for franchises and the performance of existing franchise operators if the department itself had hands-on experience and knowledge in the field.
There is one franchise in the public sector—South Eastern Trains—which is providing a better service to passengers than the private sector operator that it was brought in by the Strategic Rail Authority to replace. The franchise in an extended form is now out to tender and will move back into the private sector. Those who have argued that it would assist the Department for Transport to have a public sector comparator by which to assess bids for other franchises and the performance of existing operators deserve a full answer at some stage on why their argument is flawed.
The Bill takes us a further stage down the road of reversing the adverse effects of the fragmentation of the mid-1990s. It gives an enhanced role to Network Rail in the performance of the railway system and leaves the decision-making role on strategy and franchises to the Secretary of State. Whether that is what he wants or not, the Secretary of State will find it difficult under the Bill to avoid being held increasingly accountable by rail users for the overall performance of the network. Medium- and long-term strategy and day-to-day operational performance may seem to be two different things, but day-to-day operational performance is affected by strategic decisions on investment; the priorities that determine where that investment is to be made; who should be awarded franchises; and the level of service to be provided and on organisational structure.
Not all regard the impending demise of the Strategic Rail Authority with satisfaction. Under Richard Bowker, the Strategic Rail Authority became much more proactive and began to take a direct interest in the day-to-day performance of the railway industry and those responsible for delivery, bringing together the major players on a regular basis. Some argued that the Strategic Rail Authority became too involved in that area. Others reacted with disbelief that it had not been done earlier. Some of the train operating

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companies were also unhappy with decisions made by the SRA including on the award of franchises and the basis on which they were made.
The activities of the Strategic Rail Authority are to be reallocated elsewhere, with the Department for Transport taking over the responsibilities for strategy. If the Secretary of State is not also going to take over the SRA's role in promoting rail, the industry itself will have to take on this job in a way and to an extent that it has not up until now. If it does not do so, it will be a disgrace and will simply confirm the suspicions of many that too many railway companies are concerned only with their own individual interests and not with the wider picture of the future success and development of the industry as a whole.
As has already been said, a considerable number of clauses are devoted to rail closure procedures, reflecting a change in the process, including who is involved and in what way. Some concerns have been voiced that the Bill makes it more likely that lines will be closed and seeks to move responsibility for such decisions away from the Secretary of State and on to the shoulders of local communities and PTEs. Only time will tell if those fears have any justification, particularly under a future, more hostile Secretary of State, or whether the Bill will increase local involvement in the development of existing and new services.
Certainly the political fallout from line closures will be considerable, and the savings a drop in the ocean compared with the real issue of continuing the drive to reduce some of the significant increases in costs, in particular those of infrastructure renewal and maintenance, which occurred as a result of the duplication and contract culture that came with the fragmentation of the industry and its responsibilities in the 1990s. It may well be that the introduction of the SRA's Community Rail Strategy will result in some searching and revealing questions about how costs are attributed to less heavily used local and rural lines and the extent to which they do or do not overstate the expenditure actually being incurred.
The PTEs have expressed their concerns about what they see as a reduction in their involvement and influence in the franchising process for services in their areas. The PTEs have been good and supportive friends of the railways, and one hopes that whatever the wording in the Bill. they will continue with that support. Likewise, one hopes that the Government will provide them with the financial resources to enable them to do that.
Finally, I want to make a comment about safety. There are concerns in some quarters about safety coming under the economic regulator for the industry on the ground that financial considerations may take priority over safety. There are safeguards to prevent that happening. Some also believe that a further reason why costs have increased in the railway industry since fragmentation has been that the consequences of that fragmentation were divided responsibilities, no one in overall charge, and a blame and buck-passing culture that has resulted, until recently, in a rather rigid
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application of safety requirements that has lacked the flexibility to take account of differing circumstances. If the changes provided in the Bill and the process of bringing the railway industry back together again enable that issue to be addressed, that is a plus point. There is no contribution to overall safety, if an over-rigid application of requirements for the railway industry increases costs and drives more traffic on to our roads or discourages traffic from moving over from road to rail.
The Bill represents a further stage in the recovery and rehabilitation of the railway industry from the ideological assault launched on it in the early and mid-1990s. The sound financial policies pursued by this Government have led to economic growth and stability with low levels of inflation and unemployment. Those have provided the necessary platform for growth in railway traffic and an increase in services.
The railway industry needs to remember that every additional passenger and freight customer is a potential supporter and advocate of rail. Those who sought to attack the railway industry in the early and mid-1990s, whose policies were geared to an industry with a future in decline, have not changed their spots. They have simply been thwarted in their objectives and, given half a chance, they may well want to try again. The more supporters and advocates the rail industry has, the more difficult it will be politically for an unfriendly government to deny the industry the investment it needs and instead pursue a policy of slow and gradual decline. It is for the railway industry itself to do far more than it has to date to make the case to a broadly sympathetic public for the development and expansion of the industry and, in so doing, secure its long-term future.
3.4 p.m.
Lord Burlison: My Lords, I shall speak on the part of the Bill concerning the passenger transport executives and the effect of the legislation on their powers. I suppose that my interest goes back to the very start of PTEs. A predecessor of mine in a previous incarnation, Alderman Andrew Cunningham, was chairman of the Tyne and Wear PTE. He was a brilliant chairman, and 1 now see that many of the markers that were put down at the time by that executive have come to fruition and form part of the successes that we see today.
The Bill is a positive step, and I welcome the Government's intention to simplify the structure of the railway industry and to devolve more responsibilities over local networks to local and regional bodies. The PTEs have a statutory duty to secure the public transport services necessary to meet public transport requirements in their area. I am relieved to say that there is nothing in the Bill to change that.
Yet, the Bill seeks to take away the ability of PTEs to be involved in the specification of rail services in their area. Instead, the PTEs will have to negotiate with Whitehall in the hope that their views, based on years of local knowledge, might be taken into account. I agree with my noble friend Lord Morris of Manchester that PTEs are better placed than civil servants and Ministers in London to judge what rail services best suit the needs of their own area.

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Of course, we all trust the Secretary of State to do what is best in fulfilling his responsibilities to ensure that this country has a public transport system that meets the needs of its citizens. But, as sad a thought as it is, current Ministers will not be in those jobs forever, and it is the responsibility of the Government to ensure that legislation is fit for its purpose and will stand the test of time.
I understand from the debates in another place that the Government have proposed to reduce PTE powers in this way because they believe that the PTEs have abused or could in the future abuse their position at the negotiating table and frustrate the process. Furthermore, the Government seem to believe that the involvement of the PTEs in the rail franchising process makes for an over-complex and bureaucratic procedure and has even resulted in additional costs. Surely, obliging PTEs to enter into separate arrangements with the Secretary of State to ensure that their voice is heard is simply another layer of bureaucracy.
We must remember that PTEs were set up by a Labour government in the late 1960s to promote and co-ordinate public transport in the metropolitan areas. In the 1970s through to the early 1990s, overall public transport infrastructure investment was extremely low, and the PTEs therefore became responsible for enhancement outside London. As your Lordships are aware, PTEs are grant-funded by the passenger transport authorities, which raise funds from a levy on their constituent metropolitan district councils. In addition to that, they receive funding from other sources.
PTEs are democratically accountable. At one time, they reported to the transport committee; now, they report to a joint board of councillors from all the district councils. I would contend that the current process has led to significant growth in the use of rail networks in the main conurbations outside London and has facilitated close integration between bus and light rail systems. To me, that would seem to be something that the Government are urging local authorities and the transport industry to do, and the PTEs have been at the forefront in seeing those improvements come to fruition. The PTEs have actively pursued measures that address the problems of social inclusion, and we must appreciate the important role that railways play in the city regions, providing access to jobs and education; lower costs and wider areas to search for employment; access to opportunity for a wide section of the community; and increased provision for disabled passengers.
Rail networks in PTE areas are hugely important to those who depend on them and are often a major mode of travel. In fact, there are 137 million trips a year in PTE areas, and that is almost twice the number carried by inter-city operations. There has been significant growth in rail passenger numbers in PTE areas of investment over the past 20 years, with the use of networks doubling during that period.
We in this House have a duty to scrutinise and improve legislation that comes before us. As conscientious parliamentarians, we need to be satisfied
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that seeking to change a process that has served the needs of the travelling public so well over many years is properly justified.
I know that my noble friend has already been urged to give precise examples of where and when the PTEs have been the cause of delays and increased costs. I hope that he will feel able to give your Lordships further information in his reply.
This is an important Bill, and I wish it well in its passage through the House. For too long., the travelling public have had to put up with poor rail services, with no clear direction or leadership from those running the industry. Frankly, they deserve better. However, I hasten to add that I have travelled for many years with GNER on the east coast line between Newcastle and London, and I have no complaints with either the service or the staff on what must be the best run line in the UK.
The noble Earl, Lord Glasgow, was lucky to get an apology from British Airways. The last time I flew with British Airways, it was a morning flight, and I was told they could not get me back to Newcastle that day, although there were a number of flights available, as the flight that I was booked on was cancelled. I did not receive an apology.
I feel that the Government have got it wrong with regard to PTE provisions. Amendments proposed to the Bill in another place were rejected because it was felt that they went beyond restoring the status quo and gave the PTEs even greater powers. I have some sympathy with the Government on that. However, I am sure that that was not the intention of the PTEs.
I hope that the Minister might be able to look at this again and leave the PTEs with their existing powers, which have served them so well over many years.
3.12 p.m.
Lord Tunnicliffe: My Lords, I support this Bill, but first I must declare an interest. I am employed in the railway industry as chairman of the Rail Safety and Standards Board, an organisation which facilitates agreements between parties on safety in the railway system. I also reflect from a position of 12 years with London Underground, which carried 1 billion passengers a year, and two years looking after the buses, where London Transport carried more than 2 billion passengers a year. That gives one a pretty raw relationship with public transport. I am afraid that I am not as in love with the railways as are some speakers in the debate.
Like most Englishmen, I am fond of the railways, but I do not believe that they are automatically the solution to every transport need. Indeed, I also know of the many myths surrounding the railways. Their environmental credentials are much overplayed. Railways do not pollute at point of use except with respect to noise—and if you live close to a high-speed railway, you will know that noise pollution is a real problem—but they create carbon emissions at remote power stations or in their own power car.

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I also know that my many friends in British Rail who ran the railways in the late 1980s and early 1990s managed to run them with very reduced amounts of money, but only by stealing from the capital base. At the end of that programme, at the point of privatisation, the railways were deeply decapitalised. They were further decapitalised in the early years after privatisation.
I know that the railways will consume a vast amount of money in the foreseeable future. There is no way around it. Today, the Government announced their funding for the railways over the next four years, and it is typically, £3 billion, £4 billion and £5 billion. If you look behind those figures to the net borrowing that is also going to Network Rail, it is more like £16 billion over three years.
The railways eat money. Despite all the efforts of Network Rail and I admire what it is trying to do to reduce costs-this is an expensive pastime. Inevitably, we must come to the conclusion that those large amounts of money must be the direct responsibility of a Minister. Essentially, that is what the Bill does. It abolishes the SRA. Unlike a number of my noble friends, I am very sad about that. The SRA has done a good job and the work that it did on strategies, Southern Region electrification and the West Coast Main Line was good for the railways. We have better railways because of the work of the SRA, especially because of the work done in recent years.
Unfortunately—or fortunately—the SRA, together with the ORR, became involved in the process of readjusting the Treasury's expectations about railway funding. I spent many years readjusting Treasury expectations. It is a brutal and turbulent process. The brutal and turbulent process that has taken place in the railways over the past two years has exposed the gaps in the present structure. The Government have been forced to address those gaps. In the Bill, it addresses the gaps by abolishing the SRA.
It is a brutal solution because it does not seem to respect the work that the SRA has done. It is also a very brave decision. Noble Lords will remember "Yes, Minister". My experience is that it was a pretty accurate programme. Ministers are usually very good at not being brave and push decisions away from them to other agencies. Over the decades, that is what governments of both hues have done.
The Bill will put the responsibility for expenditure on the railways in the hands of the Secretary of State, alongside the output from that money. No longer will people find themselves in the intolerable positions that British Rail and I found ourselves in where, on the one hand, money was specified and, on the other, vague outputs were insisted upon while the relationship between the two was ignored. Under the Bill, the Secretary of State has to set out in his high-level output statement what he wants. An independent and, I believe, effective rail regulator will say what it will cost. There will be a process of trade-offs between the two of them and, at the end of the day, the Secretary of
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State will have to stand up and be counted about what is delivered and will have to extract the money from the Treasury to pay for it.
I said that I am sad about the SRA. I am pleased by the Minister's assurances that the new Department of Transport capability will build on those presently in the SRA to use their best talents and to make sure that the key strategic thinking that they have initiated goes on. I believe that the rest of the team at the SRA will be dealt with equitably. I would value further assurances on that.
There has been a lot of talk about the duty of the Secretary of State to publish a strategy. I understand that he has not said that he will not. Indeed, I share the view that Secretaries of State of all kinds should produce strategies. Surely, in order to manage large departments, they must set out what they expect to do in the future and what they expect to achieve. I hope that that is what will happen.
In the high-level output statement, we will have something much better than a strategy in many ways. We will have a clear statement from the responsible politician of what the railways will produce. It will have to be fairly specific. It will not be easy for the Secretary of State to say, "I didn't really mean this" because the Office of the Rail Regulator has to be able to value and cost it. That high-level output specification will in many ways amount to a more useful and meaningful document than a glossy strategy. The processes of decision-making that go into it will be important. I hope that they will be open and inclusive.
I look forward to an open and inclusive environment, where we see and understand the decision-making criteria to be used. I am possibly the only person who will openly welcome the new closure procedures. The department, as your Lordships may know, has produced outline criteria in one of its publications. For the first time, we have closure criteria in line with the rest of the criteria for transport decision making. It is still a fairly messy scene but, when I closed railways in the past decade, we had quite separate criteria for our decisions to spend on the railway—or to grow the railway—from those we had to use for closure. I welcome bringing them together, which seems to be the intention of this Bill.
There are some concerns from local authorities and PTEs. I am not as seized as a number of their defenders with the idea of the present powers of PTEs being precisely right. I look forward to the debate in Committee with interest. The key issue is that there has to be an equity between the PTEs and Transport for London. It is absolutely essential that they should be on equal footing, and play equal roles in the development of public transport systems in this country. Stability in the relationship between local and national decision making is something we need to look forward to. It is to be hoped that the Bill will be a step towards that, particularly if the quality contracts for buses are going to be used by local government in one form or another. They must have confidence that

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funding diverted from railways to quality bus contracts will be sustained and will be something they can have faith in.
Railways have had a long journey over 200 years. There have been rare periods of genuine stability and, frankly, rare periods of overall success. Is this to be the moment when we see the beginning of a successful period? I am sure we all hope so. It is the best way forward, but let us not pretend it is a perfect way forward. The depth of decline of the national railway is enormous. I do not mean at the surface level, I mean in the physical assets and long periods of under-maintenance when the physical assets have declined. The task of addressing that will be enormous.
The privatisation brought about by the Railways Act 1993 was much more flawed than we realised at the time. I do not share the simplistic charges of the government of the day. The things that have not worked in it are very subtle. The failure to have good congruency between the incentives of the various bodies—the fact that the entities within the national rail network are so different in character, expectations and financial structure—has created a series of perverse outcomes which have been very difficult to overcome. The Government have decided not to address those issues, and I entirely approve of that. The railway could not take the level of change necessary to hit these issues head on. This Bill is a good step forward. I hope that the Government and the industry will take it and work together to deliver the success—for our country, for our passengers—that we all deserve.
3.24 p.m.
Baroness Scott of Needham Market: My Lords, the unavoidable absence of my noble friend Lord Bradshaw has given me the welcome opportunity to participate in the debate today.
We on these Benches share the Government's aspiration for an efficient, effective and safe railway. Unlike the Government, however, we do not believe that the Bill as it stands will be enough to achieve that. I agree with the sentiments just expressed by the noble Lord, Lord Tunnicliffe, who sees this as part of an ongoing process of reform. It is certainly true that the privatisation carried out in the 1990s has resulted in a rail industry that is fragmented and riddled with perverse incentives, which have been of no benefit to the travelling public. That was described in rather poetic terms by my noble friend Lord Glasgow and the noble Lord, Lord Bhattacharyya. I rather think that if the amounts of public money that have been spent in the past decade or so on accountants, lawyers and consultants had been invested in the railway, the passengers might be rather happier today. But the Government cannot hide behind the Conservative privatisation programme for ever, as they have had eight years to improve things.
There are some significant problems. On most of our high-speed rail network, the trains are something like 30 years old, and the new franchises on the Great Western, the Great North Eastern and Midland
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Mainline do not propose any replacements. By the time the next franchises come up, the trains will be almost 40 years old. When there has been investment in fast trains, such as the Pendolinos, it has often been the case that the use of fast lines by slow trains has reduced their impact.
We agree with the Government's proposition that there should be fewer franchises. However, if my noble friend Lord. Bradshaw were here, he would emphasise again that we believe that the franchises should be for a longer period to create the environment for investment that would make new rolling stock possible. Indeed, the new northern franchise not only precludes new trains but does not even allow for refurbishment.
On the specifics of the Bill, there are a number of issues about which we have concern and to which we shall return in Committee. We share the concerns expressed by the noble Lords, Lord Morris of Manchester and Lord Burlison, about the future role of the passenger transport executives as co-signatories to rail franchises. The urban conurbations are the only parts of our country that have anything that approaches a fully integrated transport system. They have a good record of managing and increasing the growth of rail networks under their management.
We do not believe that the Government have yet made the case for making such a major reduction in their powers. As my noble friend Lord Mar and Kellie said, that it sits rather oddly in a Bill that offers a very welcome devolution of powers to London, Scotland and Wales that the powers of the passenger transport executives should be curtailed. I am not sure that the PTEs will derive much comfort from the Minister's introductory comment that they could still be co-signatories, and further the aims of the Government's White Paper, because that leaves the decision-making firmly in the Secretary of State's hands, and presumably it will be his opinion which counts and not that of the local representatives on the ground.
We support the transfer of rail safety functions to the Office of Rail Regulation. A number of independent observers over the years have found a culture of gold-plating of safety standards. As the noble Lord, Lord Rosser, said, that reflects the growing blame culture that has developed in the industry. We have always believed that overzealous application of safety standards can interfere with the running of the railway to the extent that passengers are almost encouraged to leave the railway and travel by road, where they are patently less safe, or equally that money is spent less cost-effectively on the railway than it might be if it were invested in road safety.
We have some serious worries about the tone of the Bill. The mood music seems to be one of service cuts, reduction and closures. As we have heard, one third of the Bill is dedicated to describing ways in which lines or stations might be reduced, closed or partly substituted. We are not convinced that the Bill is entirely clear about who will be held responsible for those actions—the Office of the Rail Regulator, the funding authority or the Secretary of State. It has certainly never passed me by

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that major rounds of railway cuts in this country are always remembered by the name of the hapless civil servant who carried them out and that people do not remember which government were in power or who the Secretary of State was. We will not let you get away with that this time.
The 1993 Act, which brought in privatisation, and the 2000 Act both contained specific provisions placing a duty on government to promote the railways for passengers and goods. The Minister has said that there is no such clause in this Bill because it is not needed—that of course government have responsibility for all modes of transport and will therefore promote the railway. But he must understand that the absence of such a clause in a Bill dedicated in at least a third of its clauses to closure or reduction—or "network modification", as it is called—with not a single word about expansion, will cause suspicion.
The Minister referred to a secret agenda. Our fear is that it is not actually terribly secret. On these Benches, we wish to see policymaking in the railways which is set in its full social, economic and environmental context. The impact of closures on the overall rail network and on regional and local transport plans as a whole should be considered. We shall be looking at the guidance very carefully.
On a smaller yet still important matter, until recently, as some noble Lords will know, I chaired the LGA's transport executive. It occurs to me that during the last 12 months of my term there, the dialogue between local authorities and the SRA improved enormously. They made huge efforts to improve their relationship. I hope that the Minister can reassure me and the rest of the House that the department will continue that close liaison with local authorities.
The worry which many of us have is that cuts and closures will be regarded in the narrowest of contexts—and that we will see a repeat of the Post Office closure syndrome, which is now a routine part of local life. I am afraid that I take little comfort from the Minister's reassurances about consultation. When Post Office closures are proposed, people are fully consulted—and then ignored. The Government have set much store by their sustainable community plans and are, I understand, seriously considering bringing in road-user charging. I hope that the department considers that public transport alternatives, including rail, will have to form part of both those agendas.
My final point is that, on these Benches, we are thoroughly dissatisfied with the provision made for scrutiny by Parliament or the public. The rail network guzzles public money—some £16 billion, as we have just heard from the noble Lord, Lord Tunnicliffe. We believe that public investment on that scale must be subject to detailed public scrutiny. I respectfully suggest that the noble Lord, Lord Rotherwick, is wrong to say that there should be no political interference in the running of the railways. Of course,
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it is not the job of government to micro-manage, or to interfere with operational, day-to-day railway duties. Setting strategy and overseeing that sort of sum of public money, however, is absolutely the preserve of politicians. It is the job of other politicians in Parliament to scrutinise that. We join the noble Lord, Lord Berkeley, in wishing to see strategies produced by Ministers made public and the subject of debates in Parliament. Such an important part of our daily lives deserves nothing less.
3.32 p.m.
Viscount Astor: My Lords, I thank the Minister for introducing the Bill and for his extremely helpful briefing last week. I am not one to go over old ground, but he started by saying that privatisation assumed a decline in rail services. I want to make the point that it was in fact the opposite. Privatisation sought to address the long-term decline in spending on rail services and the need for growth and new investment. I hope that the Minister will agree that, since privatisation, passenger numbers have gone up, under both the Conservative government and the Minister's Government.
It is somewhat disappointing that in all today's contributions by Members of your Lordships' House, no one has really mentioned the train operating companies or the success that they have achieved. They have spent vast amounts of money improving their services, and the proof is the rise in passenger numbers. I think that it was the noble Lord, Lord Faulkner, who stated that there were now over a billion passenger journeys. We must not forget that in our debate. It is sad that it has not been focused on by any of the noble Lords who spoke.
There is sometimes a kind of collective amnesia in rail debates, as we somehow look back on the so-called glorious days of British Rail. I suppose, in those days, people looked back on the glorious days of individual rail companies. Services are now much improved from what they were under British Rail. They are faster and work better. The idea of going back to those days is, I have to say, rather extraordinary.
The Government created the Strategic Rail Authority with a great fanfare. The Deputy Prime Minister said that the Strategic Rail Authority would put railways at the centre of an integrated transport system. It appeared in the Labour Party's manifesto in 2001, which stated that the Strategic Rail Authority would provide a clear, coherent and strategic programme for the development of the railways so that passenger expectations were met. Indeed, just two years ago, it was in the Department for Transport's review of its 10-year transport plan.
So why scrap the SRA? What went wrong? Did it fail to deliver? Did it not deliver what the Government wanted it to deliver? There has been no explanation of that. The noble Lord, Lord Tunnicliffe, got nearest to bringing out the issue, but we have never quite heard the Government's reasons. I shall not oppose the abolition of the SRA, but I should like to know from the Government why they want to abolish it.

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Behind everything—it has only been hinted at on the government Benches—is, as the noble Baroness, Lady Scott of Needham Market, suggested, a desire to bring the railway system back under Treasury or government control. That is the purpose. The Secretary of State will now be held responsible. Perhaps that is a good thing, but we should not get away from that.
One of the most important aspects of the process will be access charges reviews. Clause 4 reduces the jurisdiction of the Office of the Rail Regulator. Access charges reviews are important for ensuring a competent and efficient working railway in the years ahead. They indicate the costs of the maintenance of the lines, and franchisees bid for the lines in the belief that the maintenance needs will be met. We want to know whether that is a way of capping the money available to implement the findings of the review and, in effect, whether it is saying that the regulator has to prioritise the needs in the budget. I believe that, effectively, it is the long arm of the Treasury. There was certainly an absence of any assurance from the Secretary of State on the subject when the Bill passed through the House of Commons.
As I am sure the Minister will argue, the regulator is not allowed to apply political criteria, as it is recognised that the application of short-term political considerations is harmful to private sector confidence and to the medium and long-term needs of the railway industry. That restriction allows the Secretary of State to overrule the regulator, and thus, in a sense, it can be regarded as political interference in the funding. We should like to hear from the Minister exactly how that will work.
Much has been said on the subject of strategy. As the noble Lord, Lord Berkeley, said, unlike the Railways Act 1993 and the Transport Act 2000, the Bill contains no duty to promote the use and development of the railways or a duty to publish such strategies. Such a duty is important for the long-term future of the railways, especially in the light of the Government's Sustainable Communities Plan and road pricing proposals, which will succeed only if there are viable public transport alternatives.
The noble Lord, Lord Berkeley, made an interesting point about the cost of different forms of transport. The public should have a clear choice between travelling on an aeroplane, a train, a coach, a bus or a car. We must have a clearer understanding of the costs involved and, indeed, of the effects of pollution and so on. The difference in the cost of the various modes of transport when travelling from one end of England to the other is extraordinary.
The issue of closures will rear its ugly head as we go through the Committee stage of the Bill. The Bill makes it difficult to open a railway line but very easy to close one. The community rail development strategy transfers more responsibility for financing rail services to passenger transport executives, but it does not transfer any extra money to do so. At the same time, it
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removes the power of PTEs to determine the local rail franchises that should be awarded. This part of the Bill is about making the closure of railways easier.
It is suggested that, once again, the budgets will be capped and that local authorities will then have to decide whether to make up any shortfall via their council tax income or other funds or, indeed, perhaps whether to set up an alternative bus route instead. The fear is that will be the end of many rural services. It will be the Treasury saying to local authorities, "If you want this rural service, you can have it but you have to pay extra. We won't give you the money". We need to ensure that passengers are properly protected and that a pre-closure report is published on the social, economic and environmental impacts of any such proposal.
London is a concern. The noble Lord, Lord Harris of Haringey, carefully read the main points of the Transport for London briefing that we all received. I am grateful to him for making sure that we had all read it. However, some questions arise. Under the proposals, Tfl. will have the freedom to fund additional improvements. There is no answer on who will pay for those and how that fund will be levied.
The noble Lord also said that we on these Benches should be keen on that because it gave everyone a chance to be involved in the democratic process regarding TfL and the Mayor. There is one problem in his argument: most of the people who commute into London do not vote for the Mayor because they live outside the area. They are excluded from the democratic process when it comes to Transport for London.
There will also be a memorandum of understanding between the Secretary of State and the Mayor of London. I wonder whether the Minister will tell us anything about that. That is an area that perhaps should be subject to parliamentary scrutiny. I shall certainly consider whether the memorandum should not be subject to some form of secondary legislation.
As my noble friend Lord Rotherwick pointed out, when we dealt with the Roads Bill there was A totally different emphasis on strategic routes. Will the fast train coming from Glasgow or Newcastle have to stop at every station from Hatfield into London to pick up commuters? It is an issue we shall address in Committee.
My noble friend also mentioned heritage rail and the issue of black boxes. I hope that the Minister has a satisfactory answer for us. Can the Minister tell us, now that Network Rail will be under greater government control, what incentive will there be for Network Rail to speed up the exploitation of its huge property assets to improve stations? I am thinking particularly of the creation of safe car parks to encourage train use. In certain areas, it is difficult to commute to your Lordships' House on the train because, if you leave your car in the station car park overnight, the next morning it is unlikely to be in the state in which you left it.

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I have some questions about the incentives for train operating companies. We all agree with the importance of longer-term franchises, subject to better and more credible performance criteria, but can the Minister say something about that?
I should also like to make a point about the SRA. It compensated train operating companies that lost revenue as a consequence of claims arising from national campaigns of industrial action. Will operators' protection be retained in the future?
The Minister said that the last thing the industry needed was "ever-changing strategies". Sadly, if only previous Secretaries of State had listened to the Minister more closely we would not have had six reviews in seven years. I have no idea what the Government's strategy really is. Are the rail services there to carry commuters, run services between big cities, maintain rural roots or carry freight? What will be the priorities?
We now know that in the past seven years, despite many improvements, there is no great improvement in punctuality. The Government's plan was to increase the amount of freight carried on the railways by 10 per cent by 2010. It is clear that that target will not be met. Also in the Government's plan was the completion of Thameslink 2000 and the east London line by 2010. It is clear that that will not happen.
Lord Berkeley: My Lords, I am grateful to the noble Viscount for giving way. Can he explain why the 10 per cent growth in freight over five years will not happen?
Viscount Astor: My Lords, there certainly seems to be no evidence that it will happen, but if the noble Lord, with his expertise in freight, can show me some evidence, I shall be happy to look at it.
Lord Berkeley: My Lords, it has grown 10 per cent in the past year.
Viscount Astor: My Lords, I am grateful for the noble Lord's intervention. He must be pleased about that increase, but the question is whether it can be sustained. We will have to look at that.
Ministers have always promised that fares would not rise faster than inflation. In practice, that has not happened. The most recent increase was 4 per cent, and that is the second 4 per cent rise in only two years. That does not exactly encourage people to use the trains.
What is important, and what the Government will be judged by—what all governments should be judged by—is what is happening to the poor old passengers. Sometimes, we ignore them and talk more about networks. At the end of the day, the railway is there to provide a service to the passengers. That is how it will be judged. We will consider that as the Bill goes through Committee. I assure the Minister that we will try to be helpful in our amendments, because we support much of the Bill, but we will have to put him under a certain amount of scrutiny.
3.47 p.m.
Lord Davies of Oldham: My Lords, this has been a most interesting and challenging debate. The principal sustenance that I derive from it is from the contribution of the noble Viscount, Lord Astor, who said that there are parts of the Bill—dare I say, the principle of the Bill?—to which he subscribes. It was certainly clear from all other parts of the House that, whereas that we will enjoy debating an enormous number of issues in Committee, the principles on which the Bill is based command general assent. That is not to say that I do not recognise that we will have a fulfilling and interesting Committee, but this is Second Reading and my job is to emphasise that we are discussing the principles behind the measure.
The only time that I thought that we might be coming close to a challenge to the Bill's principles was on the question of costs and closures. That came first from the Liberal Democrat Front Bench. The noble Baroness, Lady Scott, seems to be living in a fantasy land—where this is a Bill for closures because we have a government who are determined to run down the railway system and reduce investment in it—apparently oblivious of the Government's expenditure plans for the rail industry and the amount that we intend to invest during the next few years. She was partially followed in that—although rather more
carefully, I thought—from the Official Opposition Front Bench when the noble Viscount, Lord Astor, also commented on closures. Let me make it absolutely clear: the Bill is about creating a structure in which we can invest in a modern, expanding railway.
On freight, I do not need to add a word to the point made by my noble friend Lord Berkeley: freight expansion is already healthily under way. Of course, we intend to create the conditions in which that persists.
The debate also benefited enormously from those with a real interest in the railways, who can comment on recent history with great authority. I am thinking of my noble friends Lord Tunnicliffe, Lord Rosser, and Lord Berkeley, who have spent a great deal of time in the railways. They were able to establish why it is necessary for us to create a new structure for the railways.
On the other hand, the history that we heard from the other side of the House, was a little partial, to put it mildly. It is amazing that we should be challenged about why we are abolishing the Strategic Rail Authority. We are making it absolutely clear that we intend to abolish it because, when it was conceived, the scale of the industry's problems was not as apparent as it later became. One word not mentioned by the other side: Hatfield; nor was the word Railtrack mentioned by the other side of the House, in its history of the past 10 years of rail privatisation.
As the noble Earl, Lord Glasgow, emphasised, we are struggling with the consequences of a botched rail privatisation which it has taken some time to get straight. In this Bill, the Government are creating a structure for expansion.

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There is one aspect I give freely to the Opposition. I appreciate the points made by the noble Lord, Lord Rotherwick, and the noble Viscount, Lord Astor, on unused assets of the railway system. We do not want to see those sold off to make a quick return, when assets which we would need for rail expansion might be sacrificed. I hope the Liberal Democrats will accept that that is our main proposition. However, we recognise that selling off some railway assets may bring resources into the industry. We need to have a clear evaluation of unused assets. I accept the point that was made.
It was suggested that the Government are not committed to putting strategy in this Bill. That view was reinforced by the noble Viscount, Lord Astor, in his summary of the debate. There was no strategy in the 1993 legislation, but there was strategy when we established the Strategic Rail Authority. It would be difficult to devolve the concept to a strategic rail authority and not say that its job is to provide a strategy—that was its role. That legislation did that, but it has not been recognised on all sides.
The purpose behind this legislation is to ensure that the Secretary of State is responsible for strategy. It does not need to be laid upon him; he is responsible to Parliament for the actions which he takes for the management of the railway. He is automatically responsible for the long-run decisions relating to the railway and its strategy. We put strategy in legislation only when it is incumbent upon subsidiary bodies and not upon Secretaries of State responsible for the overall strategies of their departments—certainly with something as significant as rail in the Department for Transport.
The Bill has been challenged on two main points: that it lacks a commitment to strategy and that it makes closures easier; and it is said that that reflects the view that this Government are about producing measures which restrict the railway. That is not so. We share the viewpoint that has been expressed fully from my own Back Benches. I have noted that there is a contrast between the number of constructive, intelligent and well presented contributions from my own Back Benches and the dearth of any contribution at all on the Opposition side. It may be that those on their Back Benches have a slightly clearer view of the past and the responsibility of the previous administration than those on the Front Benches giving vent today.
Nevertheless, we must consider certain issues. I was grateful to my noble friend Lord Morris for his point about passenger transport executives, which my noble friend Lord Burlison reinforced. We shall explore those points more fully in Committee. Of course we see a significant role for passenger transport executives; in fact, the purpose of the Bill is to increase the local dimension and to improve the relationship between the railways and local communities. It is important to have a relationship between influence and power, and accountability for costs incurred.
I could quote chapter and verse the reasons for our anxieties about the existing powers of passenger transport executives and why we must restructure
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them, but we will debate that in detail in Committee. I fully recognise the experience of my noble friend Lord Morris as a very important transport executive. As a former Member for Oldham in the other place, I know a little about the Manchester transport executive, of which my noble friend spoke with approval, and the issues that it is confronting.
I appreciated the remarks of my noble friend Lord Bhattacharyya about comparisons with other rail systems. No one visits Japan without appreciating the staggering quality of its rail system. That is why it is proper for the Government to try. with might and main, to improve the quality of our rail services. Recently, flag-carrying has always been related to airlines, and governments have felt happy only when their airlines perform satisfactorily; but in this age of global warming and when people seek the most effective means of transport, rail is due for a resurgence. Governments' success will be measured by the quality of the rail services that they provide.
It will take us a long time to reach the standards of Japan, but I hope that we never reach the levels of debt to which Japan descended over its rail system. Nevertheless, Japan's railways are a legendary experience, which I have enjoyed as, I am sure, other noble Lords have. I have a great advantage in that my eldest son works in Tokyo and takes me for a train ride the moment I mention the word "transport" in his presence. We must strive to match that extraordinary feature whereby one can set one's clock by the arrival of a train. The train that was intended to come in at a certain time arrives at that time. There is no doubt about the need for promptness, particularly given the vast numbers of rail commuters who use our rail system.
I was grateful to my noble friend Lord Harris for emphasising the London dimension: 30 per cent of rail journeys are made in the vicinity of London. Prompt arrival is crucial. I do not underestimate the other aspects, such as comfort and facility, but the most important dimension for people going to work is a guaranteed service that departs on time and transports them to their destination at the scheduled time.
We seek to place Transport for London four-square with the passenger transport executives elsewhere. We have not finalised the details. The noble Lord, Lord Harris, and the noble Viscount, Lord Astor, asked when the memorandum would be published. We are working towards that position. Again, the issue will be explored in Committee. The noble Viscount has given notice of his intention to raise the issue, and I know that we must respond to that point.
I hope that it will be recognised that in the Bill we seek imaginatively to approach one of the big challenges of our age: how to ensure that commuter services, certainly those coming into London, work to a much higher standard than in the past. That depends upon significant input from the local dimension. in which the Mayor of London will play a full part.
My noble friend Lord Faulkner updated my statistics. I am always grateful to him when he is able to do that; I know that he has great knowledge of the

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railways. The difference between his updating of the statistics and my lowly aspirations is that I can give only what is official and published and he can give what is always true but not published. I cannot match his figures until the official date of the end of March. He will therefore forgive me if I have alluded to figures not quite as attractive as those he put forward. My noble friend has the benefit of being able to give unofficial assessments that show how the railway is working better. I am grateful to him.
He also mentioned the Railway Heritage Committee, of which he is chair—I am grateful for that intervention. I know what an important role it plays and I accept his point. It would seem appropriate for the current powers of that committee, which enable it to designate records and artefacts owned by a number of British Rail successor bodies, to be extended to include new companies and bodies that have emerged since the enactment of the legislation that established the committee in 1996.
It is an important and interesting point. My noble friend had a fruitful meeting with the Minister in the other place, my honourable friend Mr McNulty. An undertaking was given that we would try to make progress by Committee stage. I shall be held to that; I have no doubt. I hope that I will have made progress by then.
In connection with heritage, the noble Viscount, Lord Astor, referred to black boxes on heritage trains. That is a matter not for primary legislation but for regulations. There are industry standards from which the heritage operators could apply for a derogation. They are not part of a measure of primary legislation. I hear the noble Viscount's point; I have great respect for all those who take an interest in our heritage railways. I hope that we will not spend too much time on an area that would not be appropriate for the primary legislation that the Bill contains.
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My noble friend Lord Tunnicliffe mentioned the overall position. I emphasise that we will get into the issues of the passenger transport executives in Committee. I am all too aware of his expertise on the industry and will value his contribution in Committee. I want to emphasise that both that aspect and the role of Transport for London will inevitably be the subject of intensive debates in Committee. He will have recognised from this debate that other noble Lords have keen interests in this area and will need to develop the points.
I am conscious that I took a considerable amount of time in introducing the measure and I am probably taking too long in summing up, but this has been a most fruitful debate. I apologise if I have missed points that noble Lords have raised. It has been impossible to cover everything. I want to emphasise that, as we should at Second Reading, we have cleared the decks for some interesting exchanges in Committee. There are areas that we need to cover with care.
I want to emphasise that the merits of the legislation are such as to enable us to create a structure for proper strategic investment in the rail system and its development. Responsibility will be accounted for by the Secretary of State with a clear line of authority as regards the Office of the Rail Regulator and the operation of the industry. That is against a background where the Government's commitments in their spending plans are already feeding through towards an enhanced railway system in many areas.
There is much still to be done. We cannot make up for 40 years in a short period of time, but we have the measure here that creates a structure and we certainly have the commitment and the investment to guarantee that that structure translates into reality. On that basis, I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Grand Committee.
House adjourned at five minutes past four o'clock to Monday, 21 February.

Official Report of the Grand Committee on the Charities Bill [H.L.]
(Third Day)
Thursday, 10 February 2005.
The Committee met at two of the clock.
[The Deputy Chairman of Committees (Baroness Hooper) in the Chair.]
Clause 5 [Special provisions about recreational charities, sports clubs etc.]:
Lord Hodgson of Astley Abbottsmoved Amendment No. 31:
Page 4, line 12, leave out subsection (4).
The noble Lord said: We move now to Clause 5. In doing so, I welcome back the Minister to the seat of power for the afternoon. Clause 5 deals with special provisions about recreational charities and sports clubs. We seek to remove subsection (4), on a probing basis, because we would like to tease out the Government's thinking on this matter.
Subsection (4) refers to community amateur sports clubs—CASCs—which have come up already in our discussions in Committee. These were created by the Finance Act 2002. The details are in Schedule 18 to that Act. Sporting organisations that fall within the parameters set by the Finance Act can register with the Inland Revenue and, in consequence, receive certain tax concessions.
As we learnt in our earlier debate, Clause 2(2)(g) provides that the advancement of amateur sport is a charitable purpose. Under English law, an organisation is a charity if it is established for exclusively charitable purposes. In theory, an amateur sports organisation registered with the Inland Revenue as a CASC could also be a charity under the "advancement of amateur sport" heading. As a charity, such a CASC would be obliged to comply with charity law. Probably, in most cases, it would be obliged to register with and be registered by the Charity Commission.
By saying that CASCs established for charitable purposes are not to be treated as being so established, Clause 5(4) seeks to draw a clear dividing line between CASCs and charities and ensure that CASCs do not find themselves subject to charity law and regulation.
If I am right in my assumptions so far, perhaps I may ask the Minister three questions. First, is the purpose of this clause to force sports clubs down one of the two routes; that is, to become either a CASC or a charity—they cannot be both? Secondly, if a sports club had gone down one route, could it subsequently change its mind and cross over to the other route? For example, a sports club chooses to become a CASC. It finds that it is offered a big donation if it is a charity, and
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therefore wants to switch its status from being a CASC to being a charity. There could be a tax advantage to a donor giving to a charity, which would probably not be available if the donation was given to a CASC.
Thirdly and perhaps least importantly, but it would be very interesting to hear the Minister's comments, what are the relative tax advantages of the two routes—between becoming a charity and becoming a CASC? I know that the noble Lord, Lord Phillips, has Amendment No. 31A in this group. I do not want to steal his thunder, but I think that his drafting is a great deal clearer than that in the Bill. I look forward to hearing his comments on it. I beg to move.
Lord Phillips of Sudbury: In speaking to Amendment No. 31A, I am grateful for what the noble Lord, Lord Hodgson, said in moving Amendment No. 31. Noble Lords may not be aware that as far as the noble Lord, Lord Bassam, and I are concerned, community amateur sports clubs have a rather special part in our parliamentary hearts. I set in motion the legislation that brought into being this group of quasi-charities, as I would call them. They are not quite charities but they enjoy most of the tax benefits of being charities, and now rating benefits as well. As a matter of pure charity law, if you are a charity, you are a charity. The fact that you have failed to register as such does not stop you being a charity, and you are still subject to charity law. In a sense that answers one of the noble Lord's questions.
I seek to clear up, in a way that has no unfortunate side effects, the issue to which subsection (4) is addressed; that is, to try to prevent a CASC being simultaneously a charity under the Charities Acts and charity laws. I rather hope that the noble Lord, Lord Bassam, will say that Amendment No. 31A does the trick because it heals both ways. Amendment No. 31A would make subsection (4) read:
"A registered sports club established for charitable purposes is to be treated as not being so established unless it has been entered on the Register of Charities"
at the moment CASCs can, so to speak, transmogrify into charities—
"whereupon it shall cease to be a registered sports club".
That seems to me to leave the position clear: you either are a CASC and registered as such or you are a charity and registered as such. You cannot be both simultaneously.
Lord Swinfen: Purely on a matter of practicality, I do not understand why the Government when drafting this Bill put this subsection into it. Obviously, sports clubs, whether charitable or not, are to be encouraged for the health of the nation. There is a great outcry at the moment about obesity, particularly in children and the fact that they are unfit. Purely on the grounds of practicality it should be possible for sports clubs to have charitable status. They should be encouraged in every respect and not just for the sake of children but also for adults. All adults should be encouraged to keep fit.
Lord Bassam of Brighton: It might help the Committee if I give a little background, although I

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think that there is general understanding of why we introduced the CASC provision which the noble Lord, Lord Phillips, promoted in many respects.
The CASC scheme was devised by the Inland Revenue in 2002 and was promoted to small sports clubs as an alternative to charitable status. The scheme was meant to allow a sports club to be a CASC or a charity but not both. We are trying to iron out some of the flaws that have arisen in the construction of CASCs. That is essentially why we have this provision.
In general terms a sports club that is open to the whole community and is organised on an amateur basis can register with the Inland Revenue under the CASC scheme. As I said, that scheme dates back to 2002. It gives qualifying clubs many but not all of the reliefs that charities enjoy from direct taxes and from rates on their property, as the noble Lord, Lord Phillips, and I know very well. CASCs are overseen by the Inland Revenue for compliance with the rules of the CASC scheme. The Government believe that the CASC scheme has a lot of potential to encourage the formation and growth of small sports clubs and thus to increase participation in sport at grass-roots level.
Since the introduction of the CASC scheme, a number of sports clubs have also had to be registered with and be regulated by the Charity Commission due to their charitable purposes. Our intention is that CASC status should be a true alternative to charitable status for sports clubs, making it clear that a sports club cannot be a charity and a CASC at the same time. The drafting of the Bill seeks to achieve that; I think that it does. It enables those sports clubs to choose whether to register with the Inland Revenue under the CASC scheme or, instead, to register as a charity with, and be regulated by, the Charity Commission, and it allows them to convert from one to the other in either direction. That deals with the second question; there is the possibility of switching from one to the other, but you cannot be both.
The effect of the amendment would be to maintain the currently anomalous position. We cannot accept that; it would be inappropriate and wrong, which is why we cannot accept this probing amendment.
The noble Lord also asked about the tax position of charities vis-à-vis CASCs—bodies registered as a charity or a CASC. CASCS get many—perhaps most, but not all—of the tax exemptions available to charities under Section 505 of the Income and Corporation Taxes Act 1988. As I explained, CASCs receive rate relief on their property. Overall, there is probably not a lot to choose between CASCs and going through the charities route. If there is an advantage at all, it is probably slightly to charities registering with the Charity Commission. That is where the benefit lies.
The noble Lord, Lord Phillips, thought that his amendment might do the trick. I have a speaking note that covers some of the ground already covered in this short debate. The heading on the note originally said "resist", but we thought about it a little more and
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would like to take away his amendment to see whether we can come back with something that does what he seeks to achieve. We have taken some further advice and want to be helpful. The amendment tries to force CASCs that are already on the register to retain charitable status and lose their status as CASCs. We agree to consider that change to the Bill to try to ensure that there is a nice and simplified process for that to happen. I hope that the noble Lord will be satisfied with that.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister. As I said, the amendment was probing. I am delighted to hear that there is a two-way valve so that bodies can go in either direction. I thank him for his explanation of the tax position.
Lord Phillips of Sudbury: I am also grateful to the Minister as his reply was very helpful. The simple point is that charities cannot transmogrify into CASCs. The traffic is all the other way, from CASCs to charities. The noble Lord, Lord Swinfen, made the general background point that it is wrong to obstruct sports clubs from finding the status that best suits their circumstances, so it is good to know that the matter is under review.
Lord Hodgson of Astley Abbotts: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 31A not moved.]
Clause 5 agreed to.
Clause 6 [The Charity Commission]:
Lord Phillips of Sudburymoved Amendment No. 31B:
Page 4, leave out lines 30 and 31 and insert—
"(3) The Commission shall be an independent public body free of Government direction and control".
The noble Lord said: The amendment is part of a group of amendments that strike at the same general issue. I think it fair to say that all of us with amendments in the group consider it to be one of the more important aspects of potential reform of the Bill.
The first point that I want to make is perhaps my strongest. It is that the Charity Commission wishes to have a more explicitly independent status under the Bill. The chief Charity Commissioner, Geraldine Peacock, made that abundantly clear when some days ago she addressed all Peers who had an interest in the Bill. She went on to say that, of course, the commission could live with its present status, with which it has lived for an awfully long time. But it would strongly prefer to have a more independent status, such as is provided for in Amendment No. 31 B.
2.15 p.m.
Secondly, if one was looking for what I would call really informed support for this amendment and the others in the group, one could not do much better than ask the opinion of recent past chief commissioners. Richard Fries, who was the commissioner before John Stoker, is adamantly of the view that the

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commission, the Government and the sector would be better off if there were a more independent status for the commission. Richard Fries assures me that to that list must be added the name of Robin Guthrie, his predecessor as chief commissioner and another extremely distinguished holder of that position.
Why are they all concerned? It is broadly to do with the extent to which, in modern circumstances, charity is embroiled with the affairs of government and the state. You only have to read what Fiona Mactaggart wrote in the Government's preface to their response to the Joint Scrutiny Committee's report to see the extent to which all governments these days, not just this Government, seek to embrace the charity sector. Putting it over-simply, if the charity sector can take over from government some of the functions that hitherto have been the functions of government, then government are happy, the taxpayer is happy, and on the world goes.
We know only too well that in modern circumstances the scope of political intervention—I nearly said interference—and certainly the scope of legislative intervention is at a height that our forefathers would not have thought possible. I remind the Committee that in 2003 we passed 13,407 pages of new legislation. On top of that is a great deal more law in the form of High Court precedents, government circulars, and the like. I simply sketch the context within which this amendment is brought forward—namely, one in which the state is ever more powerful and ever more intrusive and where the need for the voluntary sector, or the charity sector if you would prefer to call it that, to remain resolutely and absolutely independent of the state is unarguable. To be fair to the Government, they do not argue that proposition. I have heard the noble Lord, Lord Bassam, the noble Baroness, Lady Scotland, and Fiona Mactaggart several times assert their wish to see an absolutely independent charity sector.
That is not an issue between us today. What is an issue is the best way of achieving that. At the moment, the Charity Commission has what is called "non-ministerial departmental status". There is a catchy little phrase if ever there was one, and if you can work that one out, you are a better man than I am. Perceptions of independence become more important. The Charity Commission is a quasi-judicial body and, just as the judges in the courts have to be seen to be independent as well as being independent, so the greater constitutional distance one can create between the commission and the Government, the better for the commission and for the Government.
Let us consider, for example, the role of the commission in dealing with complaints from the public about the way in which charities conduct their affairs. It is no secret that one of the most lively types of complaint is that a charity has behaved in a way that is considered by the complainant to be too political. There is no more vibrant source of such complaints than MPs, who feel that in their patch, on their watch or in their sphere of interest some charity or another has said or done things that are outrageous because they are being political. Again, I think it is fair that no
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one that I can see in this Committee would cease to clip the wings of charities in the extent to which they can engage in proper politicking and campaigning.
The Charity Commission has done a splendid job over the past 20 years in evolving guidelines that give the charities and the public a clear set of criteria by which they can judge what are and are not proper political and campaigning activities by charities. But it is fruitless to deny that there is a grey area and a lot of scope for people to disagree about the application of the criteria.
I come back to the issue: MPs and, indeed, governments are in the business of complaining about charities. And who has to decide? The Charity Commission has to decide whether the complaint is right or wrong. The public will not believe that, if the Charity Commission has non-ministerial departmental status, it is completely free of influence from, or behind the arras of, government or, indeed, senior opposition politicians. That is another reason that I think it would be in everyone's interests if the Charity Commission were cut more loosely from the skirts of government than is currently the case.
I shall raise two more quick points before I sit down. First, the noble Lord will agree that the whole tenor of the Bill is to emphasise the important legal and quasi-judicial role of the Charity Commission. The creation of the Charity Appeal Tribunal—to which all decisions of the commission will be made subject, and, beyond it, the High Court—emphasises this special character. The Charity Commission does not do the bidding of government; it does not fulfil any function on behalf of government; and it does not carry out policy on behalf of government. On the other hand, it seeks to maintain the integrity of charities and public confidence in charity. On all those issues, one comes back again and again to the need to create more distance between the commission and the Government, perhaps along the lines of the National Audit Office under the National Audit Act 1983.
So, I put it to the Government that, although their response to the Joint Scrutiny Committee's report was a firm "no" to its request to have this greater independence, it is in their interest, no less than that of the sector and the public, that this amendment be acceded to. I beg to move.
Lord Hodgson of Astley Abbotts: I have three amendments in the group—Amendments Nos. 32, 34 and 50—which concern the issue raised by the noble Lord, Lord Phillips. I share his view that this is an important issue. I think it is probably the most important issue that we shall be debating, certainly today and probably in most of the Bill.
I wish to go further than the noble Lord, Lord Phillips. His amendment is a general statement of intent. The group of amendments that I have tabled follows up the National Audit Office example and seeks to give a better specificity to this particular concept.
Amendment No. 32, which is the principal amendment of the three, is designed to buttress the independence of the commission and—I do not have

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much to add to what the noble Lord, Lord Phillips, said—to ensure that the Charity Commission will be ring-fenced from political pressure, as opposed to the current position where the commission remains structured as a non-ministerial department.
The addition of new subsection (3)(a), which is our Amendment No. 34, is intended to avoid casting any doubt on the requirements in the Bill, as currently drafted, that the commission should give advice to the Government. It is also intended to ensure that the commission's general function set out in new Section 1C(2)6 is not affected.
It is clearly desirable that the Government should be able to call on the commission's expertise on charity matters, always provided that the commission's independence is safeguarded. So we do not want to interfere with that particular aspect of the Bill.
Amendment No. 50—the replacement of paragraph 5 of new Schedule 1A on page 70 of the Bill—is modelled on Section 3 of the National Audit Act 1983. It removes government control over the terms and conditions of commission staff, while retaining their eligibility for the Civil Service pension scheme. We believe that this is necessary to enable the commission to determine the staffing levels that it needs to carry out its extending functions and to decide the remuneration levels that those staff should be paid.
I now move on to the central aim of these amendments and I shall explain our thinking behind them. We have been helped, particularly in the drafting, by the Charity Law Association working party. As I have said, the present Bill has the effect of preserving unchanged the status that the Charity Commission now has as a non-ministerial government department. For the reasons already touched on by the noble Lord, Lord Phillips, that is quite wrong. The commission does not fulfil functions on behalf of this Government or indeed of any government. It does so on behalf of all those involved in the charitable sector—donors, contributors, volunteers, paid staff and recipients. Therefore, it should not be part of the Government, but independent of them, clearly, legally and visibly on the face of the Bill.
I hate to throw the words back in the face of the Minister, but the first time he talked about revised guidance being put out by the Charity Commission he said, "We should be putting out revised guidance". I am sure it was a slip of the tongue, but that is how thinking starts. It was the first day of the Grand Committee and we were into that matter straightaway.
The scrutiny committee's report dealt at some length with issues of commission independence in paragraphs 175 to 180. It recommended the removal of the expression, "on behalf of the Crown", and a clear statement of commission independence as intended and as planned in these amendments.
The Government's reply rejected the report's recommendation but, in my view at least, without any convincing reasons. The matter of independence for
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the commission was an issue on which there was very broad support in our debate at Second Reading. The Minister said at col. 886:
"The Government believe that the commission's independence in that respect is of paramount importance for the proper regulation of charities and for the public's confidence in charities. It is important for me to make that clear before we proceed any further".
My noble friend Lord Sainsbury said at col. 901:
"I have to say that having spent my life in business rather than politics, I find it difficult to come to terms with the idea that the Charity Commission is in effect not under ministerial direction and control. It is, after all, a member of the Government who appoints the chairman and the chief executive; has the power to dismiss them; decides the level of their remuneration, the size of their budget and the pay conditions and number of staff of the commission".
The noble Baroness, Lady McIntosh of Hudnall, stated at col. 914:
"In its response to the Joint Committee, the Government assert the necessity,
'to preserve the Charity Commission's status as a Government Department'.
I was clearly not alone in feeling some alarm when I read those words. Whatever the formal issues, the terms 'independent' and "a Government Department' do not sit altogether happily together. Therefore, despite my noble friend's earlier assurances, I urge the Minister to reconsider that matter and include in the Bill, for the sake of those who come after, a clear assertion that the Commission's independence from government is paramount".—[Official Report, 20/1/05; cols. 886, 901 and 914.]
The commission is not a regulator responsible for implementing government policy, albeit on an arm's-length basis. It has responsibility for delineating the scope of charitable activity, organisations that meet the charitable purpose test and are in the public interest. The commission is rightly made accountable to the Charity Appeal Tribunal and to the courts under the Bill. The commission is to be given increased powers to maintain the integrity of charities and public confidence in them. Charities serve the public interest which is not the same as carrying out government policy. The commission will be better able to win public confidence if, as the noble Lord, Lord Phillips, said, it is manifestly independent of the Government. Is not the advancement of public confidence in the charitable sector a central aim of the Bill?
Moreover, the commission must be able to force charities to meet their obligations. In a world where government rightly, and in my view commendably, rely more and more on charities as partners in the delivery of public services, the risk to their independence is increased. The commission must be free to prevent that independence being jeopardised.
Finally, the role of charities in contributing to public debate is vital. They have first-hand experience of some of the most difficult issues of public policy; their role can spill over into lobbying and political campaigning and it is equally vital that the commission should be free without fear or favour to draw the difficult line between proper use of that right and illegitimate political activity. It is especially important that the commission should be free to defend charities that properly criticise the government of the day.

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2.30 p.m.
The Scrutiny Committee calls for commission independence. In their response, the Government asserted that the present status is right, without giving any reasons. Non-ministerial department status, although giving the commission responsibility for the use it makes of its power, is not of itself sufficient guarantee of independence, nor are ministerial undertakings given during the passage of the Bill. Governments and Ministers come and go and we need an amendment such as this to provide a proper guarantee of commission independence in the future.
The question arises as to what status the commission should have. There is no exact model. The commission is both an extension of the courts and an independent regulator. A non-departmental public body status seems inadequate. That is suited to bodies implementing government policy, albeit arm's length from the Government.
The National Audit Office appears to offer the nearest parallel, serving the public interest through Parliament. Section 4 of the National Audit Office Act provides that its expenses are
"defrayed out of moneys provided by Parliament".
This could be the best model, but of course I accept that it is not an exact parallel. The NAO serves Parliament directly, whereas the Charity Commission, it could be argued, serves the public interest at large. The approach adopted in our amendments and reflected in my remarks is therefore to create a model specifically for the commission, drawing on the NAO model where this seems helpful.
We also considered that appointment of commission members. A key issue must be whether members of the new commission should continue to be appointed by the Home Secretary as commissioners are now. On balance, we concluded that it was best to leave responsibility with the Home Secretary, provided that the statute clearly guarantees commission independence on the basis that responsibility for appointments to many independent bodies rests with the Government and the Office of the Commissioner for Public Appointments guarantees their integrity.
Equally, following on from that, it is arguable that the requirement in paragraph 10(1), that the commission should report to the Home Secretary and itself separately lay the report before Parliament, makes the commission inappropriately accountable to the Government. Independence could easily be achieved by omitting the words "to the Secretary of State" so that the commission was simply required to publish a report and lay it before Parliament. But again on balance, we concluded that it may be unnecessary to go that far on the basis that the guarantee of commission independence prevents the Government from interfering with the commission through its annual report.
So much for the strategic considerations. At an operational level, there are equally good reasons for the Charity Commission to have a greater degree of independence than the Bill envisages. I do not wish to kick the Charity Commission and I acknowledge the programme of reform and improvement which the
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present top management team, with its chief executive, Geraldine Peacock, is undertaking. But we cannot ignore the implications of the commission remaining tied to the Home Office in terms of pay and remuneration.
I want to quote from a letter sent to me by a senior charity lawyer. He writes:
"I have heard it argued that the Commission should remain part of the Civil Service because of its pension arrangements. This is of course a disgrace. The Commission exists to provide a public service to the charitable sector and not to pay pensions to its staff. In any event I question the whole financial employment structure in the Commission, which I believe is one of the causes of its problems. The last figures I had suggested that one-third of the staff change every year, and that is almost certainly due to the fact that young people coming out of University etc. are more interested in the salary than in the pension. The pension arrangements no doubt dominate the thinking of the senior members of the Commission for obvious reasons, but do not in any way consider what is business-like, nor look to the future. I have a very clear recent example from what is effectively a public service over the application of the Commission's salary level staffings:
[firstly] that at a certain level there is a package in the Commission which produces a salary of £32,000, a Civil Service pension, 30 days holiday per annum and no medical health insurance.
[Secondly] the equivalent salary level in the private sector would produce a salary of £39,000, a contributory pension scheme on the basis of a money purchase pension with 20 days a year holiday and full sickness insurance.
The actual monetary value of the Civil Service offer is £35,500, which in no way compares with the private sector equivalent and in consequence the Commission are only engaging weak staff, and in so far as they are engaging good staff they are rapidly attracted away from the Commission into the private sector, which is the reason no doubt for the high staff turnover as well as I suspect the total lack of motivation within the Commission itself due to the whole weakness in structure which I have listed above".
He concluded:
"This needs to be addressed. I think the only way of doing this is to float the Commission off into some sort of quango independent of the Government and independent of the Civil Service".
To conclude, under the Bill as presently drafted, the Charity Commission will be performing its functions specifically on behalf of the Crown. The functions include determining questions of charitable status, as well as recognising whether charities which apply to its registration meet the appropriate test, and doing so in a much more questioning way than hitherto. In these respects, it will be acting in an executive rather than in a truly traditional way. If its status is to remain unchanged from the Bill as presently drafted, it will be more closely aligned to the Government than has at least been the public perception until now.
As the noble Lord, Lord Phillips, said, public confidence will not be increased by the knowledge of these facts. Independence based broadly on the model of the National Audit Office structure or equivalent would greatly enhance the role, the integrity and the efficiency of the Charity Commission and place the

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regulation of the whole sector on firmer ground. I therefore very much hope that the Government will take these points on board.
Lord Swinfen: Amendment No. 33 in the group is in my name. I hope that it will be for the convenience of the Committee if I speak also to Amendment No. 36, which should have been in the same group.
I was going to make a long speech, but I am pleased to say that the noble Lords, Lord Phillips of Sudbury and Lord Hodgson of Astley Abbotts, have said the vast majority of what I was going to say. I can therefore discard most of my speech because I am sure that the Committee will not want to hear it all again.
My efforts at drafting are poor. They are nothing like as good as those of the noble Lords, Lord Phillips of Sudbury and Lord Hodgson of Astley Abbotts. However, I, too, am trying to ensure the complete independence of the Charity Commission. It should not be used as an agent of government. It should be totally independent.
There is a suggestion in the Bill as currently drafted that the commission will continue as a government department. That gives me considerable concern. There is a suggestion that pressure will be put on the commission to interfere with the charity in the Iran aid case. I say only that it is a suspicion, because I do not know. The Government wanted to be extremely friendly with Iran in order to obtain oil contracts. If that were the case, it was both morally and practically wrong. However, the proposal as drafted in the Bill will increase the present inadequate parliamentary accountability while minimising government interference.
When the Government answered the report of the Joint Committee on the draft Bill, they rejected its recommendations for a more independent status. But they did so without advancing any reasons for their rejection. If the Minister is going to reject these amendments out of hand today, he should come up with extremely good and cogent reasons for doing so. So far as I can see, the independence of the Charity Commission is extremely important and I strongly support the amendments much better drafted than mine which have already been moved by the noble Lord, Lord Phillips, and spoken to by my noble friend Lord Hodgson.
Lord Borrie: We have heard powerful speeches concerned with the need for substantial, if not supreme, independence on the part of those who run the Charity Commission. Until now, they have been called Charity Commissioners because there has not been a clear legal status. But the body is to be called the Charity Commission. The Bill proposes that it should be a non-ministerial government department. I am surprised that the noble Lord, Lord Phillips of Sudbury, spoke of difficulty in knowing precisely what a non-ministerial government department was when such departments have existed for many years.
Certainly, the assumption that a non-ministerial government department, cannot or is not seen to be independent of government flies in the face of the
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experience of many such bodies. I headed one such body—the Office of Fair Trading. Neither Secretaries of State whom I served under a Labour government nor Secretaries of State under a Conservative government suggested that I or we were not in practice—on many
different matters of decision-making—independent. That is how, as I understood it, the Government wanted the body to be when they set it up. They did not want the functions of the Office of Fair Trading to be part of, for example—let us call it by its modern title—the Department of Trade and Industry.
Following that, whenever the Conservative government privatised industries they set up similar bodies. We all know of Ofgas, Ofgem, Ofwat and the rest of them. This Government since 1997 have created Ofcom. I do not think that it would be right to say that Ofcom, under the chairmanship of the noble Lord, Lord Currie, is other than independent in the way it performs its functions.
So my first point is that non-ministerial government departments can be, and—I add the point since it was emphasised—are perceived to be by the general public, independent bodies. There are several examples. I was listening carefully because I was not sure whether either the noble Lord, Lord Phillips, or the noble Lord, Lord Hodgson, intended to alter the schema in the Bill for appointments. But it is not intended to dispute that the Secretary of State should make the appointments of the commission.
Lord Hodgson of Astley Abbotts: I make clear to the noble Lord that I said that the appointment system should not be changed, provided we have a guarantee of independence of the kind suggested by the main amendments we sought to move. The appointment system should remain unchanged.
Lord Borrie: I am grateful. I felt that very powerful points were made on the importance of independence. I did not dispute that. I am just as much in favour of that as those who have spoken. One or two of the points made by noble Lords went to some extremes in suggesting that the Charity Commission was to have—I think the noble Lord, Lord Hodgson, said—a function which was an extension of the courts, or a phrase of that kind. The noble Lord, Lord Phillips, referred to quasi-judicial functions.
I would draw a distinction between the Charity Commission and the Charity Appeal Tribunal. In the Bill, it is very clear that the Charity Appeal Tribunal is a quasi-judicial body. It does not have the day-to-day work of supervising and administering the whole charity set-up of the nation. That is the job of the Charity Commission. I would emphasise that in the second of the functions of the commission set out at the bottom of page 5 of the Bill, the general function of the commission is said to be, among other things:
"Encouraging and facilitating the better administration of charities".
That is an administrative, executive job.
I will not go into the work of the Charity Appeal Tribunal, but its name is fairly helpful in that respect. It is meant to hear appeals from those who do not like the

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preliminary decision-making of the Charity Commission. It is a judicial or, if you like, a quasi-judicial body. Its members are to be appointed by the Lord Chancellor, which is very appropriate in the circumstances. Members of the Committee opposite do not wish to object to the Secretary of State appointing the Charity Commission. That is, at least in part, because it is to have executive functions.
2.45 p.m.
Lord Phillips of Sudbury: It is a fact that the Charity Commission perceives itself and talks of itself as acting in a quasi-judicial way. That is a typical and traditional way of referring to those aspects of its activities that are not the administrative ones to which the noble Lord rightly referred, but decisive activities such as allowing or disallowing an application for registration.
Lord Borrie: I am glad for that piece of clarification. I add only that non-ministerial government departments, such as those of which I gave examples earlier, also make decisions relating to the applications of particular individuals and firms. However, they are not regarded as quasi-judicial bodies deserving of being appointed by, let us say, the Lord Chancellor, and with all the other paraphernalia. That is because they are supervised, if you like, on appeal by a body that is appointed by the Lord Chancellor and has the title of a tribunal, an appeal tribunal or something of that nature, so that the public can understand that it has that special role.
I fully agree with the principles that all Members of the Committee who spoke before me mentioned in relation to the need for independence. We all seem to agree that the Secretary of State is appropriate to do the appointing. I do not see why those appointed by him for a period of time—people can be dismissed on certain grounds, admittedly—should not be as independent as experienced non-ministerial government departments and their members and chairman have been in the past. I hope that the message will go out from the Government that it is intended that the Charity Commission should be fully independent and will not be interfered with, either in the sort of example of suspicion that the noble Lord, Lord Swinfen, mentioned, or in any other way.
Lord Phillips of Sudbury: I have great respect for the noble Lord's views; he speaks with a great deal of authority and experience. Why does the Charity Commission want this greater degree of independence? Why do Richard Fries, the previous commissioner, and Robin Guthrie hold the same view so strongly?
Lord Borrie: They may have certain views that they are entitled to put forward, and the noble Lord has very rightly told us of those views. They must be taken into account by the Government. I am trying to give a broader view of how it is with other bodies and other non-ministerial government departments. With respect to those people, perhaps they have not taken those bodies into account.
Lord Hunt of Wirral: I am moved to intervene wholly as a result of the speech of the noble Lord, Lord Borrie. First, I should declare my interest as senior partner of
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Beachcroft Wansbroughs, a firm of solicitors. I also declare my interest as having been one of the Ministers—there are many; it is a roll of honour—who participated in the reappointment of the noble Lord when he was director-general of the Office of Fair Trading. It is an interesting analogy. From when I had responsibility within government, I remember the concern of the OFT about its lack of independence. I remind the noble Lord of the pay and rations issues, which I recall troubled the OFT on many occasions. They also troubled non-governmental departmental bodies, which I think that we are now supposed to know as arm's-length bodies—ALBs. I am never quite sure of the terminology.
I should explain about pay and rations. Being part of the Civil Service and of the Government, the bodies are obliged to follow spending guidelines within the Government. They cannot spend the money in the way in which they would like. They have to follow the strictures of the Treasury and a whole range of other issues. Operating within the Civil Service, they also have to follow Civil Service guidelines and operate within what I, having been Minister for the Civil Service, readily acknowledge as the finest civil service in the world, with its independence, integrity and impartiality. However, it has certain restrictions when it comes to having to operate in the outside world.
I therefore believe that the noble Lord, Lord Borrie, perhaps does not quite remember those instances when he chafed on behalf of his colleagues on the issues that constrained him. If I may add, the last time that we exchanged words on the position of the Office of Fair Trading, it was on the occasion when the noble Lord felt that there should be a chairman and chief executive in the same post. I would just like to remind him that he might have mentioned how pleased he was that he had lost that argument on that occasion, and that now the Charity Commission intends to have a separate chairman and a separate chief executive.
One of the reasons he used when he opposed me on that issue was that this regulator, this Office of Fair Trading, was within government as a non-ministerial departmental body and that therefore it did not need a separate chairman and chief executive. I am delighted that later this year there will be a separate chairman and chief executive of the Office of Fair Trading. I think that it will happen in October. I am pleased that there is a separate chairman and chief executive of the Charity Commission. I am much impressed by the calibre and integrity of this new generation who will handle these new responsibilities. I do not want them to have to put up with those constraints that so upset the Office of Fair Trading when I had ministerial responsibility, and which the noble Lord, Lord Phillips, and my noble friend Lord Hodgson have so clearly identified. Let us set the Charity Commission free from those constraints. I hope that we will hear that from the Minister. Let us underpin its independence and give it some freedom of movement as it embarks on a new chapter in its life.
Lord Borrie: I will not take up too much time on what seems to be a private recollection of the noble Lord when he was in government and when I was

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doing something else. He clearly has a better memory than I do. If and in so far as I chafed at the bounds set in terms of staff salaries and so on, I cannot fully remember. Let us suppose he is right. What we are discussing here today is the independence of a non-ministerial government department to make decisions free from interference by government. I do not remember either the noble Lord, Lord Hunt, or other Ministers with whom I had to deal, interfering with the decision-making of the Office of Fair Trading.
Lord Hunt of Wirral: I think, if I can advise the noble Lord, that we really ought to resist going down that road. I could list a number of occasions when Ministers over-ruled the decisions of the Office of Fair Trading, much to its anger and regret.
Lord Borrie: I do not want to spend the time of the Committee, which is dealing with the Charity Commission, on this. He can only be thinking of those occasions when the Government were making decisions, and rightly so, on my advice; and sometimes they very properly refused to take my advice. It might have irritated me, but it was perfectly proper. Here, we are talking about decision-making of the Charity Commission; not advice given by the Charity Commission to government departments. It would not apply in this field, which I hope that we will go back to talking about when I sit down.
Lord Hunt of Wirral: The noble Lord has made my point better than I could have done.
Baroness McIntosh of Hudnall: I think that I have the Floor. The noble Lord, Lord Hodgson of Astley Abbotts, has spared me the necessity of wearying the Committee by reminding noble Lords of what I said on Second Reading, for which I am grateful. However, I wanted rather tentatively and nervously to take issue with my noble friend Lord Borrie. I cannot resile from what I said on Second Reading.
The exchange that we have just witnessed between my noble friend Lord Borrie and the noble Lord, Lord Hunt, is an example of what we need to be wary of in this area. The issue here, as the noble Lord, Lord Phillips of Sudbury, reminded us at the outset, is one of perception. There does not seem to me to be any real issue of disagreement on any side of the Committee over the necessity for the Charity Commission to be independent and to be seen to be independent. The problem is that the Bill does not say that. In fact, it says something that can be read to mean the opposite. We must be aware that people who will be worried by that will look at the way the legislation has been drafted, whatever reassurances the Government are prepared to make.
I speak as one who not only supports the Bill but who also supports the Government, so I say that with some trepidation. I believe that whatever reassurances my noble friend is able to give, if that is not reflected on the face of the Bill, there will be anxiety that, at some point in the future, possibly with people of less goodwill or when there is less consensus around the
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issue, that may come back to haunt us. I believe the noble Lord, Lord Hodgson, or perhaps the noble Lord, Lord Phillips, referred earlier to things going on behind the arras; I shall pick up the same play and suggest very respectfully to my noble friend that protesting too much on this issue might not be advisable.
Lord Bassam of Brighton: I do not believe that there is an issue between us on the importance of the independence of the Charity Commission. I believe that all Members of the Committee accept and acknowledge that that is of critical importance to ensuring that there is public confidence. I understand the great importance of this debate and the noble Baroness, Lady McIntosh, reminded the Committee of the importance of perceptions. In a sense, that probably goes to the heart of the issue that we are considering on this group of amendments. I have looked carefully at the groups and they come at the issue from slightly different perspectives, but they have a comity of purpose in terms of what they attempt to achieve.
I want to spend some time setting out some of the background to Clause 6 and how the Bill seeks to maintain the independence of the Charity Commission which, as we are all agreed, is of paramount importance. The Charity Commission is, as the Strategy Unit pointed out in chapter 7 of its report. a non-ministerial government department which is staffed by civil servants. I think we all accept that point. However, only the courts can overturn the commission's decisions, in relation to particular charities, in the exercise of its statutory powers. Ministers have no capacity to direct or reverse any of the commission's decisions.
That insulation—if I can describe it as such—from political interests, as the Strategy Unit described it, is a strength of the current system and I have no doubt that it is greatly valued by charities and by all in the charity sector. They see it as a safeguard against the use of charity, and the advantages of charitable status, as a political football.
The Strategy Unit, in its report, concluded that the commission should continue to be independent of any political control, a point on which we are all agreed. It made no recommendation that the commission should cease to be a non-ministerial department. and indeed as I shall seek to explain it is hard to see what alternative arrangement would give the commission greater freedom from political interference. Certainly no alternative model was put forward to the Strategy Unit and, although the noble Lord, Lord Hodgson, has advanced the National Audit Office, that really is the only other model that has been mentioned in the context of this debate.
It is true that at Second Reading some very forceful views were expressed and some doubt was cast on the commission's independence and how it might operate in practice. Perhaps I should go through the detail. The powers of my right honourable friend the Home Secretary in relation to the commission are limited to the appointment of the commissioners themselves.

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These senior appointments are rightly made following fair and open competition, at present through the Civil Service Commissioners and when the commission becomes a body corporate under the Bill, under the separate but comparable arrangements for public appointments. That is a process which I think we all would accept has a great deal of probity to it.
3 p.m.
The commission reports to my right honourable friend only in the sense that it sends him an annual report which the commission lays before Parliament. The commission is not in any sense accountable to my right honourable friend, who has no powers whatever over the commission in the discharge of its statutory functions in relation to charities. The commission is thus entirely free from political control or direction and would remain so under the Bill.
It is true that the commission's budget and staffing levels are perhaps an issue for some. But, we should remember that they are not set by the Home Secretary. I would like here to correct a point made recently in correspondence to the Guardian by a former chief charity commissioner, Mr Robin Guthrie, who has already been referred to in this debate. He said that the Charity Commissioners were accountable to my right honourable friend the Home Secretary for the administration and costs of the commission.
The position has changed since Mr Guthrie left the commission in 1992—some time ago. Funding is provided directly to the commission and it is accountable directly to Parliament for its use of funding, through the recently appointed chief executive and accounting officer, Mr Andrew Hind. So Charity Commission funding is provided directly to the commission by the Treasury. There is a direct relationship between the commission and the Treasury. It does not have to report through and account to the Home Secretary for administration and costs.
My right honourable friend has no role whatever—
Lord Phillips of Sudbury: I am sorry to interrupt. It would be very helpful to the Committee if the Minister could say by what means that change was effected and when, because he is making a very important point. As I understand it, he is saying that the whole financial regime is different in terms of control today than it was in Mr Guthrie's time. We will not be impressed if control has moved from the Home Office to the Treasury. The Minister is implying that there is a lesser control over finance now than formerly.
Lord Bassam of Brighton: I am grateful to the noble Lord for his point. The position has changed. As I explained, when Mr Guthrie was chief Charity Commissioner in the early 1990s, control was routed through the Home Secretary. That is no longer the case. My understanding is that that change was made five or six years ago, or perhaps a little longer. As I
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explained, the route is through the chief executive and accounting officer, currently Mr Andrew Hind, to the Treasury.
Lord Phillips of Sudbury: The other part of my question is rather more important. Does the Treasury exert less control over the financial regime of the Charity Commission than the Home Office? Frankly, it is indifferent to us which department exerts the control; it is the level of control and constraint that matters.
Lord Bassam of Brighton: That is a question which, I guess, you could judge only when comparing past performances. It is somewhat difficult for me to do that today. The impression I get is that that direct relationship has a benefit to the Charity Commission. From my limited knowledge of that funding relationship, there seems to have been a growth in the Charity Commission's budget. I could not predict whether that growth will continue in the future. One would have to question closely the basis on which that growth has been there in the last spending round.
Lord Hodgson of Astley Abbotts: While we are talking about independence, perhaps I may draw the Minister's attention to the schedule about staffing. Paragraph 5(3) on page 70 of the Bill states:
"The appointment of other staff requires the approval of that Minister"—
that is; the Minister for the Civil Service—
"as to their numbers and terms and conditions of service".
That is an independent body having to go to the Minister for the Civil Service and say, "We want so many people and we want to pay them so much. Can I have your permission?" Is that independence? This is independence in a body in respect of which there are severe worries about its ability to perform its present functions, let alone its future ones. That is the independent body, and it is still written into the Bill.
Lord Bassam of Brighton: I shall try to complete my response to the noble Lord, Lord Phillips. In the context of the relationship between the commission and the Treasury, it should be understood that, in essence, the Treasury sets the budget and the targets, which is the limit of what it does in that relationship. I shall try to come back to the point made by the noble Lord, Lord Hodgson, in a moment.
It has also been suggested by some Members of the Committee that the commission should be made accountable to Parliament for the whole of its business, in the sense that the National Audit Office is accountable to Parliament. As I have said, the commission is accountable to Parliament for its administration and costs and, as the Strategy Unit pointed out, subject to examination by the Public Accounts Committee in another place.
The Joint Committee on the draft Bill made a recommendation that the Home Affairs Committee of another place should have an annual session with the Charity Commission, and that there should be a debate on the commission's annual report. I would

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argue that both those recommendations would significantly enhance the commission's accountability to Parliament. To go further than that and remove the commission from the Civil Service by making it report to Parliament would clearly be a rather larger management task of some magnitude.
However, the difference between the Charity Commission and the National Audit Office is that the latter exists to support Parliament in its responsibility of holding the executive to account. The Charity Commission on the other hand does not exercise parliamentary functions. It would be no more appropriate for the commission to fall within the parliamentary sphere than within the ministerial sphere.
The Joint Committee's recommendation, to which the amendment would give effect, was that the phrase,
"on behalf of the Crown",
should be removed and replaced by a clear statement that the commission shall be a body independent of Government.
As we explained in our reply to the Joint Committee, the reference to the functions of the commission being performed,
"on behalf of the Crown",
are necessary for technical reasons to ensure the commission's continued status as a non-ministerial department. They do not imply and would not create any change in the relationship between Ministers and the commission that I have described.
As to a clear statement of the commission's independence, I hope that my preceding remarks have made the position as clear as it could be to Members of the Committee. In conclusion, I am happy to confirm that the commission was, is and will remain wholly free from ministerial direction. It is subject to ministerial control only in the very particular respects that I have described.
The Government are wholly committed to the Charity Commission's independence and that is reflected in the Bill. The words to which the noble Lord has drawn our attention do not in any way detract from the commission's independence and are needed purely for technical reasons to ensure the Charity Commission's continued status as a non-ministerial department. Our belief is that non-ministerial department status best suits the Charity Commission's needs and that the case for any alternative model has not been made.
Speaking with great experience as a former director-general of the OFT, my noble friend Lord Borrie, touched on that issue. I have a long list of non-ministerial departments, which underlines the independence of that sector. The regulatory bodies—such as Ofsted, Ofcom, the Office of Fair Trading, Ofgem, the Office of the Rail Regulator, Ofwat and the Postal Services Commission—all work very effectively in that way. They are independent of government. They are free to criticise when it is right and appropriate. They obviously, as my noble friend Lord Borrie suggested, from time to time provide an advisory role. But they have that cherished
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independence, which works well for them. I think that it works well for the Charity Commission. The Charity Commission has been fully consulted while working out those proposals. Although the commission has indicated a willingness to consider other models, my understanding is that it is content with the arrangements set out in the Bill.
The noble Lord, Lord Hodgson, made a point about the annual report going through the Home Secretary. I am not drawn normally to invite amendment.
If the committee advances a consideration which suggests that the report should go directly to Parliament rather than to the Home Secretary and to Parliament, we would give fair consideration to that amendment. It would help underline the value that we, as government, place on the independent role of the Charity Commissioners as regulators.
We have had a long discussion on this important issue. I remain of the view that the provisions we have in place work well and will work better under the new legislation because I think that it underpins the independence we all value so much in the way the Charity Commission works. It is contingent on us to ensure that in moving forward we are agreed on that point.
Lord Hunt of Wirral: Before the Minister sits down, it might be helpful for the Committee to have a note dealing with the point he raised earlier; namely, the transfer of functions from the Home Secretary to the Treasury. If I recall correctly, the Treasury, instead of the Home Office—the Home Office being the sort of messenger to deliver the bad news from the Treasury— decided to communicate that bad news itself. I am not too sure that that is a loosening of the bonds. I think it is rather the opposite. I may be wrong and my recollection may be faulty. Therefore, it would be helpful to have a note of what happened, as the Minister described it.
Perhaps we may have a note on which government departments exercise control over the Charity Commission—the Minister for Civil Service on pay and conditions and numbers of staff—what controls the Treasury have over how much money can be spent on each portion of the budget and whether money can be moved; and what decisions the Charity Commission can make on pay resources. That kind of a note would be very helpful to the committee because there is some misunderstanding about the present position.
Lord Swinfen: Can the note include the authority under which the change was made? Was it made under the Charities Act 1993 or some regulations? I do not expect him to answer that now, but perhaps he can when circulating his note to all Members of the Committee.
Lord Bassam of Brighton: I am grateful to the noble Lord, Lord Hunt, for enabling me to provide some further elucidation to the committee. I am quite happy to pick up the additional points requested by the noble Lord, Lord Swinfen.

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We think that current arrangements work well and that the independence, which we all value, will be underpinned. I agree that we need to deal with perceptions. I think that we can do that. The commission, in grasping the nettle, the need and the urgency for reform, has begun clearly to demonstrate that in improving its operation and aspiring to carry on with that further improvement.
I have to resist the amendments. This is a very important debate. I recognise its centrality to what we are trying to achieve. I am very grateful to all noble Lords who have played a very constructive part in this very constructive debate.
Lord Phillips of Sudbury: I am sure that I express everybody's thanks to the noble Lord, Lord Bassam, for summing-up the debate. I am sure that we shall return to the matter because a number of noble Lords have made it clear how important they think this aspect of the Bill is. It is one of the benefits of this Chamber that when one gets into reminiscences of political times past there are proponents and others with a different recollection. I am extremely grateful to the noble Lords, Lord Borrie and Lord Hunt, for the considerable piece of clarification in which they engaged. It leaves those of us who are proposing amendments towards the independence of the commission even more convinced that that is needed.
3.15 p.m.
Vis-à-vis the point made by the noble Lord. Lord Borrie, about the multiplicity of other bodies that have the present status of the Charity Commission, I believe that the Charity Commission is qualitatively different from Ofcom, the OFT and so on. By and large, those bodies have a principal nexus with the business world. They have connections with the public at large, but their principal nexus, through legislation, is with the business world. The Charity Commission is a creature of common law, although it was created by statute in the Victorian era, and is the only lynchpin between the public at large and Government vis-à-vis charity. It is truly of the people by the people and for the people. The political point made by some of us in the course of this debate about the commission being subject to a great deal of political pressure in the cockpit of politics was not answered by any of those who oppose the amendments.
I turn to the point raised by the noble Lord, Lord Hodgson, about the remuneration of the commission. The noble Baroness, Lady McIntosh, and the noble Lord, Lord Best, will recollect that in the Joint Committee on scrutiny we really emphasised the importance of the commission being free to set its own pay scales and to deal with its own recruitment and remuneration. As was pointed out, paragraph 5(3) of the first schedule which creates the new commission structure is precisely about controlling all those points, as the noble Lord, Lord Hodgson, read out. The intervention of the noble Lord, Lord Bassam, about the Treasury now being this new benign master, rather than the
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overpowering Home Office, thanks very much, but no thanks. In withdrawing the amendment, I am sure that we need to return to these matters.
Amendment, by leave, withdrawn.
[Amendments Nos. 32 to 34 not moved.]
Lord Swinfenmoved Amendment No. 35:
Page 5, line 8, at end insert—
"( ) The Commission and the Crown shall jointly appoint an independent reviewer to report, within one year of the bringing into force of Parts 1 and 2 of this Act, and a year after Part 3 if implemented at a different time, on the Commission's ability and resources to meet its responsibilities under the Charities Acts."
The noble Lord said: This amendment has been given a great deal more importance than it originally had by the remarks of the Minister when we were debating the previous group of amendments. He has told the Committee that the Charity Commission is now directly funded by the Treasury and the Treasury is noted for trying to cut down the funding that government departments and non-governmental departments receive.
I notice that the amendment is defective for what I intended it to do. If Part 3 is implemented at the same time as Parts 1 and 2, the funding would not be reviewed. So I shall not press the amendment.
However, the Bill gives a great deal more work to the Charity Commission and there is doubt in the charity world whether it will have proper funding to carry out its task. Therefore, it is worthwhile having a joint Government and Charity Commission review, after a reasonable time, on the work that it is carrying out and on whether it is properly funded. In my amendment I have suggested a year, but a year may be too short a period. It may be wiser to make it two years, but I believe that we should have a review after a reasonable time. I beg to move.
Lord Hodgson of Astley Abbotts: I support my noble friend's amendment which seems to be entirely sensible. We spend much time passing legislation and much less time looking at its impact, benign or not. The whole debate on sunset clauses, statutory instruments and reviews of legislation would benefit from the kind of amendment proposed by my noble friend. I suspect that he is right when he says that one year is probably too short a time to be able to assess the situation properly. It would be a terrific commission indeed that managed to get its arms round the matter and to deal with and to learn useful lessons from its performance a year from its kick-off. I suspect that it will need a longer period. Nevertheless, I believe that the principle is a very good one.
Lord Phillips of Sudbury: I support the spirit of the amendment, which addresses the point that I made in summing up the debate on the last set of amendments.
Lord Bassam of Brighton: The Joint Committee made a recommendation to the effect that there should be an independent review of the Charity Commission's ability to meet its new responsibilities under the Bill. As we said in our reply to the Committee, the Commission is already carrying out a strategic review

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in order to position it and equip it to fulfil its future role. Although the review is managed by a steering group of commission staff, the steering group is assisted by external consultants. The strategic review is due to report this summer.
In addition, the Government have accepted the Joint Committee's recommendation that there should be a review of the impact of the legislation and a report to Parliament five years after the Bill receives Royal Assent. The noble Lord made the point, cogently, that one year is probably not sufficient. We can argue about time frames for assessing the effect of the legislation. We think that five years is probably more appropriate. One takes a view, and one has to work as best one can to ensure that reviews are effective. To enable the legislation to bed in and work probably does need a longer time frame.
The Government fully accept our obligation to give the commission the resources it needs to do the job. We have had something of a debate about the role of the Treasury. I am sure that colleagues like making fun of the Treasury, but it does an important job, and it must look at the broader impact on public expenditure. We recognise the importance of keeping within limits and working to tight budgets. Since 1997, the commission's budget has been increased by £8 million, or 35 per cent, which is a significant increase. It received a 6 per cent increase in last year's spending review, partly to reflect new responsibilities likely to arise from the Bill. Further pressures arising from the Bill will be considered in the context of the strategic review.
The Government do not believe that the commission would be helped by a further review of the kind described in the noble Lord's amendment. My right honourable friend has appointed to the Charity Commission a new non-executive chair, Geraldine Peacock, and a chief executive, Andrew Hind. Both have held leadership roles in a variety of settings, as well as having strong track records in the voluntary and community sectors, and they are respected for their work.
What the Charity Commission now needs is a period of freedom from external reviews, while the new chair and chief executive get on with the important job of modernising the Charity Commission, which they have begun with the strategic review. The Government have every confidence in their ability to lead the commission forward as it takes on the important new responsibilities given to it by the Bill, and we will of course ensure that the commission continues to have the resources it needs to do the job that Parliament entrusts to it.
In terms of the mechanics of the money and the way it flows, the commission has a parliamentary Vote like all other government departments. It achieves this by bidding to the Treasury, as I explained earlier, like all other government departments. Accounts are audited annually by the National Audit Office, which is a paragon of independence, as we heard earlier. So there is a proper process there, and the monitoring is appropriate and right. Obviously, the role of government is to ensure that the funding is fit for
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purpose and adequate to the job. I hope that what I have said about the review and the way in which it has been conducted thus far will satisfy noble Lords who are concerned about the issue.
Lord Swinfen: I thank those who have supported the spirit of the amendment and I thank the Minister for his reply, which I shall read with interest. Personally, I am not satisfied with having to wait five years for a review. I would be much happier if it were three years, which is quite long enough.
I would also like to see a provision in the Bill because otherwise there is grave tendency for slippage to occur. But the Charity Commission and the Government will want to review how the legislation works. Will the Minister bring forward an amendment on Report to put this provision into effect?
Lord Bassam of Brighton: I never rule anything out. I will certainly go away and give the matter some consideration and further thought. However, in saying that, I do not make a specific promise to bring it back on Report.
Lord Swinfen: I thank the noble Lord and I, too, will give the matter further thought between now and Report. I may well come forward with another amendment to achieve a proper review within a reasonable length of time. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 36 not moved.]
Clause 6 agreed to.
Schedule 1 [The Charity Commission]:
Lord Hodgson of Astley Abbottsmoved Amendment No. 37:
Page 69, line 9, leave out "four" and insert "five"
The noble Lord said: We have had an important debate on the structuring and positioning of the commission. We now turn to its make-up. Our next group of amendments probe the way in which it is established. They are, by their nature, of less strategic significance than the debates we have had today, but nevertheless it is worthwhile having the Government's thinking on the record.
The first group of amendments comprises Amendments Nos. 37, 38 and 39, all of which relate to Schedule 1(1), which sets out in detail the Charity Commission membership. Amendment No. 37 seeks to increase the minimum of people who sit on the commission from at least four to at least five, other than the chairman. Noble Lords will notice that our later amendments cover the details of how we wish to alter the composition of the commission membership.
In general terms, we believe that a commission of four—or five if you include the chairman—is too small. We do so on two grounds. The first is to provide strategic direction for and control of the commission which is responsible for regulating a sector as diverse and dynamic as the charitable sector represents an unreasonable workload for any four people. Secondly,

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with only four members, the danger of the commission becoming introverted and isolated in its view and its decisions are increased.
Finally, our Amendments Nos. 38 and 39 seek to clear up the drafting of the Bill as we believe that subparagraph (2) is superfluous. Members of the Committee can see that these amendment make two subparagraphs into one and shorter Bills are better Bills. I beg to move.
Lord Phillips of Sudbury: There is force in the points made by the noble Lord, Lord Hodgson.
Lord Bassam of Brighton: Under the Charities Act 1993, the Home Secretary is required to appoint a chief charity commissioner and a minimum of two other commissioners to a maximum of five commissioners in all. The Strategy Unit proposed—and in their reply the Government accepted—that the maximum number of commissioners, members of the Charity Commission, under the Bill should be increased from five to nine, including the chair. The intention is to broaden the range of backgrounds and experience represented on the commission. That is achieved by the Bill.
The chair of the commission is a member of the commission appointed like other members by the Home Secretary under paragraph 1 of the proposed Schedule 1A to the 1993 Act—lines 9 and 10 on page 69. The effect of the noble Lord's amendment would be to increase from four to five the minimum number of members to be appointed to the commission under the Bill in addition to the chair.
There is no magic about the minimum of four members in addition to the chair proposed by the Bill and it is the Home Secretary's intention to appoint additional members to the proposed maximum of nine, including the chair, as soon as the relevant provisions can be brought into force. However, Members of the Committee may feel that it is better to express the minimum number of members, including the chair, as an odd rather than an even number to avoid the possibility of a tie should matters ever come to a vote. This means that the numbers, excluding the chair, must as it is now in the Bill be an even number.
3.30 p.m.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for those comments. I am also grateful to the noble Lord, Lord Phillips, for his support. I take the point about having an uneven number of members on the commission overall. This was obviously a probing amendment. We shall think further on the matter and perhaps return to it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 38 and 39 not moved.]
Lord Hodgson of Astley Abbottsmoved Amendment No. 40:
Page 69, line 14, leave out "two members have" and insert "one member has"
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The noble Lord said: I rise to speak to Amendments Nos. 40 and 43 which concern the same part of the schedule that we have been discussing.
Amendment No. 40 concerns the minimum number of members of the commission who must have legal qualifications. I fear that although I was lucky enough to obtain the support of the noble Lord, Lord Phillips, previously, I shall be less lucky now.
We believe that, as the maximum number of members stands at eight, having a requirement that one-quarter of the commission membership be made up of lawyers is inappropriate. Indeed, as regards the minimum number, half the commission would be made up of lawyers. Therefore, with Amendment No. 40 we seek to reduce the minimum number of lawyers from two to one.
Amendment No. 43 would then fill the space left by one less lawyer with the inclusion of an accountant. The wording of Amendment No. 43 is designed to produce someone who is a practising accountant, a company auditor, and as such will provide that expertise. We do this for two reasons. First, in its new role and with its extended powers and duties the financial complexity of the operations of the commission has increased considerably. For example, according to the regulatory impact assessment which accompanied the Bill, new costs to the Charity Commission would include between an extra half a million pounds and a million pounds to cover proposals for exempt charities, between £350,000 and £650,000 for excepted charities, £430,000 for changes to the commission and between £400,000 and £600,000 for processing appeals. Therefore, the financial complexity of the commission's operations will inexorably increase.
Secondly, and equally importantly, a major aspect—some might argue that it is the major aspect—of the commission's duties relates to the maintenance of public confidence in the operation of charities. In no aspect of the operations of the charitable sector is public confidence in the sector more likely to be dented than by cases, or a case, of financial misappropriation and malfeasance. A member of the commission with detailed accounting and/or auditing knowledge is essential to provide both expert analysis of cases brought to the commission and experienced judgment of how best to address and remedy any weaknesses.
Amendment No. 43 would ensure that one member of the commission must be an accountant. This would ensure that financial expertise, as well as the legal expertise that is already required by the provisions of the Bill, would have to be included in making up the membership of the commission. I beg to move.
Lord Shutt of Greetland: I address both Amendments Nos. 40 and 43. I have reservations about this trading description, as it were, of those who are fit and proper people to be members of the Charity Commission. I see the point of having lawyers about the place, but on the other hand you can buy 'em in. I am in favour of accountants. I have been an accountant all my working life. But should we not also have someone who is involved in real estate and an

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investment broker? Frankly, we need people of good judgment; that is what it is important to have on the Charity Commission. If we can get people of good judgment who also have other trading attributes, that will be fine. However, in my view it is not helpful to clog up the system by describing members in a certain way.
Lord Phillips of Sudbury: Just to show that the "Liberal" in Liberal Democrats still means something, I disagree with my noble friend. I am grateful for the noble Lord, Lord Hodgson, not calling me Mandy Rice-Davies because I would, wouldn't I, support the idea of two lawyers rather than one. However, although on the whole I think that too many lawyers is a great curse of our society, on this occasion I believe that it makes a lot of sense to have two legal commissioners. We have learnt from these debates just how particular charity law is and how difficult it is in many respects. It requires a high level of legal judgment. You cannot simply deal with it technically. Many value judgments are involved in applying charity-law tests and criteria.
Since the heart of what the Charity Commission has to do is legal, it seems to me eminently sound that there should be two lawyers among its number to ensure that that central role is adequately resourced. If I may say so, it is not enough to buy 'em in, as my noble friend Lord Shutt said; you need them there all the time to know when to buy 'em in. Therefore, I oppose Amendment No. 40.
Lord Bassam of Brighton: When I saw this group of amendments, I thought that it comprised "be beastly to lawyers and nice to accountants" amendments. My view was rather underlined by the contributions made to the debate.
Paragraph 1 of the new Schedule 1A preserves the position under existing law which requires two of the Charity Commissioners to have a seven-year legal qualification. The Strategy Unit proposed, and the Government accepted, that the number of commissioners should be increased to ensure broader representation —the point that was made by the noble Lord, Lord Shutt—particularly from the voluntary and community sector. However, as the noble Lord, Lord Phillips, said, legal issues will remain at the heart of the commission's work. It is essential to ensure that an appropriate number of the commission's members continue to be legally qualified.
The Bill sets the minimum number at two. When the number of members is increased from five to nine, the proportion who are lawyers will automatically decrease. Therefore, one could argue that their influence—I am sure that it is not a malign influence—would diminish. Because of that we believe it is more desirable that the members, as a board, should continue to have more than a single legal voice to listen to. Lawyers among the Committee might attest to the benefits of lay persons having a variety of legal views at their disposal rather than just a view from one source. That is an important point. Lawyers are good at niggling away at issues between themselves and I am sure that that can be a very creative process.
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The Bill would not prevent the Home Secretary appointing more than two legal commissioners if he so wished, but I can tell the Committee that he has no present plans to do so. I hope therefore that the Committee will accept the status quo. The noble Lord, Lord Hodgson of Astley Abbotts, wanted to ensure that there was at least one accountant on the board. We are certainly not against the suggestion of particular members having skills and knowledge, but it would be wrong to try to limit that in the way the amendment suggests. It is too restrictive and might act against appointments being made in a more flexible way in the future. That is one of the reasons why we wish to expand the number of commission members. We want to see a broad range and ensure that there is scope for that to occur.
As regards advice, the commission has 25 accountants and 23 lawyers on its staff, so accountants are well represented—slightly better so than lawyers. Having heard that explanation, I hope that the noble Lord will feel happy to withdraw the amendment.
Lord Phillips of Sudbury: Did the Minister's last remark carry the implication, which I would support, that the Charity Commission needs more lawyers?
Lord Bassam of Brighton: I think that the noble Lord would be unwise to draw too much from my observation.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister and to the noble Lords, Lord Shutt and Lord Phillips. I believe that the Minister is trying to have his cake and eat it. On the one hand he says, "We must have flexibility. We must get the best people", which follows the point made by the noble Lord, Lord Shutt. On the other hand, he says, "We're going to have two of them and they have to be lawyers". Indeed, it could be half the commission, as I have said.
I have no particular problem. The reason for reducing the number of lawyers from two to one was not because I necessarily believe there should not be two lawyers on the commission, but because I did not want to be accused of unduly enlarging the commission and restricting or removing the flexibility when I sought the appointment of an accountant.
I believe that the Minister underestimates the amount which accountants on the commission could provide to it in the performance of its duties. The Minister can either take his hands away from the issue and say, "Let's have appointments in the way that makes the most sense", or he can say, "We want two lawyers for the reasons I have explained". In that case, he is starting to set the structure, not the people, and one carries an accountant in the train of those two legal appointments.
I will read what the Minister said and think about it. However, I am not convinced by the arguments he has put forward.
Lord Phillips of Sudbury: Will the noble Lord, Lord Hodgson, reflect on his maths? He said several times that there could be a situation in which half the commission were lawyers. As I understand it, the minimum number of commissioners is five.
Lord Hodgson of Astley Abbotts: The noble Lord is absolutely right, but I am talking about the four members of the commission. There are four members of the commission plus a chairman. Two of the members can be lawyers. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbottsmoved Amendment No. 41:
Page 69, line 17, leave out from "Wales" to end of line 19.
The noble Lord said: In moving Amendment No. 41, I shall speak also to Amendments Nos. 42, 44 and 47. They too are concerned with the narrow point of the make-up of the commission, and are on the Welsh aspect. Amendment No. 41 removes the necessity of consultation with the National Assembly for Wales before the Welsh member is appointed. Amendment No. 47 removes the necessity for consultation with the National Assembly for Wales before the Welsh member is removed.
The amendments are intended to give the Government the opportunity to explain why such consultation is necessary; why, if it is necessary, similar consultation is not required for the other appointments; and, finally, how it is proposed to be carried out. Is the Minister seriously proposing that the Welsh Assembly as a body be consulted before an appointment or removal? Surely not. This is a fig leaf and the Minister must know it.
For instance, it appears from the Bill that no consultation is required for the appointment of a legal member and, perhaps more importantly, no one has to be consulted before the appointment of either the chairman or the chief executive of the commission. All that the chief executive appointment requires is the prior approval of the Minister for the Civil Service under paragraph 5(2) of new Schedule 1A on page 70.
Amendment No. 44 is also concerned with the issue of the Welsh member and seeks clarification on the meaning of paragraph 1(4) of new Schedule 1A. That paragraph explains that the Welsh member of the commission as defined in new sub-paragraph (3)(b) does not include the chairman of the commission. What does that mean? Does it mean that the chairman cannot have the dual responsibility of being the member who is knowledgeable about the condition in Wales as well as being the chairman of the commission? Or does it mean that someone with knowledge of charitable conditions in Wales has to be excluded from being chairman? If the former explanation is correct, I ask the Minister why he believes that it is necessary. Surely one can envisage a situation where the Welsh member would be a suitable chairman. I beg to move.
3.45 p.m.
Lord Swinfen: I have a query. Why do the Government not have to seek advice from Parliament? They will have to seek advice from the National Assembly for Wales about someone to represent Wales. Why is advice not sought from Parliament as a whole about the other members of the commission? It does not strike me as very logical.
Lord Borrie: Hearing the noble Lords, Lord Swinfen and Lord Hodgson, I suspect a party-political motive, which is unworthy of these discussions.
Lord Swinfen: If the noble Lord will forgive me, I had not given this amendment any consideration until I heard my noble friend move it. It was examining the Bill as he was doing so that brought this to my mind. We have not discussed this.
Lord Borrie: I did not suggest that the noble Lords had discussed it. I suggested that they had a common recollection of their party's objection to devolution in Wales. This is a very straightforward provision. As a matter of courtesy, and for practicality, the National Assembly should be consulted about the Welsh member. Conservative Members may not like devolution—or the element of devolution, which is fairly modest in Wales compared with Scotland—but it is there and this is a courteous application of common sense.
Lord Bassam of Brighton: Paragraph 1 of new Schedule 1A to the 1993 Act requires at least one of the members of the Charity Commission to be someone who knows about conditions in Wales and who has been appointed following consultation with the National Assembly for Wales. The Strategy Unit's recommendation is that one member of the commission should be appointed by my right honourable friend the Secretary of State for Wales. However, the National Assembly for Wales has devolved responsibility for the voluntary and community sector in Wales. Charity law and regulation is, in practice, the only significant area of community policy in Wales for which the Home Office retains responsibility.
In the light of this, the Government believe that it would be more appropriate for all members of the Charity Commission to be appointed by the Home Secretary, following consultation with the National Assembly in the case of the member who knows about conditions in Wales. As the noble Lord, Lord Borrie, said, this is a common courtesy to do with the way in which the devolution settlement has worked out.
Details of how this arrangement will work in practice are yet to be finalised, but we would expect the National Assembly for Wales to be represented on the selection panel and for the Minister for Social Justice and Regeneration in the Welsh Assembly Government to be consulted before the appointment is made. The final decision will remain with my right honourable friend.
Nothing in the Bill would prevent the Home Secretary appointing to the chair of the commission a person who knows about conditions in Wales.

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However, the Government do not believe that the appointment of the chair of the commission, as opposed to its members, should necessarily require consultation with the National Assembly. Even if the chair is a person who knows about conditions in Wales, the commission should include at least one other member who has been appointed following consultation with the National Assembly.
Lord Hodgson of Astley Abbotts: I thank the Minister. I assure the noble Lord, Lord Borrie, that I had no wish to be discourteous to the National Assembly for Wales. But I think that sometimes we put fig leaves that do not mean anything into Bills. It is important that, if one is to offer courtesy, it is in a form and manner that can be followed through and made effective. I am partially reassured by what the Minister said, but only partially.
I could not quite understand the shuffle between paragraph 1(4) of new Schedule 1A, consultation, the chairman and the member from Wales. I shall read carefully what the Minister has said, rather than take up the time of Committee by asking him to clarify further now. I read the Bill to mean that the chairman of the commission could not be the member for Wales. I shall read the Bill again more carefully in the light of what I think the Minister said in his response. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbottsmoved Amendment No. 42:
Page 69, line 19, at end insert ", and
( ) one member is a trustee of a registered charity that is not subject to audit under section 27 or 30"
The noble Lord said: This is the final amendment in the group dealing with the make-up of the commission. We are still with Schedule 1. The amendment adds a further defined member to the make-up of the commission. I pray the restraint of the noble Lord, Lord Shutt, while I explain why I make such a proposal.
It is a trustee of a charity which is not subject to audit under Clause 27 or 30. Those clauses refer to charities, either companies or trusts, which have an annual gross income which exceeds £500,000. The effect of the amendment is to include on the commission a representative from the smaller end of the charity scale; that is, a charity with a gross annual income of less than £500,000. I accept that that is not very small, but I felt that it was the easiest way in which we could get at least a first canter over the ground to explore the Government's thinking about the need for a representative of a smaller charity.
We laboured the point at Second Reading and during the earlier meetings of the Grand Committee that the Bill should avoid a one-size-fits-all policy on regulation and that charity regulation should be proportionate in its application to larger and smaller charities. The noble Baroness, Lady Scotland, was clearly in agreement with that view at Second Reading when she explained how the Bill will make
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improvements in several areas of the law and in the regulation of charities. The fourth reason she gave was the,
"changes to ensure that effective and proportionate regulation applies right across the charity sector, including those charities that are not required to register with the Charity Commission".— [Official Report, 20/01/05; col. 883.]
"Effective and proportionate regulation" are the key words, and I know that we shall return to them at the next meeting of the Committee in various amendments.
In my experience of the City, too often regulatory bodies can be over-influenced by the big business. They are the bodies which provide representatives for panels, which suggest policy amendments and which respond to consultation papers. The little guys can get overlooked. With charity law and regulation being altered, and the commission's powers being enhanced, it seems only sensible that a representative of the smaller end of the charity sector should constitute one small part—less than the lawyers—of the commission's membership. The amendment would achieve that important effect, and I beg to move.
Lord Shutt of Greetland: I support the amendment. There is a big difference between the professional and trading qualities of a person compared with the knowledge which someone may have of charitable activity. It is important that the commission has as a member someone who understands the small charities. We should not forget that, by and large, they are the majority of the charities. The commission will from time to time send out letters, documents, newsletters and so forth, and I imagine that the commissioners will have the opportunity to look at them. To have as a member someone who can say, "Look, I or my friend could be the recipients of this as clerks. Does it make sense? Does it contain anything which relates to our little charity?", is most important.
It all fits in with the whole business of independence. I am having difficulty with independence, quasi-independence, the Minister's position and so forth. In one sense, I understand and accept the arguments put forward today about independence. However, it is important that the commission, if independent, does not run off and do its own thing. There should be someone there who knows something about the smaller charities.
I therefore believe that this is a good amendment, and it could mean that there is a balance within the commission which gives an understanding of the smaller charities.
Baroness Howe of Idlicote: I support the amendment. I am not yet certain whether it should be written onto the face of the Bill, but a very good case has been ably made for why this large sector could learn from this kind of interaction—and, indeed, contribute to it—if such charities are represented on the commission. If the Minister can convince us that this will almost certainly happen as part of the overall ethos, then it may not be necessary for it to be on the face of the Bill. Although for practical reasons that may be necessary for the more technical members, the

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lawyers and the accountants, I hope very much the Minister will accept the intention behind the amendment.
Lord Swinfen: I also support the amendment. I run a very small charity. I am not a trustee—deliberately—so that other people can advise me and keep me in order, which trustees do very effectively. The very small charities have a great deal of difficulty in doing their work without necessarily being able to afford the right advice—indeed, sometimes without being able to afford any advice at all. I am sure that it would be very useful for the Charity Commission as a whole to have the assistance of someone who has worked with a very small charity—possibly someone who has helped to set one up and get it going, or who has assisted in overseeing its day-to-day running.
Many charities nowadays are multi-million pound businesses. They are charitable; but they are multi-million pound businesses. We must not forget that, as in the industrial world we have to cater for the man starting up in a garage on his own as well as for the ICIs of this world.
The Lord Bishop of Peterborough: I, too, support the amendment. I am a trustee of a number of charities of all sizes, some ex officio and others in my personal capacity. I entirely agree with the points that have been made that the smaller charities have particular needs and are sometimes overlooked in the evident desire to regulate the larger charities. I therefore wholeheartedly support the amendment.
Lord Phillips of Sudbury: I, too, support the amendment. When I first read it I did not take full account of its potential. I repeat what I said at Second Reading. I have a recurring nightmare about the Bill that, clause by clause, one can justify what is on the page but in aggregate, collectively, it will be yet another rod for the backs of the small charities that make up this wonderful charity sector.
I shall be interested to hear what the Minister says in response, because there may be aspects of the debate that have not yet crossed my mind. However, I commend to the noble Lord, Lord Hodgson, that, rather than draft the amendment as he has—that "one member is a trustee of" and so on—he should state that one member has particular experience of small charities, or words to that effect.
The danger is that every member of the Charity Commission is a member of a small charity—we all of us are—and so that would not be an effective test. A generalised test would be much more effective. I have suggested those words, but the noble Lord may perhaps be able to think of better ones.
Lord Bassam of Brighton: It is certainly an interesting amendment. It has attracted broad support from within the Committee—one would not need to have too acute political antennae to detect that—but the problem with it as it stands is that it is too prescriptive—a point made by the noble Lord, Lord
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Phillips—in prescribing that it has to be a trustee of a registered charity who occupies a particular place within the commission.
My problem overall is that the amendment would impact on the flexibility that we want in terms of the appointments of commissioners. The likelihood is that the sort of person to whom we will look to become a commissioner in future will be someone who has broad experience of the charitable sector. I am a patron of a number of charities, which vary from one that has a very small annual turnover to an institution that has a rather large annual turnover. The breadth of experience in the individual who might become a commissioner is important so that they appreciate the problems of large and small organisations.
4 p.m.
I do not want to be entirely negative about the amount; I can certainly see that it is inspired by a good spirit and I have heard what has been said on the issue. I am rather reluctant to have prescriptive provisions entered into the Bill; I share with the noble Baroness, Lady Howe, some discomfort with that. However, I hope that the Committee will be satisfied that I agree to consider how the concerns raised on the issue can be best accommodated by the Bill. I say that without making specific promise to bring back an amendment. but the issue is something that I am certainly happy to take away to see what we can do with it.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for that two-thirds of a positive response. I am also grateful to all those who spoke in support of the amendment—the noble Lords, Lord Shutt and Lord Phillips, the noble Baroness, Lady Howe, my noble friend Lord Swinfen, and the right reverend Prelate the Bishop of Peterborough. Let me say at once that I have no pride of ownership on the drafting. The idea was to have a debate on its principle, and I am sure that there are better ways in which things could be done. I simply wanted to ventilate the issue before the Committee.
I entirely agree with the point made by the noble Lord, Lord Phillips, about rods for the back of the charity sector. Actually, we are talking about straws on the camel's back. Each provision seems very reasonable, but the cumulative burden will be very great indeed. Therefore, we need someone to speak for the smaller end of the sector. I am grateful to the Minister for having agreed to take the issue away to think about how he can address it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 43 and 44 not moved.]
Lord Hodgson of Astley Abbottsmoved Amendment No. 45:
Page 69, line 27, leave out "five" and insert "three"
The noble Lord said: I am glad to say that we have now left paragraph 1 of the new schedule and are on to terms of appointment and remuneration. Amendments Nos. 45, 46 and 48 cover the details of the length of

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appointment. Amendment No. 45 ensures that membership shall be for a term not exceeding three years, as opposed to the five proposed in the Bill. Amendment No. 48 replaces the open end in new sub-paragraph (4), which apparently permits members to be reappointed without limit after their term of office has expired. Our amendment inserts a new provision that a member may be reappointed for only a further two terms.
Both those amendments are clearly intended to regulate more carefully the terms of appointment within the commission. To give a member a three-year appointment slot with a rolling review that can extend up to nine years—three times three—seems more structured and better regulated than in the Bill as drafted. As I read it, the Bill suggests a member can hold office for five years and then be reappointed for an infinite number of five-year slots.
We have been round this piece of the course before. The Minister will say that all three of our amendments are unnecessary because the appointments will follow the guidelines for appointments. I do not agree with that approach. The length and number of appointments of a body that is supposed to be independent of government, for the reasons that we hacked through earlier, should appear in the Bill. If the Government really believe in the guideline approach of the office of the Commissioner for Public Appointments, why mention any term at all, such as the five years in the Bill? I beg to move.
Lord Borrie: I do not agree with this amendment. I am sure that we are all very familiar with the terms of appointment in these Bills and the question always arises about how to achieve a balance between continuity on the one hand and change on the other. Therefore, I ask whether the term should be three or five years, as this amendment proposes. What I tend to feel about three years is that, by the time you have got to know what the job is all about, got your feet under the desk, got to know everybody and all the issues, you are practically halfway through the term and then on the way out again. Three years can go by incredibly quickly whereas five years allows a little more time.
I am bound to mention that the noble Lords, Lord Hodgson and Lord Phillips, who may speak on this amendment, made powerful speeches earlier in the afternoon in favour of the independence of the Charity Commission. That independence is enhanced by a somewhat longer term than whatever you first think of and five years is somewhat longer than three.
The noble Lord, Lord Hodgson, made a strong point about reappointment. Perhaps it is not sensible to have this open-ended provision in paragraph 3(4) where someone can be appointed for a succession of five years—which could amount to 20 or 30 years in theory. I doubt whether that would happen, so I doubt whether there is a practical problem unless the noble Lord knows examples of where it has been. Therefore, it is best to leave the provision in Schedule 1 as it is.
Lord Phillips of Sudbury: I have two
amendments in this group, which is rather an odd group. I am grateful
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for what the noble Lord, Lord Borrie, said because I agree with him entirely, both on Amendment No. 45 because three years is too short and on Amendment No. 48 because two further terms is reasonable. I will say no more than that because the noble Lord said it all.
I now turn to two amendments in my name. The first, Amendment No. 46 deals with the rights of the Secretary of State to remove any commissioner. At the moment, the Secretary of State may remove a commissioner on the grounds of incapacity or misbehaviour, which is a common formulation in statutes of this kind. My amendment would add what seems to be a minimal protection—namely, that the Secretary of State can do that only,
"having first (other than in an emergency) consulted with the Commission (… except the person to be removed)".
That seems to be, if not common sense, then common manners. After all, the commission will have a great deal to say, I hope and suspect, about removal on the grounds of incapacity or misbehaviour.
Amendment No. 49 is nothing whatever to do with the other three amendments, but I suppose that I had better deal with it because the groupers have put it in this group. Paragraph 4(3) of the schedule states:
"If the Secretary of State determines that there are special circumstances which make it right for a person ceasing to hold office as a member of the Commission to receive compensation",
then he can go on and pay compensation.
This is a probing amendment. The phrase,
"special circumstances which make it right for a person … to receive compensation",
could not be more vague. I want to be quite certain. If the Minister can assure me that that could not subvert the rights of a commissioner who had been removed vis-à-vis his or her contractual rights and remedies, I shall be content. I do not think that it does, but let us have it plainly stated.
Lord Bassam of Brighton: It is a slightly disparate group, but I shall try to deal with the amendments in turn. Paragraph 3(1) of the new Schedule 1A places a limit of five years on the period for which a person may hold office as a member of the Charity Commission. In recent years commissioners have generally been appointed for an initial period of three years and offered an extension at the end of that period. My right honourable friend the Home Secretary would propose to follow that practice under the Bill.
It is difficult to form a judgment about the optimum length of an appointment, and what is appropriate for one kind of appointment may be less appropriate for another. But in general terms the Government believe that a five-year maximum would be long enough for a member to have a real impact on the commission's work while ensuring that there is an infusion of new blood from time to time. Therefore, we believe that three years is too short, while five years probably enables us to get the maximum. It is right that consideration is given to ensuring that people move on.

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We might like to consider again the notion of placing a limit on the Home Secretary's power to reappoint members of the commission. We might want to come back with an amendment on that issue, which might satisfy some of the concerns that have been raised.
On Amendment No. 46, paragraph 3(2)(b) of the new Schedule 1A to the 1993 Act allows the Home Secretary to remove a member of the Charity Commission from office on grounds of incapacity or misbehaviour. We hope that that situation would not arise very often; it is not one that has arisen often in the past, so one hopes that it will be an infrequent occurrence. If it were to arise, the Home Secretary would, in practice, expect to consult not perhaps the whole commission but at least the chair; or, if it were the incapacity or misbehaviour of the chair that was itself at stake, one or more other members of the commission, or perhaps the chief executive. We are dealing with circumstances which we hope and expect will rarely if ever arise.
It is difficult to deal comprehensively with those sorts of issues in a Bill, covering every eventuality, and for that reason we think that it is best not to spell out in the Bill exactly what consultations the Home Secretary might expect to have before removing a member of the commission in these highly unusual and sensitive circumstances. I hope that the noble Lord will not feel obliged to press the amendment at a later stage. But I am happy to confirm that the Home Secretary would expect to consult the commission very carefully, as I have set out.
On Amendment No. 48, paragraph 3 of the new Schedule 1A places a five-year limit on the period of any appointment to the Charity Commission under the Bill. The effect of sub-paragraph (4) of paragraph 3 is to ensure that a person may be appointed to the commission for a second or subsequent term even if he or she has previously been so appointed. As I explained earlier, the Home Secretary's practice has in the past been to appoint for three years, and then usually to renew the appointment for a further two years. Sub-paragraph (4) of paragraph 3 is needed to ensure the continuing validity of that practice. It would not be the Home Secretary's intention to appoint for the full term of five years and then to reappoint once or indeed twice to a maximum of 15 years, as I suspect is the intention of the amendment. I hope that that deals with that particular issue.
Amendment No. 49 proposed by the noble Lord, Lord Phillips, raises the issue of compensation. Paragraph 4(3) of the new Schedule 1A is technically necessary to ensure that the Home Secretary is able to pay compensation to a person who ceases to be a member of the Charity Commission if there are special circumstances which make it right for him to do so. Those circumstances are deliberately not defined in the Bill, precisely because they have to be in some sense special. It is not, for example, the intention to limit the application of the power to circumstances in which a
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member of the commission is removed on grounds of incapacity or misbehaviour, as we touched on in connection with the earlier amendment.
We cannot envisage any circumstances in which a payment of compensation to a former member of the commission might conflict with the former member's legal entitlements, but I am happy to confirm that the provision would not override those entitlements if such a conflict were to arise. I hope therefore that the noble Lord is satisfied with that explanation of our attitude to the amendments.
4.15 p.m.
Lord Hodgson of Astley Abbotts: I am grateful to all noble Lords who have contributed to the discussion on this point. Amendments Nos. 45 and 48 should be read together; that is, if the term of five years is not replaced with three years, one would not want to have a maximum of two. That would result in three times five, which is 15 years and thus, as the Minister said, very long. So the purpose here was to ensure a maximum of nine years through three appointments of three years.
It is now general practice in the private sector for non-executive appointments to be structured on a three-year rolling basis rather than on five years. A term of five years might have been the norm years ago, but it was felt right to shorten it. The reason that the companies I am associated with have shortened it is, if I may say, a very unheroic one. It is extremely difficult to get rid of a non-executive director unless they have done something seriously wrong. However, their performance may be simply sub par. If it continues like that for the three years of their term, they are not reappointed. My concern about a five-year appointment is that if someone is all right but is not making a major contribution, there is no moment at which you have to reappoint, thereby forcing a discussion, because the appointment just rolls on. Shortening the term from five years to three therefore is an attempt to make sure that the commission members are regularly reviewed both on their performance and on what they contribute to the way the commission operates. That is very important, given the strategic nature of their role.
Given that, the provisions in the Bill in which we have provided for five years but only three years will be used do not go to the heart of what I seek here. I am very concerned that the Minister did not refer to the code of practice from the Commissioner for Public Appointments, but if he looks at it he will see that the commissioner now says that an appointment as chairman means that you start again at the beginning; that is, you can be appointed as a non-executive director for a time, and when you are appointed as a chairman, you start again. On that basis you could have two five-year terms as a member and two five-year terms as a chairman, making 20 years in total, which is clearly far too long.
I do not think that we have got to the root of this issue. There is a need for freshness by bringing in people who can take a new approach. People can become part of the furniture too quickly in this rapidly changing world. They become exhausted with the fast

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rate of change. A period of three years to get stuck in, followed by another appointment of three years if you are doing well, and a third appointment of three years if you are doing really well is quite sufficient. If you do not do well, the knife can fall after each three-year period.
I shall read what the Minister has said, but I may want to discuss this further at a later stage.
Lord Bassam of Brighton: Before the noble Lord, Lord Phillips, rises to respond to his amendments, I want to reiterate that I am happy to consider a limit on the Secretary of State's power to reappoint. In part I take to heart what the noble Lord says, although I cannot believe that there would be many circumstances in which someone would end up remaining in post for as long as he has suggested. However, I am prepared to consider at least part of his point, which I thought I had made clear earlier on.
Lord Phillips of Sudbury: As the noble Lord, Lord Hodgson, set out his powerful argument for rapid turnover so as to avoid people becoming part of the furniture, I could not help thinking about our own tenure in this place.
Turning to the two amendments tabled in my name, I am as unhappy with the Minister's response to Amendment No. 46 as I am happy with his assurance on Amendment No. 49. Earlier we spoke at length about the importance of the independence of the commission. I do not see how it could conceivably be justified for a Secretary of State to swoop in and sack someone without even telling the commission, let alone consulting it.
It is all very well for the Minister to argue with the words, "In practice we would expect to consult, and if it was not the chairman in question, we might consult the secretary", but that is not good enough.
Lord Bassam of Brighton: It is.
Lord Phillips of Sudbury: Oh, it may be!
Lord Bassam of Brighton: All that I would say to the noble Lord is: read what I said. I thought that I made it plain that there would be that consultation and that we considered that very important. I do not see the Secretary of State's role as, as the noble Lord rather graphically put it, swooping in to sack people without talking to people about what is going on. That is not how his role is set out.
Lord Phillips of Sudbury: With great respect, the Minister said that the Secretary of State would consult but he will not accept the amendment. If the Secretary of State would consult, why on earth can the Minister not accept the amendment? The truth is that the Minister is saying that in the normal course of events, the Secretary of State will consult. I repeat that we are here dealing with an essential issue of independence over the Commission. I will certainly return to this on Report.
Baroness Howe of Idlicote: I want to clarify my mind on one point. Speaking of three years, because I
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support the amendment, if there are to be three plus three plus three years is at least the third appointment to be an open competition? That is quite an issue.
Lord Bassam of Brighton: Each appointment is in open competition.
Baroness Howe of Idlicote: As I understood it, reappointment often does not go out.
Lord Bassam of Brighton: The important point is that the initial appointment is subject to open competition.
Lord Hodgson of Astley Abbotts: I thought that I had already sought leave to withdraw the amendment.
The Deputy Chairman of Committees: The noble Lord made an attempt that failed.
Amendment, by leave, withdrawn.
[Amendments Nos. 46 to 50 not moved.]
Lord Hodgson of Astley Abbottsmoved Amendment No. 51:
Page 71, leave out lines 13 to 22.
The noble Lord said: We now come to paragraph 9 of Schedule 1 on page 71. This is a probing amendment that would remove the paragraph entitled "evidence". The paragraph explains when the Documentary Evidence Act 1868 shall have effect. As part of my research in preparation for the Bill, I asked three or four charity lawyers what on earth that meant. Not one of them could tell me off the top of his head. Therefore, for those of us laymen who are unfamiliar with the provisions and impact of the Documentary Evidence Act 1868, the import of the paragraph is difficult to comprehend and put into the context of the Bill. For the greater good of the public, could the Minister explain the effect of the paragraph and the difference that it will make to charity law as it currently stands? I beg to move.
The Deputy Chairman of Committees (Lord Elton): If this amendment is agreed to, I shall be unable to call Amendment No. 52.
Lord Bassam of Brighton: I suspect that the answer is: not much difference at all. The provision is designed to ensure that where evidence is needed in the courts or any legal proceedings that the Charity Commission has issued an order, regulation or other document, the evidence may be given by producing a copy certified by a member of the commission or the commission's staff. The provision modifying the 1868 Act apparently reflects a comparable provision in the 1993 Act and, as far as I am aware, reflects no change in policy. It is a carrying over, a continuance of existing practices.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for that reply. I am sure that charity lawyers around the country will be grateful for that short explanation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Bassam of Brightonmoved Amendment No. 52:
Page 71, line 14, after "first" insert "column of the"
The noble Lord said: The amendment corrects an error in the drafting of the Bill. The Documentary Evidence Act 1868 has only one schedule, so to refer to it, as the Bill currently does, as the first schedule is inaccurate. The schedule has two columns. The first column lists departments and the second column lists people within those departments who may certify copies or extracts of certain documents as true copies or extracts. At the moment the Bill puts the commission in an unspecified place in the first schedule, whereas it should put the commission into the first column of the only schedule to the 1868 Act. The amendment achieves that objective. I beg to move.
On Question, amendment agreed to.
Lord Phillips of Sudburymoved Amendment No. 53:
Page 71, line 26, at end insert "and duties (see sections 1(C) and 1(D) of this Act)"
The noble Lord said: I ask the noble Chairman whether I am allowed to speak also to Amendment No. 55, which should not, in my view, have been grouped with Amendments Nos. 54 and 56, except that it is in numerical order. Amendments Nos. 53 and 55 deal with the same point.
The Deputy Chairman of Committees: It is in order for any Member to ungroup an amendment. On reaching an amendment that has been ungrouped, it is appropriate to speak to it. If the noble Lord wishes to speak to it in advance, that is also in order.
Lord Phillips of Sudbury: I am most grateful. I believe that it will save time. These two amendments deal with the annual report of the Charity Commission as required under the schedule and the annual public meeting, which is also provided for in the schedule. That is an extremely good provision.
However, whereas under paragraph 10, which deals with the annual report, and paragraph 11, which deals with the annual public meeting, the commission has to give an account of how it has discharged its functions, there is no reference to the discharge of its duties. It seems to me that the discharge of its duties is quite as important as the discharge of its functions. Therefore, this amendment ensures that in the annual report and when responding to public inquiry at the annual public meeting the commission should be under an obligation to deal with duties as well as functions. I beg to move.
Lord Bassam of Brighton: In both amendments the noble Lord makes a good point. For that reason, we shall take the amendments away, give them fair consideration and bring something back on Report.
Lord Phillips of Sudbury: I am grateful. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbottsmoved Amendment No. 54:
Page 71, line 42, after "meeting")" insert "by rotation in London, Cardiff, Newcastle, Manchester, Birmingham and Leeds"
The noble Lord said: Amendments Nos. 54 and 56 run parallel to the point just made by the noble Lord, Lord Phillips. This matter concerns the annual public meeting, which effectively is the annual general meeting for the Charity Commission held under paragraph 11 of Schedule 1. Amendment No. 54 has the simple effect of requiring the rotation of the location of the annual meeting so that it does not always take place in London.
It is a truism that charities exist all over the country and, therefore, it must surely be neither balanced nor fair always to hold the annual meeting in the same place. There are many who already believe that the country is too M25-centric. Rotating the AGMs so that they are spread around the country would, from time to time at least, give smaller local charities a better chance of attending them. Where the annual public meeting is to be held is not specified in the Bill and it would be helpful if the Minister could explain at what location or locations the Government believe such meetings should take place.
Following that line of argument, which is for a more user-friendly relationship between the commission and the regulated entities, Amendment No. 56 adjusts subsection (5) so that the commission shall give reasonable notice "to each registered charity" of the annual meeting. In the brave new world that we are creating with this Bill, there must be a strong argument that all registered charities should be informed of the details of the annual meeting. The drafting does not appear to ensure that such details must be communicated directly to each registered charity. The commission is, after all, inter alia, the sector regulator. Each regulated entity, particularly the smaller regulated entities, should be formally and directly informed of the AGM, the annual meeting, or whatever we are going to call it. Amendment No. 56 would ensure that such details, electronic or in the form of a letter, would be communicated to all registered charities. I beg to move.
4.30 p.m.
Lord Shutt of Greetland: I support these amendments. Particularly as a strong regionalist, I am rather in favour of rotating where the meetings may take place. I hope that when we consider this again the noble Lord might be more adventurous. It strikes me, "Why not Hexham, Halifax, Helston, and Hove?" for example. We should not always be in the usual suspect cities. We might go once every 100 years to Sudbury. I support this in principle, but beware of the usual suspect cities.
Lord Dearing: I support the amendment. These are great and glorious cities, but I agree that there are others. It would be unquestionably courageous of the

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Government to accept particular cities rather than others. I hope that they accept the principle that there are other places than London.
Lord Phillips of Sudbury: I wholly support the amendment. My only thought would be that one could put in a provision requiring rotation beyond the M25 without actually getting into precisely which cities. You never know; Milton Keynes might be a city in the future.
Lord Swinfen: I also support the tenor of the amendment, but it would not be right to name particular cities.
Lord Bassam of Brighton: I agree with the tenor as well. I am a bit disappointed that Brighton has been left off. I was beginning to feel aggrieved for the West Country as well; Truro is a nice place, and I am sure that we would all like to visit it.
The amendment is useful in the sense that it encourages the view that we should aspire to see these meetings take place on a rolling basis up and down the country. I do not see a problem with that aspiration. It would be wrong to put it in the Bill. It would be wrong to spell out the locations exactly, because you could run into the problem of rotating them in that form in perpetuity. I know that the commission is sympathetic to this, and it certainly empathises with the principle behind the amendment; I understand that three of its new open board meetings this year are to be held in regional locations: York, Liverpool, and somewhere in Wales yet to be determined. The spirit is willing, but the amendment would be overly prescriptive.
The effect of Amendment No. 56 would be to require reasonable notice "to each registered charity". There are some 190,000 registered charities—I have not done that calculation but someone else has. It is calculated that it would cost some £42,000 to notify all registered charities through the post. Many, but by no means all, registered charities have an e-mail address. The commission will aim to publicise details of the annual meeting as widely as it can using its website, the press, and the various umbrella organisations in the voluntary sector. I hope that the noble Lord will accept that it is not really a practical proposition to give effect to this amendment, but that the commission has, through me, given an undertaking that it will do whatever it can to give the broadest possible publicity to its annual meeting. Perhaps in the light of that commitment the noble Lord will feel able to withdraw that amendment as well.
Lord Shutt of Greetland: I am not certain that the Minister is correct about the amendment not being practical. The Charity Commission favours charities with regular circulars, newsletters and so forth. Therefore, the newsletters could certainly advertise an annual meeting. It is not a case of separate postage; the circulars are published on a very regular basis.
Lord Bassam of Brighton: I am sure that that is the case, and that the commission would be more than
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happy and willing to do exactly that. However, with a very specific obligation to each registered charity, there is a danger of missing one. When things are set out in tablets of stone and statutory concreteness, as it were, it is perhaps an unreasonable expectation. I am sure that the commission would want to get to all the charities in one way or another.
Lord Hodgson of Astley Abbotts: I entirely appreciate the points made by Members of the Committee who spoke in support of the principle of Amendment No. 54. I mentioned only those six cities to get the reaction that I duly got about why the idea was a good one, but they were not the right cities. However, I was grateful for the Minister for his reassurance.
What the noble Lord, Lord Shutt, said on the second amendment was exactly right. The Charity Commission will communicate with its regulated charities by various means, and it is perfectly possible to time the newsletter so that it could carry with it notice of the annual general meeting. For the first time this afternoon, the Minister was extraordinarily weak in his response. He said that the idea would prove very difficult. That is like saying to a company that it is awfully difficult to send a letter to every shareholder. Company law would not allow that.
The charities are regulated entities coming under the rod—to use the word of the noble Lord, Lord Phillips—of an active and proactive Charity Commission, which we all support. If it is efficient, it should be able to write to every registered charity by means of e-mail, inclusion in a quarterly newsletter or whatever else, and to time that so it is done effectively. To try and pin on it £42,000 for that alone is very weak indeed. I am not satisfied with the Minister's answer to Amendment No. 56, and I want to come back to it because it is important.
Lord Bassam of Brighton: I have just quietly conferred. I undertake to see whether we can have some discussions with the Charity Commission on how practical the idea would be. I heard what the noble Lord said, and the shareholder point is a valid one. We will give the matter some further thought.
Lord Hodgson of Astley Abbotts: I am extremely grateful for that. It is a handsome offer indeed, and I hope that we have some positive thought and attention to the issue. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 55 and 56 not moved.]
Schedule 1, as amended, agreed to.
Schedule 2 agreed to.
Clause 7 [The Commission's objectives, general functions and duties]:
Lord Hodgson of Astley Abbottsmoved Amendment No. 57:
Page 5, line 19, at end insert—
"6. The furtherment objective."
The noble Lord said: We wish to discuss a number of amendments in relation to the commission's objectives, general functions and duties. Amendments

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Nos. 57 and 63 are the first of those. They add another objective to the existing list given to the Charity Commission under new Section 1B. Amendment No. 57 adds the "furtherment objective" to the existing list of five, and Amendment No. 63 gives a definition of the furtherment objective to the five existing explanatory definitions in new subsection (3).
The objective is defined as,
"to promote public awareness of the charitable sector and to stimulate philanthropy".
We believe that the failure to include that as an objective is a weakness of the Bill. The new objective in our amendment is—according to the Government in speeches made by the noble Baroness, Lady Scotland, and the noble Lord, Lord Bassam, today—one of the fundamental reasons why the Bill has been introduced. Yet it is not included specifically within the remit of objectives of the Charity Commission.
The noble Baroness made the policy intentions of the Government crystal clear in her introductory speech at Second Reading. She stated that the Government's three aims for the Bill were,
"first, to provide a legal and regulatory environment that will enable all charities, however they work, to realise their potential as a force for good in society; secondly, to encourage a vibrant and diverse sector independent of government; and thirdly, to sustain high levels of public confidence in charities through effective regulation". —[Official Report, 20/1/05; col. 883.]
If increasing public awareness of charities and the stimulation of philanthropy were included in the objectives set for the Charity Commission, we would be taking a big step towards achieving the Government's overall objectives for the Bill.
As several Members of the Committee have noted previously, the provisions of the Bill have increased the power of the Charity Commission by several notches. It is to become a proactive regulator. Its new role will include maintaining public confidence, setting the test for public benefit and maintaining it, ensuring compliance with the regulatory structure, promoting effective use of charitable resources and enhancing accountability.
Those are worthy objectives, which we support. But they are defensive; they are all restrictive. They invite the Charity Commission to draw attention to failure—never to success. Moreover, they run the danger of creating within the commission a box-ticking mentality.
The charitable sector is worth more than that. It needs a body to promote public awareness of what it stands for, what it offers society and what it achieves. It needs a body to explain how important a role the sector fulfils so that our fellow citizens of every age, background and economic circumstances are encouraged to contribute to the charity or charities of their choice, or at least to appreciate its contribution to our wellbeing.
It is true that individuals can and do play their role, but their work is inevitably and, quite properly, self-promoting. An even-handed sector overview is needed. That can best be provided by the commission. Hence, these two amendments, which I beg to move.
Lord Shutt of Greetland: I am not certain whether that clause is needed, but something like it is. "Furtherment" is a funny word. In my life, I do not
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think that I have used it very often, but I believe 1 know what is meant. I have with me Hansard for the Second Reading debate, because it is as well to have it here.
I was impressed with the contribution made by the noble Lord, Lord Sainsbury of Preston Candover. Being philanthropic himself, he clearly stated that he had been part of the Joint Committee which had considered the Bill, and so forth. Yet, towards the end of his contribution, he said:
"Last year research was published by Philanthropy UK which suggested that a fifth of wealthy people considering establishing a grant making trust decided not to do so because of the bureaucracy it involved, or because of what they had learnt from the difficulties created by the Charity Commission and by the charity SORP. A senior QC tells me he now advises his clients only to give out of income rather than endowing a grant making charity, because of what he calls unwarranted interference by the authorities".—[Official Report, 20/1/05: col. 904.]
If that attitude gets into the ether, it is bad for charities. One of the Charity Commission's objectives is to say, "Charities are good things. Wonderful things can happen because of charitable resources". That is rather important. Therefore, if that is "furtherment", I am in favour of it. It is important that we do not let it slip in this debate.
4.45 p.m.
Lord Best: I would like to support this amendment but I have some modest misgivings to add to the discussion. I declare an interest here because the Council for Charitable Support, previously chaired by the noble Lord, Lord Dahrendorf, and the Giving Campaign, a largely publicly funded campaign, have combined to become the Giving Forum, and I have agreed to chair that new joint body. The objective of that body is to promote—I suppose that is furtherment—philanthropy and charitable giving. Therefore, anything I say needs to be understood in the context of that new body and that alternative group supporting and promoting charitable giving alongside the idea that the Charity Commission should have that as a central role.
The Joint Committee on the draft Bill considered that matter in some detail. As the noble Lord, Lord Shutt, mentioned, the noble Lord, Lord Sainsbury of Preston Candover, spoke in favour of putting something in the Bill to stimulate philanthropy because of the anxiety that regulation would overwhelm people's willingness to give. At that time we heard that although incomes have been rising by far more than inflation, giving has remained only constant. Some stimulus could profitably be put behind a giving campaign.
In comparison with the United States, for example, there is a rather modest level of giving at present which is not keeping up with the rise in earnings, particularly as regards the rise in earnings of those in the top 10 per cent and top 1 per cent of earners. On the one hand, I am entirely supportive of the idea that the Charity Commission should join the fray, and that stimulating philanthropy should be part of its objectives—it should certainly not use its regulatory powers to inhibit giving by wealthy individuals and the community at large—but on the other hand it needs to be made clear that we are not giving this task solely, or even possibly most prominently, to the Charity

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Commission, as other agencies are keen to take on that role too. Therefore, as I say, I support the amendment but with reservations.
Lord Phillips of Sudbury: Like other noble Lords, I am inclined to be sympathetic to the amendment for the reasons advanced already. The noble Lord, Lord Hodgson, made a strong case. The joint scrutiny committee laid great emphasis on the need to encourage public giving. However, I have two reservations. The first concerns the language. There used to be a lovely old word in the English lexicon—"furtherance". However, I have never heard of "furtherment". The noble Lord would win me over considerably if he substituted "furtherance" for "furtherment".
My second reservation, which may betray my own limited understanding of meaning, is that I am not sure that philanthropy covers volunteering. The joint scrutiny committee rightly banged on and on about the importance of giving time as well as money. If the amendment is accepted, I would like to see the words "and volunteering" added after "philanthropy".
The more important point, which was touched on by the noble Lord, Lord Best, and to which I shall be very interested in the Minister's response, is whether in imposing this proactive objective one would not load the poor old Charity Commission with a duty the extent of which is completely open-ended. It might be difficult for the commission to decide how much of its resources—especially as it will be under great pressure as a result of this Bill—should be devoted to this objective. The noble Lord, Lord Best, said that we must not on any account reach a position where the Charity Commission is by law charged with promoting philanthropy and volunteering in some special way. It would be interesting to discuss this matter outside the Committee to examine its potential consequences in that regard.
Lord Bassam of Brighton: This has been a helpful and reflective short debate on the issue. I am with the noble Lords, Lord Best and Lord Phillips, on this one. It is a fine spirit that wishes to see the Charity Commission take up this role, and I can understand, certainly for the purposes of debate, why the noble Lord, Lord Hodgson, has put it down. If it is stated so explicitly, that might cause confusion in the public mind about what the Charity Commission is there for. I want to run through some points on that.
Principally, the Charity Commission is a regulator of charities, and its objectives have been drafted with the objectives of a regulator in mind. Promoting public awareness of the charitable sector does not seem to me to be a principal function of the regulator. That seems to me pretty much the job of the sector itself, or perhaps of the Government. Certainly, the Government have taken steps to promote charitable giving, charitable activity, giving up of voluntary time, and so on. That seems quite proper. It is a form of encouragement, and it is something in which we all share an interest. I can think of other organisations that already are better placed to undertake the important work of promoting the sector. The NCVO
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is an example that springs immediately to my mind, although it would not see itself as just having that function and role.
The proposal that the commission should have an objective to "stimulate philanthropy", which is the other part of Amendment No. 63, was itself a recommendation of the Joint Committee. The Government agreed with the Joint Committee's conclusion that the draft Bill should include provision to ensure that the regulatory burden on grant-making charities does not discourage philanthropy. Rather than giving the commission the objective to "stimulate philanthropy"—an objective similar to that of the Giving Campaign, and one that we do not think is compatible with the commission's role as regulator—we propose in the Bill to give the commission a new general statutory duty. Clause 7, new Section 1D(2)2.(a), gives the Charity Commission a duty of acting,
"in a way which is compatible with the encouragement of—
(a) all forms of charitable giving".
Perhaps the noble Lord does not like the words so much, but that goes some way in the general direction in which the noble Lord seeks to take the Charity Commission without going over that line, which might confuse, certainly in the public mind, the role of the commission principally as a regulator.
I hope that the noble Lord will feel able to withdraw his amendment. The noble Lord, Lord Phillips, made a good point that perhaps this is one of those issues where some further thought needs to be given to where the principal thrust of promoting the sector and promoting charitable giving needs to take place. I am not sure that this is the right way to do it, although I understand the motive behind the amendment.
Lord Phillips of Sudbury: Before the noble Lord responds, I wonder whether, in drawing attention to Clause 7 new Section 1D(2)2. on page 6, the Government would think it helpful to say not merely:
"So far as is reasonably practicable the Commission must, in performing its functions, act in a way,"
but also "in performing its functions and meeting its objectives". That would extend that, and it would go some way to meeting the point made by the noble Lord, Lord Hodgson.
Lord Bassam of Brighton: I am happy to think about it. I am grateful to the noble Lord for the suggestion, although he usually likes economy of purpose in the drafting of legislation, and he is not always keen on adding to it. I did notice a few additions that he proposed today.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for the positive response to the spirit that I was striving for here. I am particularly grateful to the noble Lord, Lord Shutt, for his powerful speech quoting the speech given by my noble friend Lord Sainsbury of Preston Candover on Second Reading. That is the guts of what we are trying to get at here. Do we have a system that will encourage people? If we do not, we are arguing about the wrong things.

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I take the points that the noble Lord, Lord Best, made. Of course the commission must speak for the sector and not individual charities; it must be a joint effort. The charity sector itself must contribute to spreading the good word. As ever, I am grateful to the noble Lord, Lord Phillips, for suggesting drafting improvements. The amendment was a peg on which to hang this discussion.
I was disappointed at the Minister's remark that this amendment, which I saw as lifting the issue by giving the Charity Commission an objective relating to the stimulus of the sector, could be encompassed within new Section 1D(2)(2). That provision states that the commission must:
"in performing its functions, act in a way which is compatible with the encouragement of".
That is pretty mild stuff. The Minister's response was not very persuasive.
The Minister asked why it was fair that the Charity Commission should be given an educational role. I invite his officials to look at the Financial Services Authority, which, besides being a very strong regulator, is required by the Government to educate the public about financial affairs. That is no more than we are doing here.
Lord Bassam of Brighton: Is it not slightly different? Obviously without looking at the relevant legislation, I think that its aim is to encourage compliance through the promotion of the authority's work. This is rather different; as the noble Lord says in his amendment, it aims,
"to promote public awareness of the charitable sector and to stimulate philanthropy".
Presumably, the provision to which the noble Lord refers seeks to promote the importance of compliance and the ease with which organisations might achieve that objective.
Lord Hodgson of Astley Abbotts: It is not exactly the same but it is an educational function. It is worth looking at. I am pleased that the Minister has been able to give this a general welcome but I am slightly disappointed in other respects. We must look at the wording and try to table an amendment that gives more oomph to what the Charity Commissioner does. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbottsmoved Amendment No. 58:
Page 5, line 19, at end insert—
"7. The advisory objective."
The noble Lord said: This is my second shot at the coconut. This amendment adds an advisory objective. We are still in exactly the same part of the Bill as we were with the last pair of amendments. Amendment No. 64 gives a more detailed definition of the phrase.
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Under Clause 24 the commission is given the power to give advice and guidance, but, from my reading, it appears to be passive. The Bill does not specify the need for it to be an objective of the commission to provide advice and guidance to the sector as well as providing regulation for it. In Amendment No. 71 and amendments that the noble Lord, Lord Phillips, has tabled, we shall seek to ensure that these very different functions are properly separated and distinguished as the joint scrutiny committee wished.
I shall give an example of the role that I believe the commission should play. In the mid-1980s I was a founder director of the Securities and Investments Board, which was established under the Financial Services Act 1986. It provided the first detailed and comprehensive statutory regulation of the financial services industry. Previously, any regulation had been carried out on what can only be described as a pretty loose rein by the DTI.
A series of firms, particularly smaller ones, were faced with a new regulatory system—a statutory one at that—which carried not inconsiderable penalties for failure to comply. When I was on the board of the SIB those firms were inclined to approach us in good faith, explain that they were adopting a particular course of action and ask for our view. Under the powers specified then, we had no option but to reply, "The law is there for you to read. You should take whatever advice you wish and then take whatever action seems appropriate. If we then believe that you have broken the law we will come after you. By the way, do not think that the fact that you have sought our views will in any way count in your favour if we initiate proceedings against you".
5 p.m.
That always seemed to me to be a hopeless way of proceeding—one without merit in any sense. The regulator appeared standoffish and unhelpful, the regulated company was bewildered and, above all, there was no reward for having tried to work within the system.
I have some fear of a similar situation coming about here. We have a considerable increase of regulatory powers, a substantial increase in the number of charities to be regulated and I can see no requirement for the Charity Commission to provide advice and guidance.
Further, there is a greater complication in this Bill, which we did not face at the SIB. We then had a static situation: the regulatory framework was, so to speak, cast in stone. But here we have a dynamic situation, in that the Charity Commission will be developing the regulatory framework in a number of ways over such things as the public benefit test.
So, the amendment is designed to move "the provision of advice and guidance" from a passive possibility to an active objective. It is too easy looking down the road with a different commission and a different chairman to envisage a situation where the body decides that providing advice and guidance is too difficult and too risky.

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I could say more about the matter. I shall resist doing so. But I would draw the Minister's attention to the debate we had on the issue on community interest companies on 25 March 2004 when we were in the rather inelegantly titled Companies (Audit, Investigations and Community Enterprise) Bill. My noble friend Lord Glentoran at col. GC336 moved an amendment to that effect.
I accept that part of what I am seeking to achieve could probably equally well be achieved by a wholesale changing of "may" to "must" in Clause 24. But I think that the approach we have adopted is more open-ended and straightforward. I hope that the Government will feel able to accept it. I beg to move.
Lord Best: I think I come down, but only just, on the side against the proposed amendments. While the Charities Aid Foundation is the body that brings together the sector in relation to charitable giving, the National Council for Voluntary Organisations (NCVO) brings together people to provide the advice and guidance that the sector needs. That body has expressed some opposition to the amendment. I declare an interest as a member of the NCVO's advisory council.
Cries of "regulatory creep" come from that body. That is not a term of abuse for the chairman or chief executive of the Charity Commission; the NCVO is saying that this is the start of a takeover by central agency through its advice and guidance of the sector, and that that advice and guidance is something that comes better from within and from the federations and associations that support that sector.
The Joint Committee, when hearing evidence on whether the Charity Commission should have a powerful role heard contrary views from some of those representing the smaller charities around the country. The National Association of Councils for Voluntary Service (NACVS) put to us that most of its members found advice and guidance in its existing form from the Charity Commission more than helpful and would not be at all anxious for greater powers to be given to the Charity Commission through the strengthening of an objective of this kind.
NACVS also said that—and this was agreed across the piece by all, whether for or against advice through the Charity Commission—if there is to be a role for the Charity Commission of this kind, it needs to be very clearly differentiated from its regulatory role because confusion can easily emerge between what the Charity Commission says is a good idea for a charity to get on with and what it must do. Among the ways in which people presenting to the Joint Committee thought that that distinction could be drawn was the Charity Commission even going as far as to have two lots of letterheads, so that advice that was only advice was different from the guidance that a charity was compelled to take on board. Others told us that we could have the same headed paper, but that it should come in different colours. The point that everyone made was that there must not be confusion, as there
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often is, between a powerful body saying, "We advise you to do X and Y", when they really mean, "You must do this to comply with our requirements".
On balance, I think that the Bill as already set out goes far enough. However, if we are to have a greater power, we would need to be careful in distinguishing advice and guidance from what the Charity Commission requires of charities.
Baroness Howe of Idlicote: I support very much what my noble friend Lord Best said. We can see a more powerful Charity Commission emerging with considerable extra powers. To have the same body regulating with those very strong powers and advising on what must be done is dangerous.
The more I read and listened to the debate, the more I thought back to my past. I was a member of a body that was both a promoter and a regulator—the Equal Opportunities Commission when it was first set up. Both those duties were important to get the message of treating men and women the same off the ground. However, after a while, it became quite difficult. Luckily, lots of other organisations came on the scene, such as Business in the Community, which were able to give more independent advice before particular actions were taken. Cases were also taken to court that set a framework for the future.
I am nervous about the issue. There is a role to promote charitable giving, and I would rather that the commission did that and adjudicated on where legal boundaries were breached. I must declare an interest, as I am also on the NCVO advisory committee. However, I would much rather that a body like the NCVO had a rather more statutory body that was able to perform the duty of helping small and large charities, giving them advice about how they should proceed.
Lord Phillips of Sudbury: I tabled Amendment No. 67, which is, unfortunately, not in this group. It would add, as a further function:
"Giving advice and guidance to charity trustees".
I have some query about the notion of Amendment No. 58 going in as one of the objectives. The objectives are the principal foundation of the whole of the Charity Commission's work, and I am not sure that giving advice sits entirely comfortably with the other five—potentially six—objectives in Clause 7.
I also take careful note of what the noble Lord, Lord Best, and the noble Baroness said about the danger of parts of the charity sector seeing the Charity Commission getting too big for its boots, and trying to push people around—giving unbidden advice, if you like. When the noble Lord, Lord Hodgson, and I reflect on the debate, it may be sensible for us to make sure that—in so far as one is talking about the giving of advice by the Charity Commission—advice has to be sought. At least, it must be sought in bespoke cases: the Bill should not allow the Charity Commission to

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give gratuitous advice to a charity or charities in a way that could become oppressive. That bears a considerable amount of careful further thought.
Lord Bassam of Brighton: I wonder whether the noble Lord, Lord Phillips, has anything to say on Amendment No. 67. I believe that that amendment sits with this group.
Lord Phillips of Sudbury: Would the Minister like me to deal with that now?
Lord Bassam of Brighton: That would be helpful.
Lord Phillips of Sudbury: My proposal was to insert as one of the functions the following:
"Giving advice and guidance to charity trustees and to any charity or charities whether particularly or generally".
I note that we already have Clause 24, to which reference has been made, but that is the power to give advice and guidance on written application from charity trustees. I do not believe that anyone is arguing with that. It is an enlargement of what is already in Section 29 of the Charities Act 1993. Apart from some amendments to the wording, the general notion of giving advice which is sought must be a good one.
It is worth noting that subsection (4) of the new clause introduced under Clause 24 allows the commission to give general advice vis-à-vis the administration of charities under the second of its functions in Clause 7. Already within the Bill we have a power of initiative on the part of the commission in a general way to give advice unsought. As I say, I want to contemplate the issues raised by Members of the Committee and listen to what the Government may have to say. For the moment, I shall leave the matter there.
The Lord Bishop of Peterborough: Having listened to the debate, I confess that I have more sympathy with the amendment tabled by the noble Lord, Lord Phillips. I have sought the advice of the Charity Commission on a number of points and always found it helpful, but I entirely take the point made by the noble Lord, Lord Best, that to make it an objective is too strong. To create a function that the Charity Commission should perform on application I believe might be useful and would clarify the purpose of the Bill in this small detail.
Lord Bassam of Brighton: I am very grateful to those who have joined in this debate. It is quite useful and shows how useful the Committee process is. Members of the Committee have different experience which informs how we legislate and informs our consideration of these particular amendments. I believe that that has worked well. I am grateful to the noble Lord, Lord Phillips, for making his points under this general head.
As the regulator of charities, we believe that the principal task of the Charity Commission is regulation. Of course, the commission will, during the exercise of that function, also give advice to the charitable sector. It has power to give advice by virtue of Clause 24 to which the noble Lord, Lord Phillips,
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has referred. Our view is that the giving of advice and the providing of guidance is really ancillary to the main function, so it does not need to be a function in itself.
Therefore, we believe that it would be inappropriate for the commission to have a general advisory function which, in a sense, would be to raise its advisory powers to the same level as its regulatory functions. I believe that was a point that the noble Lord, Lord Best, made in his contribution. That is not to say that we do not see advice and guidance as being very important because the commission will issue guidance and it already gives advice.
When I was preparing for this discussion I asked whether there was any estimate of volume of advice given and someone said that at the last count, 28,000 pieces of advice and guidance were provided in a given year. Calculating that must have been an incredible exercise. So there is a volume of advice given.
My guess is that most of that advice is given to enable charitable organisations to comply with the regulatory framework. It is valuable because of that. Any intelligent regulator will not want just to use its position as a "hard" regulator and say, "You cannot do this". It will want to enable charitable organisations to function and work well by saying, "Well, this is how you can achieve that objective". We want to see that sort of clear advice and guidance. Therefore, the advice is towards compliance.
5.15 p.m.
Lord Phillips of Sudbury: I hope that that reply will help Members of the Committee; it certainly helped me. First, as regards the 28,000 pages of advice and guidance, under what part of the Bill—with particular respect to Clause 7—would that fall in future? Secondly, what distinction does the Charity Commission currently make between advice and guidance, if any? I am sorry to shoot those two questions across the Floor. I do not expect an instant response.
Lord Bassam of Brighton: The noble Lord will probably want to look at new Section 1C(2), proposed in Clause 7, which refers to,
"Encouraging and facilitating the better administration of charities".
I think that that is the heading under which the commission would operate.
Lord Wedderburn of Charlton: Does my noble friend agree that there is a fault in not only what he has just said, but in new Section 1D(2), which says that, in exercising its functions,
"the Commission must … act in a way which is compatible with the encouragement of

(a) all forms of charitable giving, and

(b) voluntary participation in charity work".

People cannot be encouraged to give without being given advice on how to do so more than they were. A lot of that seems to be rather repetitive when the Government have included most of it already.
Lord Bassam of Brighton: I thank my noble friend Lord Wedderburn for that very positive contribution, which is right. To sum up, the advisory role is ancillary to the main function of regulation. There is adequate provision already. It is clear that a mass of advice has been given to charitable organisations—nearly all of it on request. I understand that some 3,000 pieces of advice were given at the Charity Commission's behest, but proactively supporting its role as a regulator, which is as it should be.
I have heard what has been said in this useful debate. It has probably informed us better on how a regulator can work and make good use of its advisory role.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister and all Members of the Committee who have participated. They have shown, and I accept, the argument that this should not fit as one of the commission's objectives. I accept the comments made by the noble Lord, Lord Best, and the noble Baroness, Lady Howe, about the dangers of advice and regulation becoming co-mingled, and the comments made by the right reverend Prelate along the same lines.
The amendment put forward by the noble Lord, Lord Phillips, has a lot to commend it and was probably better placed than that which I had tabled. But, that having been said, he said that he felt that there was a danger of the commission becoming too big for its boots, and that it should give advice only when it was sought. I do not see how his Amendment No. 67 meets the seeking requirement. It seems that one is able to give advice irrespective of the requirement. His point was good, but I thought that that should be incorporated in his amendment to give it the narrow function that he sought. In the mean time, I beg leave to withdraw the amendment.
Lord Hodgson of Astley Abbottsmoved Amendment No. 58A:
Page 5, line 21, leave out "increase" and insert "promote"
The noble Lord said: I shall speak briefly. I know that my noble friend Lord Hunt has been much involved in the amendment and that he will wish to say more about it. We are still concerned with the commission's objectives. We are looking at the public confidence objective, which is defined as,
"to increase public trust and confidence in charities".
We wish to replace "increase" with "promote".
The problem with "increase" is that it indicates a never-ending process, which could go up and up. There is a problem with "promote", as there is with "increase", because it indicates a prior absence. Any such aspersion is unjustified. As we know, public confidence in the charitable sector is already very high, as many surveys have demonstrated and as the Minister and his colleagues have said many times.
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One of the purposes of the Bill is to make sure that that confidence does not fall. Perhaps "maintain public trust and confidence" would have been better and less judgmental. So why do we advocate the word "promote"? It is for the simple reason that we had heard the Government were minded to accept "promote" in connection with Clause 13. I am afraid we concluded rather unheroically that half a loaf was better than no bread. I beg to move.
Lord Hunt of Wirral: I would like to thank my noble friend for his comments. Following the recommendation of the Joint Committee, I urged this amendment on the Government during the Second Reading debate in the Chamber. I rise merely to thank Ministers for the speed and the good grace with which they responded to my call. As my noble friend pointed out, increasing compliance is almost certainly impossible to demonstrate, and impossible to achieve, especially in a statutory duty in perpetuity. Therefore, I am very grateful to the Government for having proposed not only Amendment No. 61 but also Amendment No. 118, which I warmly welcome.
Lord Phillips of Sudbury: I have tabled Amendment No. 62. I am very happy with the amendments tabled by the Government and with Amendment No. 58A.
Lord Dearing: I support the two government amendments in particular. Unfortunately, the noble Baroness, Lady Warwick, has another commitment, but if she could have been present she would also have supported them. Within the university sector there is a strong commitment to compliance with charities law. To say that they must increase compliance seems rather difficult when they are already complying. It seems to imply greater regulation when there is already recognition, even by Her Majesty's Government, that there may be over-regulation of universities. Therefore, I very much welcome these two government amendments. I also thank the noble Lord, Lord Hunt of Wirral, for his part in the matter.
Lord Bassam of Brighton: I had better move the government amendments. I am grateful for—
Lord Swinfen: The noble Lord may speak to the amendment at this stage and move it when we get there.
Lord Bassam of Brighton: That is quite right. I am very grateful. We have been going a long time and I am getting ahead of myself.
I am grateful for the comments that have been made about the government amendments, which means that I do not really have to speak to them at all. However, I wish to make a few comments on Amendment No. 58A which would effect the following change. The requirement for the Charity Commission to increase public trust and confidence in charities would become a requirement for the commission to promote public trust and confidence in charities and itself as regulator.

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I believe that Amendment No. 58A was tabled to take into account a future scenario where trust and confidence had reached 100 per cent and therefore it would be impossible for the commission to increase trust and confidence. Where public trust and confidence reached 100 per cent, the commission would therefore be bound to fail in that particular objective. That is a tricky one.
In recommending that the commission be given objectives, the Strategy Unit's review, Private Action, Public Benefit, also stated that it would be necessary to develop a set of indicators to measure the regulator's impact in the areas of the objectives. It took the objective we are now discussing as an example. It stated that indicators for the objective of increasing trust and confidence on the part of the public could be linked to survey and other evidence, for example on levels of confidence in charities, trends in giving, volunteering and other actions which probably have a correlation with public confidence and perceptions of the amount of fraud in charities compared with the reality.
We do not believe that there will ever be evidence to indicate that public trust and confidence has reached 100 per cent. Therefore, it would always be possible to increase rather than promote trust and confidence. I hope that that rather convoluted explanation persuades the noble Lord that his amendment in the circumstances is probably unwise.
Finally, I am very grateful to Members of the Committee who have spoken in support of government amendments.
Lord Hodgson of Astley Abbotts: I thought we set off in rather a hopeful direction. Suddenly the Minister swerved off the road at the end and I am contemplating a wreck.
I said in my remarks that I thought "promote" was not as good as "maintain", for the reasons I explained in relation to Amendment No. 58A. I am grateful to Members of the Committee who thought that we should make some changes to this part of the Bill for the reasons that are applicable and where the Government intend and agree that amendments should be made.
I fail to see the distinction that the Minister was drawing between the clauses where they are happy to make the amendments, under government Amendment Nos. 61 and 118, with the other amendments in the group. I have to withdraw the amendment now, but we shall return to it because I think that the Minister is now imposing an impossible position on the sector and the commission. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Phillips of Sudburymoved Amendment No. 59:
Page 5, line 22, at end insert "and in itself as Regulator"
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The noble Lord said: I can move the amendment very swiftly. I believe that the public confidence objective would be incomplete if it merely increased public trust and confidence in charities, but not in the Charity Commission as regulator. I do not see why the commission should be immune from the public confidence objective.
If asked: how can the commission police its own performance vis-à-vis public trust and confidence? I would say that it does that all the time, one way or another, in terms of measuring its own effectiveness. It is important that it holds itself to account in order that others can hold themselves to account. I beg to move.
Lord Bassam of Brighton: I think that we are probably going back over some of the territory we have discussed already. I shall try to address my comments precisely to the noble Lord's amendment.
The purpose of the amendment would be to give the Charity Commission the objective of increasing public trust and confidence in itself as regulator. The Joint Committee had some reservations about the capacity of the Charity Commission. In one of its recommendations it stated:
"The evidence we have heard has given us reason to question whether the Charity Commission is properly organised and properly resourced to make it effective in its new tasks".
However, as the Government said in our response to the Joint Committee, the Charity Commission is an effective and properly resourced organisation. I have already referred to the strategic review that the commission is currently carrying out, which includes consideration of the commission's future engagement with the charitable sector, designing the commission's operations to match our future engagement with that sector and improving the way in which the commission influences and communicates with its stakeholders.
The final recommendations of the review will be presented to the commission's open board meeting on 22 March this year.
We do not believe that increasing public trust and confidence in the commission is an end in itself. Therefore, it should not be included in the commission's objectives. Our view is that public trust and confidence in the commission will follow from the successful attainment by the commission of the objectives in the Bill.
For those reasons, trying to oblige the commission to increase trust and confidence in the way in which the noble Lord has argued his amendment would probably be unwise. It is much more likely that that trust and confidence, which is already at a very high level, will be taken to a still higher level when the legislation works through and the commission looks openly at itself in the way that I have described. I like to think that that will greatly enhance the commission's reputation, as I am sure it will. It has a very good track record on which to build. For those reasons I hope that the noble Lord does not press his amendment at Report stage.
Lord Phillips of Sudbury: I am grateful to the noble Lord. He is a little like the Grand Old Duke of York:

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his arguments all lead in one direction; namely, what a good amendment this is; but then he said that public trust in the Charity Commission is not an end in itself. I do not quite understand that. It is very late, I am very tired, and I do not have the will to go on, so I shall withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendment No. 60 not moved.]
Lord Bassam of Brightonmoved Amendment No. 61:
Page 5, line 26, leave out "increase" and insert "promote"
GC 180
On Question, amendment agreed to.
The Deputy Chairman of Committees: I cannot call Amendment No. 62.
[Amendments Nos. 63 and 64 not moved.]
Lord Bassam of Brighton: Given that the noble Lord, Lord Phillips, is tired, I would not want to weary him any more, so perhaps this is an appropriate and convenient moment for the Grand Committee to adjourn until Wednesday 23 February at 3.30 p.m.
The Deputy Chairman of Committees: The Committee stands adjourned until Wednesday 23 February next.
The Committee adjourned at twenty-nine minutes before six o'clock.

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