Sitting of 22 February 2005

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

Wheels to Work Schemes
Lord Cameron of Dillingtonasked Her Majesty's Government:
Whether they intend to roll out the Wheels to Work scheme throughout rural England by involving the Jobcentre Plus network.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, Wheels to Work schemes are developed and run locally and, where appropriate, Jobcentre Plus contributes to local schemes.
Lord Cameron of Dillington: My Lords, I thank the Minister for that reply. I am disappointed but not surprised by it. Delighted as I am, of course, to have a conversation with the Minister, I am slightly surprised that a representative from the Department for Works and Pensions is not here to answer the Question.
I am sure the Minister is aware that the chances of rural youngsters finding jobs within walking distance are pretty remote. Without the means to buy a set of wheels they are unable to get a job, and without a job, of course, they are unable to buy themselves a set of wheels. Wheels to Work schemes are an admirable solution to this problem because they involve lending such people mopeds which, after six to nine months, they have to repay into the pool. The Minister will know that the schemes are very successful.
Is the Minister aware that the cost of such schemes is around £70 per person per week, including administration costs, whereas the jobseeker's allowance, which is otherwise payable, is nearly double that, excluding administration costs? What incentive is there for the local regional jobcentre managers to finance these schemes?
Lord Whitty: My Lords, I am delighted that the noble Lord is delighted that I am answering his Question after all. He is correct to say that these schemes have in many cases proved hugely successful. Most of them involve the supply of a moped or a bicycle, but other subsidised transport schemes, driving lessons and advice come under the general heading of Wheels to Work. That demonstrates that these are essentially local schemes put together by local partners to fit local conditions. That is probably the secret of their success. Therefore moving to the noble Lord's original suggestion of a national system, which would inevitably be more prescriptive, is not the
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solution. Although jobcentres have been major partners in this, they are not the only partners—in some cases they have not been one of the participants—and so it is not obvious that the jobcentre should take the prime responsibility for the role which, in the period of the noble Lord's tenure, the Countryside Agency took on and which will now pass to the RDAs.
Lord Renton: My Lords, what kind of wheels are they and what kind of work is it?
Lord Whitty: My Lords, by and large, they are two wheels but, as I have just explained, some forms of the scheme give subsidies to four wheels. The work is the work that the unemployed person would not otherwise be able to get or the training place that they would not otherwise be able to get to.
Baroness Miller of Chilthorne Domer: My Lords, as the noble Lord, Lord Cameron, rightly said, the schemes benefit enormously young people seeking work. But is the Minister aware how much they benefit also small and medium-sized rural enterprises, which are then able to access a very energetic, young and enthusiastic work force? I was speaking only last week to one such person in north Devon. Given their effect on the rural economy overall, does the Minister consider that the RDAs should fund such schemes if the Government have no intention of introducing a national scheme?
Lord Whitty: My Lords, the national schemes which were originally directed through the Countryside Agency will become the responsibility of the RDAs and the schemes already in place will continue to be funded by them. Clearly schemes of this kind will be of interest to the RDAs' support for rural businesses as well as to bringing down the rate of rural unemployment.
Baroness Byford: My Lords, how many schemes have been set up particularly with regard to bicycles, mopeds and other forms of transport? How many rural jobcentres are there and how many have been closed within the past four years?
Lord Whitty: My Lords, I do not know the answer to the second part of the noble Baroness's question. It is definitely a matter on which the DWP will have to communicate with her. The rural dimension of the scheme is a matter for Defra. As regards local exchanges, I ought perhaps to have the information with me but it would be sensible if my colleagues wrote to the noble Baroness about the number of jobcentres.
As to the scheme itself, at 30 September last year there were, roughly speaking, 1,329 schemes. In the bulk of those—just over half—the largest single element was the provision of mopeds. A much smaller number of schemes involved bicycles and the others

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involved loans or subsidies for travel of one kind or another. So the schemes are very flexible, albeit mopeds predominate.
Lord Tordoff: My Lords, is the noble Lord not surprised that the noble Lord, Lord Tebbit, who is not in his place, is not here to congratulate the Government on encouraging people to get on their bikes?
Lord Whitty: My Lords, leaping to the defence of the noble Lord, Lord Tebbit, as I always do in his absence or otherwise, he has always denied that particular saying. Nevertheless it has passed into mythology and therefore I believe that, in his absence, we can definitely include the noble Lord in support of these schemes.

Israel and Palestine: London Conference
2.43 p.m.
Lord Wallace of Saltaire Lord Wallace of Saltaire asked Her Majesty's Government:
What will be the main issues on the agenda of the conference which they are convening on the future of Palestine on 1 March.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, we have discussed the agenda of the 1 March London meeting on supporting the Palestinian Authority with the Palestinians themselves and international partners. The Palestinian Authority will present its proposals on state-building and capacity-building in the areas of governance, security and economic development. We anticipate that the international community will respond by offering practical support. We will continue to consult the Palestinians, the quartet and international partners in the run-up to the London meeting.
Lord Wallace of Saltaire: My Lords, I thank the Minister for that helpful reply. Will she tell us a little more about how this conference—which will include only the Palestinians and will be held without Israeli participation—fits into the broader picture of moving, at last we hope, towards a viable two-state solution, particularly in the light of the rather encouraging and constructive comments made by President Bush in Brussels yesterday about the need for a territorially contiguous Palestinian state?
Baroness Symons of Vernham Dean: My Lords, I endorse what the noble Lord, Lord Wallace of Saltaire, said about President Bush's remarks yesterday. I am happy to tell your Lordships that when I met the Arab League ambassadors this morning I noticed that those remarks had also been noted by them. The real purpose of this meeting is to allow the international community to support the Palestinian Authority's own plans to build the institutions needed to underpin a future Palestinian state. In the context of the remarks of the noble Lord, Lord Wallace of Saltaire, it is a question of making sure
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that a Palestinian state, when it is established, can indeed be the viable sustainable state that we all know is a necessary part of the overall road map plan and, of course, of the two-state solution.
Lord Wright of Richmond: My Lords. while I endorse very warmly the welcome of the noble Lord, Lord Wallace, for President Bush's reported statement about the need for the respective parts of a Palestinian state to be contiguous and his renewed call for a freeze on settlement activity, may I nevertheless ask the Minister to give an assurance to this House, and perhaps also to the Palestinians attending the conference on 1 March, that Her Majesty's Government will continue to keep a close watch on settlement activity in the light of Prime Minister Sharon's threat to consolidate an Israeli presence in the territories other than Gaza?
Baroness Symons of Vernham Dean: My Lords, I can give your Lordships an assurance that we will remain very watchful over what happens regarding settlement activity. Your Lordships will know that we have already expressed disappointment that the Israelis have plans in hand for increased settlement building. That is within the bounds of already established settlements, but phase one of the road map demands that the Israelis freeze their settlement activity. There are concerns that Israeli action at the moment is not compatible with such a freeze. There are also concerns about renewed activity regarding building the security barrier, which has been a subject of considerable anxiety in your Lordships' House.
Baroness Hayman: My Lords, does my noble friend agree that sustaining the considerable political courage that has been shown by both the Palestinian and the Israeli leadership in recent times will require tangible benefits on the ground for their constituencies? In that respect will the meeting in London consider particularly the possibilities of achieving speedy economic development for those Palestinians living in Gaza?
Baroness Symons of Vernham Dean: My Lords, indeed, we shall be doing exactly that. In answering the original Question from the noble Lord, Lord Wallace of Saltaire, I mentioned that we would be looking at the areas of governance, security and economic development. As regards economic development, we will seek to stimulate private sector growth and improve conditions to facilitate internal and external trade. We will also look forward to the possibility of a donor conference and of a meeting that will bring together private sector investors under the auspices of the World Bank. Therefore, the remarks of my noble friend Lady Hayman are well taken; indeed, work is going on in all areas in the economic sphere.
Lord Howell of Guildford: My Lords, will there be a pledging of any funds at this conference? I think we all agree that the main aim is a viable Palestinian state, and one which is not composed, as President Bush said, of a

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set of scattered territories. So surely the need now arises for a very clear plan on how to create a viable state and, indeed, how to cope with the situation that the noble Lord, Lord Wright of Richmond, mentioned regarding Mr Sharon's intention to annex a further 7 per cent of the West Bank even while he is seeking to disengage from Gaza. How are these matters to be brought together and how will Israel, which will not be present at the conference, be brought into the plans since it will have to provide most of the infrastructure and most of the economic support to make this viable state work at all?
Baroness Symons of Vernham Dean: My Lords, I agree with a great deal of what the noble Lord said about concerns. I should tell the noble Lord and the House that the Israeli Government have been consulted about the meeting next week. They have been consulted about the areas to be covered and, indeed, are broadly supportive of the sort of agenda that we will discuss next week. It is not, however, a donor conference in itself. It is not a conference where people will be formally invited to make financial pledges, although it will cover the areas of economic growth and activity that I detailed a moment ago to my noble friend Lady Hayman. Having said that it will not be a pledging conference, a number of countries have pledged money to the Palestinian Authority but have not as yet delivered on those promises. If they consider that next week is a good opportunity to do that, we will be delighted.
Lord Dykes: My Lords, does the Minister not agree that the encouraging reality for more and more moderate and sensible peace-loving Israelis—and an increasing number of members of the Likud party—is that the only true, genuine security and long-lasting peace for Israel will come by proper, full withdrawal from the occupied territories, including the West Bank, and a proper negotiation with a fully sovereign Palestinian state? That reality is increasingly striking even Mr Sharon. Will not Her Majesty's Government make a greater effort to ensure that he accepts those realities now?
Baroness Symons of Vernham Dean: My Lords, we do exactly as the noble Lord, Lord Dykes, suggested. No one for a moment pretends that the meeting next week will take the place of a proper negotiated settlement. That would come under phase 3 of the road map, when the final status issues—the all-important issues—of borders, refugees and the status of Jerusalem should be negotiated. The conference next week aims to put into place those matters that the Palestinians themselves have said that they need for building a future for statehood and to give them the type of backing that will enable them in the fullness of time—we hope in a matter of a very few years—to be able to have exactly those types of negotiations.
Lord Kilclooney: My Lords, since, in a democratic society, the institution of policing is important, and since the infrastructure of policing has been absolutely destroyed in the Palestinian territories during the Israeli
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occupation, will Her Majesty's Government make some practical offer to assist the Palestinians in the reform and training of the police institution?
Baroness Symons of Vernham Dean: My Lords, that is exactly what we have been doing. That is exactly what the United Kingdom has been engaged in for well over a year. It has been our view that it would perhaps be empty to call upon the Palestinians over and over again to do better on security, but to deny them the very capacity to deliver that security. That is why we have helped them in putting together a communications room in Ramallah, which is now being replicated in other parts of the West Bank and Gaza, so that there can be proper communications between security officers. That is also why we have gifted them police cars. The noble Lord is right—that practical level of support is vital and will continue.
Lord Phillips of Sudbury: My Lords, in relation to the point make by the noble Lord, Lord Wright, and other noble Lords, about security, is it not a hopeless position for the new premier of Palestine to be in that he must seek to control his own militants when there is continued building of homes for Israelis in the occupied territories? What are we doing about that?
Baroness Symons of Vernham Dean: My Lords, words such as "hopeless" are really not helpful at the moment. This is the most hopeful that any of us who have been dealing with this issue have been for a very long time. So I hope that the noble Lord will reflect on his judgment that the position is hopeless. Of course there are problems. We have just discussed them. I raised the problems, not only of the settlement activity, but of the barrier. These are real concerns and we shall continue to go back to the Israelis over those points. But the situation is not hopeless, because the Palestinians themselves have said that they want to discuss, for example, clearer chains of command on security, the way in which their security services operate and more effective co-ordination between their security services. That is only part of the picture. Other issues, including good governance and economic development, are also vital and they are on the agenda next week.

Food Production: UK Self-sufficiency
2.53 p.m.
Baroness Byfordasked Her Majesty's Government:
What effect the decline in self-sufficiency of United Kingdom food production is having on the long-term sustainability of United Kingdom agriculture.
Lord Whitty: My Lords, there is no direct relationship between self-sufficiency levels and sustainability. The Government's Strategy for Sustainable Farming and Food has been promulgated and one key issue is to bring farmers closer to the market. By removing the link between subsidy and production through the CAP

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reforms, we have made a huge step in that direction. It will enable British farmers to produce what the market wants, rather than what subsidy dictates or what any artificial target for self-sufficiency might dictate.
Baroness Byford: My Lords, the Minister will know that Defra released figures in January, which showed that the UK's self-sufficiency of indigenous food has fallen by 9 per cent since 1997. Given that situation, what assessment have the Government made of the likely further decline of UK food production following the introduction of the single farm payment?
Lord Whitty: My Lords, that depends on how farmers react to the freedom that is given to them by the change in the single fann payment to move away from subsidy-induced patterns of production to those in which they can meet the highest demand and make the highest level of profitability. Although the noble Baroness is correct to say that the self-sufficiency figures have gone down, the volume and the value of production in the UK have gone up—or, rather, down and then up again—in approximately the same period, certainly since 1999. So there is no direct correlation between the two. I would hope that the change in the CAP would allow us to compete in export markets as well as our internal market.
Lord Livsey of Talgarth: My Lords, will the Minister address the fact that the dairy farming industry has been seriously affected, because it cannot, at present, produce milk at a profit? It is not subsidised. Given that self-sufficiency rates have decreased by more than 10 per cent in the past 10 years, what impact has that made on the balance of payments and how many billions of pounds is that worth?
Lord Whitty: My Lords, before I answer the noble Lord, perhaps the House will allow me to apologise to him because, in the reply I gave him on self-sufficiency on 9 February, I said that the figure was 72 per cent for self-sufficiency, when it was actually 74 per cent. That is a level of self-sufficiency of which no other industry could conceive. Therefore, agriculture is still doing pretty well in an increasingly liberalised market. The dairy sector is the wrong example to give in relation to self-sufficiency. While there are other problems there, we are virtually 100 per cent self-sufficient in the liquid milk market.
Lord Peyton of Yeovil: My Lords, is the Minister aware that his original Answer smacked very much of the old days of MAFF, with a detachment and failure to recognise that a healthy agriculture industry in this country is essential in the long term—I repeat, the long term?
Lord Whitty: My Lords, I hesitate to defend my predecessor department, MAFF, because it had a bad reputation in certain respects. However misguided some of the policies that it and the European Union were occasionally engaged in, its concern for agricultural
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production was pretty clear. Yes, we, in this Government, want a healthy, competitive and profitable agriculture sector, which will benefit the whole economy as well as rural areas. Our policies are directed to that end.
Lord Grantchester: My Lords, a large element of demand for UK produce is in the hands of public sector bodies. What measures are being taken to help source local supplies under the Government's public procurement policy?
Lord Whitty: My Lords, my noble friend is correct to say that public procurement is a significant part of the market. One disturbing matter that we discovered in our analysis of the market was that the level of UK procurement in the public sector was lower than that which is obtained in the average supermarket. Therefore, we have taken steps, through the Public Sector Food Procurement Initiative, to ensure that departments ranging from prisons to the education service focus more on local and sustainable food. The effects of that are beginning to be seen through the system.
Baroness Miller of Chilthorne Domer: My Lords, has the Minister seen the Farming Industry Marketing Strategy published by the Tenant Farmers Association and the National Beef Association, which is a clear critique of the fact that far too much purchasing by supermarkets and large retailers takes no account of whether or not the food is produced in Britain? There is space for a marketing organisation that deals with food for Britain and not food from Britain, which is what the Government only seem to be supporting at present.
Lord Whitty: My Lords, the noble Baroness is well aware that there are restrictions on what government can do under the European rules on state aid for promotion of British products within Britain. That constrains our action, although I fundamentally agree with her. There are indirect ways in which the Government and the industry promote British produce. But I would repeat that over 70 per cent of produce in the supermarkets is British—particularly in the areas with which the organisations to which she referred are concerned—and in the fresh meat market we are doing remarkably well. The publication she mentioned is a good analytical document, but I do not necessarily agree with all the conclusions.

ECHR: Law of Libel
3 p.m.
Lord Clinton-Davisasked Her Majesty's Government:
What is their response regarding the law of libel to the decision of the European Court of Human Rights of 15 February in the case brought by Ms Helen Steel and Mr David Morris.
The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): My Lords, this was an exceptional case which did result in unfairness. We need to consider the judgment carefully and, if necessary, to learn lessons. We accept the Court's judgment on legal aid. The law was changed in the Access to Justice Act 1999 and funding can now be made available in defamation cases in exceptional circumstances. The judgment refers also to the need for the defendants' means to be taken into account in assessing damages. Given the usual principles of English law on compensation, which the libel damages in this case were, we are giving further consideration to the implications of this most unusual case.
Lord Goodhart: My Lords
Lord Clinton-Davis: My Lords, I believe that I am entitled to ask a supplementary question.
Although I appreciate that the Government must have time to consider the implications of that important judgment, when can we expect a definitive statement from them on the issue? Secondly, although I appreciate the circumstances to which my noble and learned friend the Lord Chancellor alluded concerning the 1999 Act, will he also ensure that the House will be told if any extension of legal aid to defamation is made? In my view, it is not enough that that should be done only in extraordinary circumstances.
Lord Falconer of Thoroton: My Lords, perhaps I may deal with the second part of the question first. On the basis of the judgment in the case, we do not intend to extend legal aid generally to defamation cases. As my noble friend rightly points out, Section 6(8)(b) of the Access to Justice Act 1999 allows funding in defamation cases in exceptional circumstances. That was introduced only after the McDonald's libel case to which the European Court judgment refers. We think that that deals with the problem identified in the McDonald's case. I pay tribute to my noble friend Lord Clinton-Davis because he was instrumental in including Section 6(8)(b) in the Bill, with the foresight for which he is famous.
As for the first part of the question, I cannot tell when we will complete our consideration of the judgment, but it will be as soon as possible. This litigation has now been going on since 1990—for 15 years. The events in respect of which the litigation relates occurred in the mid-1980s—20 years ago. That makes Jarndyce v Jarndyce look like a fast-track case.
Lord Goodhart: My Lords, will the Government initiate a wider review of the whole question of the libel laws of this country? England has some of the most draconian libel laws in the world, which is why it has become a preferred forum for litigants from all over the world, even though publication may have been very limited in this country. Would it not have been
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better if McDonald's had started from the beginning by realising that its case had very little hope of success?
Lord Falconer of Thoroton: My Lords, in relation to an overall review of the libel laws, our first step is to consider the effect of this judgment. I do not commit myself to an overall review of the libel laws, but I commit myself to a review of the effect of this judgment. In the light of that, we will then consider the overall position of the libel laws. As for who won and who lost in this case, McDonald's won in the English courts and received £40,000 damages. It lost in the European Court of Human Rights. The estimated costs that it spent in winning that £40,000 were £10 million. Draw your own conclusions as to whether it improved or deteriorated its reputation by doing that.
Lord Borrie: My Lords, would my noble and learned friend care to say whether the phrase "exceptional circumstances" may set rather too high a hurdle for obtaining legal aid, because of the need for equality of arms between two sides in the case and for the court to receive adequate advice from both sides to reach the right result? Would he comment?
Lord Falconer of Thoroton: My Lords, the principle on which we operate in relation to legal aid for defamation is that we do not think that in the normal case legal aid should be available, because the legal aid budget is stretched. In the area of civil legal aid, we believe that matters such as social exclusion, housing, debt problems and family problems come before financing defamation actions. I therefore think that the term "exceptional" is right; the barrier should be high before defamation proceedings are given money. I entirely agree with my noble friend: in those exceptional cases, one is seeking to achieve equality of arms between the big battalions and the little person who is trying to fight a libel action.
Lord Thomas of Gresford: My Lords, is it right that years of court time should be wasted by a large corporation with access to millions of pounds for advertising and so on to bring defamation proceedings against individuals without any resources? Cannot the libel laws be reconsidered in that regard?
Lord Falconer of Thoroton: My Lords, the question is put in an impossible way. A company is entitled to have its reputation protected, like anyone else. Plainly, what went wrong is that a case lasting 313 days in court over two and a half years, the whole proceedings lasting for 10 years, could not possibly produce a just result.

Clean Neighbourhoods and Environment Bill
Brought from the Commons; read a first time, and ordered to be printed.

Child Trust Funds (Amendment) Regulations 2005
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)rose to move, That the draft regulations laid before the House on 21 December 2004 be approved [4th Report from the Joint Committee].
The noble Lord said: My Lords, these regulations were considered in Grand Committee yesterday. I beg to move.
Moved, That the draft regulations laid before the House on 21 December 2004 be approved [4th Report from the Joint Committee].—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2005
Lord McIntosh of Haringeyrose to move, That the draft order laid before the House on 31 January be approved [8th Report from the Joint Committee].
The noble Lord said: My Lords, this order was also considered in Grand Committee yesterday. I beg to move.
Moved, That the draft order laid before the House on 31 January be approved [8th Report from the Joint Committee].—(Lord McIntosh of Haringey.)
On Question, Motion agreed to.

Mental Capacity Bill
The Parliamentary Under-Secretary of State, Department for Constitutional Affairs (Baroness Ashton of Upholland): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 9,

Schedule 1,

Clauses 10 to 18,

Schedule 2,

Clauses 19 to 59,

Schedule 3,

Clauses 60 to 62,

Schedules 4 and 5,

Clause 63,

Schedules 6 and 7,

Clauses 64 and 65.—(Baroness Ashton of Upholland.)
On Question, Motion agreed to.

Prevention of Terrorism
3.8 p.m.
The Minister of State, Home Office (Baroness Scotland of Asthal): My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Home Secretary in another place. The Statement is as follows:
"With permission, Mr Speaker, I should like to make a Statement about the Prevention of Terrorism Bill, which is being introduced today.
"On 26 January, I told the House that I intended to bring forward a Bill as quickly as possible to repeal the powers in Part 4 of the Anti-Terrorism, Crime and Security Act 2001—the 2001 Act—and to replace them with a new scheme of control orders applicable to all suspected terrorists, irrespective or whether they are British or foreign nationals or, in relation to most controls, the type of terrorism with which they are involved. This Bill is designed to meet the Law Lords' criticism that the previous legislation was both disproportionate and discriminatory.
"The Bill needs to be seen in the context of the scale of the continuing and serious threat to the security of the United Kingdom from terrorism. I have today published a series of discussion papers that sets out the Government's view of that threat and our strategy for reducing it. And I have laid before the House a copy of the report of the noble Lord, Lord Carlile of Berriew, on the operation of the Part 4 powers in the 2001 Act, in 2004. Let no one be in any doubt that there are terrorists here and abroad who want to attack the United Kingdom and its interests.
"Some believe that the absence in this country of a terrorist outrage like 9/11 or Madrid means that the terrorist threat has somehow passed us by or failed to materialise. That view is short-sighted, complacent, ignorant of the facts and potentially cavalier in its disregard of the safety of this country.
"I pay tribute today to the vigilance and professionalism of our security authorities including the police for all that they have done and are doing to keep this country safe. It is their efforts that have protected us from such an attack and not any reduction in ambition by terrorist organisations.
"My principal responsibility as Home Secretary is to protect this country and everyone in it. I am determined that we will take the steps that are necessary to ensure our safety.
"The Government's preferred approach—our first option—is to prosecute terrorists. We are considering the scope for new offences including that of 'being concerned in the commission, instigation or preparation of terrorist acts' and other measures, with a view to helping the police and the prosecuting authorities bring more cases to court. I intend to bring forward further counter-terrorist legislation on those issues as soon as parliamentary time allows.

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"Some suggest that we could bring more prosecutions if only we would allow intercept to be used in criminal proceedings. I have thought about that very carefully. But for all the reasons that I set out in my Written Statement to the House on 26 January, I do not believe that that is true.
"The reality is that intercept is only a part—often a small part—of the intelligence picture in such cases. Its main value is usually in helping the intelligence and law enforcement agencies to direct their resources, such as surveillance, most effectively to disrupt terrorist activities and gather evidence to support arrests and prosecutions.
"The fact is that there will always be some, including some extremely dangerous people, whom we cannot prosecute either because the material that we have is inadmissible in criminal proceedings or because it cannot be used for fear of revealing, and so endangering, sources and techniques. Some say that we should do nothing about those people or that we should just monitor their activities through surveillance and so forth and hope to deflect them in that way. I do not accept this; the risk is too great. That is the reason for the Bill that I am publishing today.
"The Law Lords' judgment on 16 December found that the Part 4 powers in the 2001 Act were disproportionate and discriminatory in that they applied only to foreign nationals and we had apparently managed to contain the threat from British nationals without detention. As I told the House on 26 January, I accept that judgment and therefore believe that it is important to address those concerns. We should not simply renew the current legislation, which the Law Lords regard as flawed. We should replace it, and with strong measures that are fully compatible with the ECHR and applicable to both British and foreign nationals.
"The Bill that I propose empowers the Secretary of State to make control orders and to impose under them a range of controls on the individuals concerned which will be tailored to meet the threat that each poses. The purpose of the order is to prevent him or her continuing to carry out terrorist-related activities. The orders will be time limited. But they will be capable of being renewed or remade if the threat posed by the individual justifies it.
"The Bill makes provision for a range of controls to be imposed. That list will include prohibitions or restrictions on the possession of specified articles or specified services or facilities; on association and movement; on an individual's place of residence, place of work or occupation; and other restrictions on their ability to travel, including abroad.
"A breach of a control order without prior consent will be a criminal offence, triable in the usual way through the criminal courts and punishable by imprisonment, a fine or both.
"At the top end, the obligations that could be imposed could include a requirement for the individual to remain in a particular place at all times or some similar measure which amounted to a
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deprivation of liberty. The place in question will vary with the threat posed by the individual. It could be the individual's own home, or his or her parents' home. It could even, in certain circumstances, be in accommodation owned and managed by the Government.
"Such severe forms of control orders would, however, require a derogation from Article 5 of the ECHR before they could be implemented. As honourable Members know, Article 15 of the ECHR allows member states to derogate from certain aspects of the convention where there is a,
"state of public emergency threatening the life of the nation",
and the measures proposed are,
"strictly required by the exigencies of the situation".
The basis of any derogation is, therefore, these two conditions: the threat to the life of the nation and the necessity for the measures which would deprive of liberty.
"The Bill therefore provides that I can make orders that require a derogation if, and only if, there is a designated derogation in force from all or part of Article 5 in respect of a public emergency threatening the life of the nation; the obligation imposed is such as has been described in that derogation; and I am satisfied that, on the balance of probabilities, the person is or has been involved in terrorism and the imposition of that obligation on that person is strictly required for the purposes of protecting the public from risks arising out of, or associated with, that public emergency.
"In the event that a derogation is necessary, I should make the designated derogation order. It would come into force immediately. But it would need, under the Human Rights Act 1998, to be confirmed by a vote in each House of Parliament within 40 days of its having been made if it is to continue in force. So the conditions of any derogation—that is, the threat to the life of the nation and the necessity for the measures which would amount to a deprivation of liberty—would be considered, assessed and voted upon by every Member of Parliament if it was to remain in force. I believe that that framework is robust and enables the security of this country to be properly addressed in all foreseeable circumstances.
"These are rightly onerous conditions, which Parliament will have to consider at any time when a derogation is made. I have, of course, carefully considered the current situation and have to tell the House that it is not my intention to seek a derogation at this time.
"I am clear that a derogation is justified on the basis of the threat that we currently face. As I told the House on 26 January, there is a continuing public emergency as a result of the threat from Al'Qaeda, its agenda and its adherents, including the different groups and linkages that make up the Al'Qaeda movement in its broadest sense.
"However, on the second criterion for derogation—the necessity for the measures—I have been advised by the police and security authorities

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that they consider that the control orders that will be established by this legislation are currently sufficient to deal with the individuals concerned and that deprivation of liberty, though valuable, is not 'strictly required' in the language of the convention. They support the measures in the Bill that allow me to impose obligations up to but not including a,
"requirement to remain in a particular place at all times",
and the flexibility that they give me to tailor the obligations imposed under any order to the threat posed by the particular individual. The security authorities tell me that at this stage they do not want to add anything to the range of controls that I am suggesting.
"Of course these circumstances can change in the future, and quickly. Were the current situation to worsen, we could find ourselves in a position where it is imperative that we are able to place a particular individual or individuals under,
"an obligation to remain in his/her home at all times",
or some other measure which amounted in effect to a deprivation of their liberty within the meaning of Article 5 of the ECHR. This Bill would allow me to impose such an obligation on a particular individual, or individuals, as appropriate provided that a designated derogation order setting out such obligations is in force.
"In considering whether to derogate, my starting point will be—as now—the threat we face. I shall look at the security authorities to advise me on that and on the measures they think are strictly required to meet that threat. And I shall take advice on the legal and other issues that arise in relation to any proposal to derogate before making a final decision.
"If my decision is to derogate, I shall make the necessary designated derogation order and lay it before Parliament. As I have said earlier, the order will come into force immediately but it will continue in force only if it is confirmed by a vote in both Houses within 40 days of its being made.
"Any derogation from Article 5 of the ECHR raises very serious issues. Were we to derogate, we would need to keep the need for such a derogation under regular review. The Bill therefore provides for me to lay an order, subject to affirmative resolution procedure, before Parliament each year (after the first) to the effect that it continues to be necessary to have the power to impose derogating "obligations" by reference to the derogation, and that derogating control orders shall have effect (beyond the first year of the derogation) only while such an order is in force. There will therefore be an opportunity annually for Parliament again to have its say on whether the derogation continues to be necessary.
"The Bill gives certain responsibilities to the Secretary of State. I know that some would prefer it if they were allocated entirely to the judiciary. I have listened very carefully to all that has been said on this point both inside and out of this House and I have sought to address the concerns that have been expressed in the Bill. But as I have already indicated,
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it is the Government's, and my, prime responsibility to protect the nation's security. It is in many ways our paramount task. Decisions in this area are properly for the Executive who are fully accountable to this Parliament for their actions. But when an individual is deprived of liberty for any length of time that is of course also a matter for the courts. Everyone must recognise that in the interests of security and speed an order may need to be imposed immediately. But in those exceptional cases where there is a clear requirement to make an order depriving an individual of his liberty the courts must determine as soon as it is practicable whether the order should continue.
"It therefore follows that the judiciary do have a critical role to play in the process. In relation to control orders not requiring derogation, their role is to review and, where appropriate, to confirm decisions made by the Executive. For derogating control orders, their role is to decide on the merits whether to continue the order or to refuse to confirm it. The Bill makes full provision for this.
"The Bill provides for non-derogating control orders to be subject to challenge in the High Court by the person against whom the order has been made, and for the court to apply the principles of judicial review in hearing the case. The court would be able to consider the issues in both open and closed session with a special advocate representing the interests of the subject of the order in closed sessions.
"Derogating control orders will be subject, as befits the seriousness of the issues raised, to a different form of scrutiny by the High Court involving an automatic two-stage process. On being made, the order would have to be referred immediately to the court for consideration within seven days at a preliminary hearing to assess whether the Home Secretary had reasonable grounds prima facie for making the order. Both sides would be represented. There would be open and closed sessions and the interests of the subject of the order would be represented in closed session by a special advocate.
"If the court was so satisfied, the case would be automatically referred to the High Court for a full hearing at which the court would decide for itself, on an assessment of all the material, whether the order should have been made and what conditions should have been applied. Again there would be open and closed sessions and the interests of the subject of the order would be represented in closed session by a special advocate. It would be open to the court at both stages to strike down the Secretary of State's order or give him directions to modify it.
"I have published this Bill today in full confidence that it meets the situation we face in three important respects. First, I believe it meets the judgment of the Law Lords. Secondly, the Bill rightly confirms that the security of this country lies with the Government of the day, fully responsible to Parliament and the country. The Government are fully accountable to Parliament for the way they carry out their responsibilities and under the Bill that accountability

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will be manifest and demonstrable, and timely. At the same time the process of judicial scrutiny which I propose should meet the genuine concerns which have been raised. Thirdly, the Bill will ensure that the measures we put in place fully meet the threat we face from terrorism, both as we see it today and as it might, despite all our best efforts and those of other countries, develop and mutate over time.
"This is an important Bill. It raises serious and difficult issues. But we must have the capacity to protect our people now and to be able to do so in the future. It would be the gravest dereliction of duty to wait until we have suffered a terrorist outrage here and then respond only after the event. I am not prepared to take a risk of that kind and I hope the House will join me on this. On that basis I commend the Bill to the House".
My Lords, that concludes the Statement.
3.27 p.m.
Baroness Anelay of St Johns: My Lords, I thank the Minister for repeating the Statement made by the Home Secretary in another place a short while ago. I also thank the Home Secretary for his courteous offer of briefings to me and my colleagues over the last week.
I join the Minister in paying tribute to the police and intelligence officers who work so hard to try to keep the British public safe. They have an arduous and dangerous task. We do not underestimate the difficulty of the problem facing the Home Secretary. There is no difference between us on the determination to protect the public from terrorism. There are no easy answers.
We believe, however, that the Home Secretary has today settled on the wrong answers—ones that sacrifice essential and longstanding British principles of liberty and justice, in a way that is unlikely materially to enhance the security of our people. For the Home Secretary to say today in another place that any alternative solution to his own is a "do nothing option" is a complete misrepresentation of what he should know to be the case.
Tempting though it is to refute the Home Secretary's allegation now, this is not the time and place—that would lead me into a Second Reading speech which is for another day. Suffice to say that we believe that this House should have proper time to consider extremely carefully all his proposals. But at present the Government seem determined to prevent that happening, despite the fact they say that this is an important Bill that raises serious and difficult issues.
The Government have been forced to this point by the decision of the Appellate Committee of the House of Lords just two months ago. The speech by the noble and learned Lord, Lord Hoffmann, who was a member of the Appellate Committee that gave the judgment in the case, is particularly relevant. He said:
"I said that the power of detention is at present confined to foreigners and I would not like to give the impression that all that was necessary was to extend the power to United Kingdom citizens as well. In my opinion, such a power in any form is not compatible with our constitution".
In effect. that is what the Home Secretary is doing in a major part of this Bill. I accept, of course, that he has applied some limited judicial hack-stop safeguards,
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but under these proposals a politician will be able to make the controlling order to restrain the liberties of a British subject. He will do that on the basis either of a balance of probabilities or even of simple suspicion. He will do it for reasons and on evidence that may not even be known to the British subject who may lose his or her liberty.
Today, we are told that a state of emergency exists. When a Home Secretary tells us that, we must believe that it is true. We are told that that justifies the provisions of the whole Bill. Then we are also told that the Home Secretary has been advised by the security services that they do not need to use the full extent of the powers in the Bill at this point in time. So, the Home Secretary, we are told, will not yet seek to apply the powers that require derogation. He is leaving them to some later, unspecified date when he will, if still in government, introduce them by order.
There are a thousand questions that could be asked, but I will restrict myself to a meagre two. The rest will wait until Committee. First, do the Government believe that the only control orders listed in the Bill that require derogation are those that restrict residents to a specified location? Secondly, the Minister referred to the fact that the restriction on residence could specify living in special accommodation owned and managed by the Government: what is that intended to be? Will it be Army barracks or police cells? Will it be newly built? What is the plan?
The Home Secretary has said that he wants to achieve agreement, and I, for one, believe him. However, the reality is that he has chosen to put himself at the moment in a position in which it is not possible to secure agreement on all aspects of his proposals. He is right to say that we should not wait for a terrorist outrage before we take action. I venture to suggest that nobody in the House would advocate any such course. I fervently hope that we will all use our best energies in the forthcoming days—I suspect that it will be no more than days—to work constructively towards agreement. I give my full commitment that we on these Benches will do just that.
3.31 p.m.
Lord Dholakia: My Lords, I add my thanks to the Minister for repeating the Statement in your Lordships' House. I also ask the Minister to convey our thanks to the Secretary of State for the discussion that he has conducted with my party and the trouble that he has taken to explain the Government's position on the Part 4 powers, following the Law Lords' judgment. I also add my thanks to the police and the security services for the way in which they help us in protecting our citizens.
I have no doubt that the Home Secretary is genuine about finding a way forward. That is reflected in the Prevention of Terrorism Bill that is being published today. However, I also want him to know that the Liberal Democrats have been genuine in trying hard to find a solution. Following the meeting at 10 Downing Street, my right honourable friend Charles Kennedy said

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that we would not walk away but would give serious consideration to the control orders and to the process that the Minister was outlining.
Our position remains no different from the arguments that we advanced during the passage of Part 4 of the Anti-terrorism, Crime and Security Act 2001. We have a fundamental disagreement with the Government about the proposals in the present Bill. Put simply, we believe that the deprivation of liberty, in whichever form, must be done through a judicial process. The Home Secretary has moved, in strengthening judicial review, but the difference remains. He still sees the role of the judges as one of reviewing his decision. We believe that they should take the decision. I do not understand why, if the Home Secretary is prepared to let judges overrule his decision, he is not prepared to let them take the decision in the first place. Does he not recognise that, by applying to judges for control orders, he will still meet his responsibilities for national security as Home Secretary?
Will the Secretary of State think again about establishing a process that allows him to apply to a judge for a control order, rather than simply setting it himself? Will he also acknowledge that his current proposals are still based on reasonable proof? Should we not move towards a burden of proof beyond reasonable doubt, when it comes to removing someone's liberty?
I acknowledge that communications interception will not bring the current detainees to trial but could help in future cases. Previously, the Secretary of State said that he would leave the door open on that. I ask the Minister to go a stage further and ask the Newton committee to make specific proposals on how it could be done by the end of the year. That is a perfectly reasonable request.
The Secretary of State suggests that derogation is not needed for control orders that do not allow house arrest to be made. Is the Minister aware that the legal advice provided by Liberty indicates that derogation would be needed for any form of control order, including lesser restrictions, such as banning access to the Internet? What legal advice have the Government received?
Finally, I ask the Minister to outline the Government's plans if today's proposals fail to be approved by both Houses. Will the Minister seek a renewal of the Part 4 powers? If so, how long will it be for?
In essence, the judgments are all about the balance between the principles of justice and the maintenance of security. The proposals that the Secretary of State has outlined today get the balance wrong. That is why we shall work actively to amend the legislation.
3.36 p.m.
Baroness Scotland of Asthal: My Lords, I thank the noble Baroness, Lady Anelay of St Johns, and the noble Lord, Lord Dholakia, for their thanks for the efforts that we have made. I also thank them in particular for their tone. All of us recognise how difficult the situation is and that we need to strive energetically to find a solution that best meets the extreme nature of the circumstances in which we find ourselves. The Home Secretary has considered the
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matters carefully, as have all colleagues in government who are seized of the matter. I assure noble Lords that that seriousness of approach will continue.
The noble Baroness, Lady Anelay of St Johns, asked in particular about the sort of accommodation that might be provided by the Government. The noble Baroness will know that there are bail hostels and other accommodation provided by the probation service, particularly for those who have no fixed abode. That is, of course, government accommodation, and it is those sorts of accommodation that we are thinking about in principle, so that those matters may be dealt with.
The issue of intercept information was raised. I thank the noble Lord for his acknowledgement that, with regard to the current cases, intercept evidence would not assist us. I say with the utmost humility that, in cases that are likely to be similar to the current cases, it is likely that, in the same way, intercepts would not help us. Therefore I repeat that our preference in all circumstances is to prosecute wherever possible. The legislation that we hope to introduce as quickly as we can, when parliamentary time allows, may enable us to address some of the issues, but they do not relate to those very precise issues.
Why not review the Part 4 powers? We find ourselves in a somewhat uncomfortable position. Your Lordships will know that the House of Lords has, in effect, declared that the Part 4 powers were discriminatory and were not therefore capable of being pursued. There is an argument—I put it no more strongly—that any secondary legislation that came from that source could be fundamentally flawed. Therefore, we cannot rely on that situation.
The difficulty with the particular individuals is that we cannot prosecute them. In the ordinary way, one would not be able to take advantage, for example, of the anti-terrorism legislation that would allow you to arrest those whom you reasonably anticipate that you can prosecute. So we find ourselves in a very difficult situation. It is for that reason that we have come to the conclusion that the control order is the best way forward.
We have taken legal advice. Your Lordships will know that we have consulted both within and without government on the course on which we are now set. I can assure your Lordships that we are as confident as we can be that the powers that we seek to take on the non-derogating control orders would be consistent with the ECHR. I hope we made clear in the Statement the basis on which the derogating control orders would he contemplated.
3.40 p.m.
Lord Hooson: My Lords, does the Minister agree that the provision of safeguards against terrorism have a parallel in the past in the provision of safeguards against espionage? The threat is the same. Surely, there are precedents, for example, in espionage cases at all levels which were heard in camera. In the Cyprus spy trial, for example, the jury was positively vetted, and it was an impeccable jury. Would it not be possible to introduce a judicial element into the process at a much

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earlier stage? The public are really puzzled about that point. At the moment, I do not see why it is not possible for the Government to ensure that a judge and, if necessary, a positively vetted jury consider the evidence.
Baroness Scotland of Asthal: My Lords, of course in the past there have been cases on very difficult issues, such as espionage, and they have been dealt with. That is why I reiterated that, where possible, the Government's preferred course is to prosecute. The situation in which we find ourselves in relation to the small number of individuals who have been subject to Part 4 powers is simply that it has not been possible to prosecute them using any of the usual strategies that we have available to us. That is why we seek a separate and different situation.
On judicial scrutiny, I hope I made it plain that there will be a high degree of judicial scrutiny both for non-derogating orders and for derogating orders. Of course, non-derogating orders will be reviewed in accordance with the usual principles of judicial review. If we ever have a situation in which such powers need to be taken and an order needs to be made, there will be judicial scrutiny because, although the Home Secretary will make the decision, within seven days the matter will go before a judge for him or her to determine, on a prima facie basis, whether the order is sound. If a judge finds that the order is not sound on a prima facie basis, he or she can discharge it and if he or she thinks there is a prima facie case, it can then be given a full substantive hearing.
Some practical points have to be considered on the steps that one needs to take. The Home Secretary may receive information that will require very speedy action to secure the safety of this nation. I emphasise that the period before such a matter will automatically go before a court will be a mere seven days. We believe that that is the better course.
Baroness Hayman: My Lords, I should like to add my thanks to those already given to my noble friend for her normal extraordinary courtesy in consulting those of us with a longstanding interest in the matter. I fear it means that she had to endure my Second Reading speech a little while ago, so I shall not inflict it on her again.
I should like to raise two issues with her—one of principle and one of process. The issue of principle returns to the issue of judicial scrutiny or judicial involvement in the original decision making. I do not believe that what has been outlined in the Bill is so far away from allowing judicial involvement in the original decision that it would not be possible to change from an executive decision, which is then scrutinised on its rationality and reasonableness, to a judicial imprimatur, which is nearer to a prosecution and we would all wish to see.
I welcome the fact that the Government have said that they will bring forward legislation to allow prosecutions in more cases. I suggest to the Minister that that would involve different forms of prosecutions. Does she accept that one would be more
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comfortable if one could deal with these provisions in the context of provisions that also made available more opportunities for prosecution?
That leads me to the issue of process. After 11 September, we legislated in haste, which was understandable. To legislate in haste on issues that are this delicate and difficult in 2005 is less easy to justify. I understand what my noble friend says about the difficulty of the renewal of Part 4 and the preference for what has been outlined here compared with what exists at the moment in Part 4, but I have the gravest reservations about the timeframe that is being allowed. If this is the least worst option, will my noble friend look very carefully at making it a least worst option that has the shortest possible parliamentary life?
Baroness Scotland of Asthal: My Lords, 1 thank my noble friend Lady Hayman for those comments. I understand the anxiety that she has expressed. I can see why she should suggest that it would be more comfortable if we could undertake the two parts together; namely, the legislation on changing the ability to prosecute that we hope to be able to bring forward when parliamentary time permits. and this matter. We are faced with a situation in which that simply is not possible. As the Part 4 powers need to be renewed by the 14th of next month and we are not in a position to introduce other legislation before then, we find ourselves in the unenviable and uncomfortable position of not being sure whether it would be lawful and proper for us, as has been suggested, to extend the Part 4 powers.
Noble Lords should know that the Joint Committee on Statutory Instruments has raised that issue with the Government and we have given a reply. We do not know the final view of the committee, but it would be right for us to be appropriately cautious that it may not be minded to agree with our view.
Lord Thomas of Gresford: My Lords, the noble Baroness has pointed to the flaw that cracks open this Bill. On the one hand, derogating orders are to be put before a High Court judge who will decide on the merits and may, if necessary, vary the conditions of the control order. Non-derogating orders, which are all that are proposed at the moment according to the Statement, are simply subject to judicial review and to all the limitations of judicial review, such as whether the Home Secretary has taken his decision properly or whether he has acted in a way that is so unreasonable that no sane Home Secretary could come to that decision. That is a very weak safeguard in relation to the liberty of the subject. Would it not be easy to relate the procedures for derogating orders that are proposed in the Bill to non-derogating orders, in which case many of the concerns expressed will be resolved?
Baroness Scotland of Asthal: My Lords, of course I hear what the noble Lord says. Perhaps I can help him and the House about why we disagree. All steps that we take have to be proportionate in relation to restrictions on liberty. The restriction on liberty in the non-derogating orders falls short of a denial of liberty in terms of free movement. Therefore, it is proportionate to say

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that judicial review—which has many teeth that this Government and previous governments have felt quite keenly—is an appropriate way of ensuring that such decisions are reviewed and kept within proper order. We therefore believe that the non-derogating orders are properly reviewed by judicial review.
In the case of derogating orders, the nature is changed. It is likely that we are talking about a denial of liberty. Where there is such a denial of liberty, one demands a higher degree of judicial scrutiny and intervention. In that case, instead of simply saying—as with the non-derogating orders—that the court is limited to asking whether a Home Secretary reasonably directing himself or herself to the circumstances of the case could properly have come to that decision, in the derogating control orders the court has the opportunity to substitute its own decision for that of the Home Secretary. The justification for the judicial substitution of the judge's decision for the Home Secretary's decision is the quality and extent of the deprivation of liberty which is contemplated. The proportionality issue is dealt with on that basis.
The Lord Bishop of Worcester: My Lords, I too express thanks not just for the repetition of the Statement but for the coolness with which it was delivered and with which the Minister responded. That quality is extremely important if we are to discuss this situation carefully. It is clear from the tone of the Statement and the Minister's replies that the profound nature of the decisions that face us is in the Government's mind. I appreciate that.
However, I am puzzled. As well as the practical considerations which are adduced in favour of decisions being made by the Home Secretary and only afterwards scrutinised by a judge, there seems to be a theoretical view with which I am not familiar and which I am puzzled by. That view is that responsibility for the safety of the realm rests on the executive. My understanding of my position as a citizen—let alone my position as a Member of this House—and of the position of the judiciary is that we all share the responsibility. It is not the case that one branch—namely, the Executive—exists to protect the public.
While other people prevent those decisions being too draconian, surely all of us are charged in our different roles with that responsibility. Would it not therefore be much better if we adhered to our constitutional principle that decisions in the case of derogated orders to deprive a person of liberty should be taken by—and only by—by a judge and that those decisions and judicial procedures should be able to be accommodated with all possible speed? I remain puzzled why the Government have felt it necessary therefore to go down the road of executive decision in a matter that constitutionally belongs to the judiciary.
Baroness Scotland of Asthal: My Lords, of course the right reverend Prelate is right. At one level, we all share responsibility for the safety of the nation, both as individual citizens and as parliamentarians either in this House or another place.
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However, a special responsibility is vested in the elected Members and the government of this country who are charged with exercising certain responsibilities on behalf of the citizens who have elected them to form that government and therefore to govern. The primary responsibility of the Home Secretary and the Prime Minister is to do that which keeps this nation safe. That is part of the responsibility of the government and the executive.
In a democracy such as ours, it is right that there is a separate, heavy responsibility placed on the judiciary who are upholders of the rule of law and who are there as a check and balance to make sure that the exercise of the executive's discretion is proper, balanced and in accordance with the rule of law. That is their function. That does not mean that the Home Secretary, the Prime Minister or the government can abrogate their responsibility for keeping this nation safe.
Lord Mayhew of Twysden: My Lords, is there not a great danger here to the constitutional standing of judges? As the Minister said, their role is to uphold our liberties. The Government propose to wheel in the judiciary again to draw the constitutional sting that is inherent in these proposals.
As the Minister said, in the case of derogated orders it will be their jurisdiction to substitute their own decision for that of the Minster if they wish. Surely that is deeply dangerous. It is not judicial review. It will be taking—or will be perceived as taking—a quasi-executive action and, worse than that, one that deprives somebody of his liberty. Does the Minister recognise the real danger to the constitutional standing and the perceived role of judges that is inherent in that?
Baroness Scotland of Asthal: My Lords, we do. The noble and learned Lord, Lord Mayhew, puts his finger on one of the issues in terms of balance. That is why we say that it is important for the Home Secretary who is charged with that responsibility to make a decision. It is a decision that is then scrutinised by the judiciary exercising its proper judicial function about whether that decision was a right and proper one. When the House looks at the stumbling blocks that have been put in the way of the exercise of that decision, it will see the equivalent of four locks. That is why it is correct that the executive—in the form of the Home Secretary—should make the original decision, accept that responsibility that is the government's and his and then and only then should the court exercise its judicial function in checking whether the Home Secretary is right. That is the best way to do that, both constitutionally and practically.
We have listened to the two arguments pulling the other way. In this short debate it has already been strongly said that we should expunge the responsibility on the executive. I hear clearly what the noble and learned Lord says. There will be governments who would be content to hide behind the skirts of the judiciary and say, "It is not our fault. It is the members of the judicial committee of the House of Lords who have so determined that your security should be infringed upon in the way complained of. It is not our fault".

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This Government do not shirk our responsibility. We accept that responsibility is ours and we say that the judiciary should have their proper role for scrutinising that which we have done and that which we have decided.
Lord Morris of Aberavon: My Lords—
Lord Ackner: My Lords—
Lord Davies of Oldham: My Lords, it is the turn of the government Benches. The noble and learned Lord, Lord Ackner, will follow.
Lord Morris of Aberavon: My Lords, having regard to the recent views of the appellate committee, are the Government satisfied that the powers sought are proportionate and fall within the tenor of their judgments?
Baroness Scotland of Asthal: My Lords, my noble and learned friend rightly asks that question; we are so satisfied. One of the most taxing and difficult tasks that we have undertaken in the past two months is to come to a resolution that does two things: first, it takes the necessary steps, which we have to take, to keep our country safe—that is our overriding criterion; and, secondly, it does that in a way that would enable us to comply with the judgment of the Judicial Committee of the House of Lords, which we accept, as is proper.
Lord Ackner: My Lords, the Minister has very fairly accepted that judicial review is not a process of appeal. It is a procedure to ensure that the Government have not exceeded their jurisdiction. It is a jurisdictional matter and a procedural matter.
When it comes to the derogation orders, the Minister says that the merits of the decision, which cannot be considered on judicial review—or very rarely—then can be scrutinised. If the merits of the decision can be scrutinised after the Minister has made his decision, why cannot they be considered before the Minister makes his decision? Why cannot the Minister go to the judge and say, "I propose to do this. Is this, on the merits, a right and valid decision"?
Baroness Scotland of Asthal: My Lords, first, for the reasons that I just gave in answer to the noble and learned Lord, Lord Mayhew, and, secondly, because of practicality. It may be that information comes before my right honourable friend the Home Secretary or his counterpart in any future government that clearly demands immediate action. In those circumstances, it would be simply practical and easier for that decision to be made and for it to be very quickly reviewed.
I cannot over-emphasise that we are talking about seven days. As the noble and learned Lord, Lord Ackner, will know, in the administrative court it can be possible for these matters to be brought before the court very quickly, in a period of fewer than seven days, which is the outer limit when the court will be
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obliged to deal with the matter. It involves automatic reference, not an application having to be made by any one party.

Northern Ireland
4.2 p.m.
The Lord President of the Council (Baroness Amos): My Lords, I would like to repeat a Statement made in another place by my right honourable friend the Secretary of State for Northern Ireland. The Statement is as follows:
"With permission, I should like to make a Statement on Northern Ireland.
"I came to the House on 11 January to make a Statement relating to the Northern Bank robbery on 20 December. To recall the background: a highly organised and brutal gang kidnapped the families of two staff from the bank's headquarters in Belfast, threatening them with death unless the individuals co-operated in the execution of the largest robbery ever seen in these islands.
"Since then a major police investigation has been under way. As the House is aware the Chief Constable of Northern Ireland made his conclusion clear that the Provisional IRA was responsible for the robbery. The Prime Minister and I have indicated that we accept the Chief Constable's judgment, which is also shared by the Irish Government and their security advisers. The Chief Constable's statement, seen in the context of other subsequent events, serves to reinforce the extent of the challenge that we all face in working towards peace and stability in Northern Ireland.
"Earlier this month, on 10 February, I laid before the House a copy of a report presented to the British and Irish Governments by the Independent Monitoring Commission. That report, which the commission had elected to produce in addition to its normal twice-yearly reports to the two Governments, concluded that the Northern Bank robbery was planned and undertaken by the Provisional IRA and that this organisation was also responsible for three other major robberies during the course of 2004.
"I am very grateful to the members of the commission for their quick response to the very grave situation created by the robbery and its attribution.
"The IMC concluded, on the basis of its own careful scrutiny, that Sinn Fein must bear its share of the responsibility for these incidents. It indicated that, had the Northern Ireland Assembly been sitting, it would have recommended that the full range of measures referred to in the relevant legislation be applied to Sinn Fein, including the exclusion of its Members from holding ministerial office. In the context of suspension, it recommended that I should consider exercising the powers I have to apply financial penalties to Sinn Fein.
"The House will recall that following the 1MC's first report in April last year, I issued a direction removing, for a period of 12 months, the block

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financial assistance paid to Assembly parties in respect of both Sinn Fein and the Progressive Unionist Party.
"Having reflected on the IMC's latest report, I have concluded that it would be appropriate for me to issue a further direction removing Sinn Fein's entitlement to this block financial assistance for a further 12-month period, the maximum period permitted under the legislation.
"I am, therefore, minded to make a further direction to come into effect on 29 April—the day after the existing direction expires. Before reaching a final decision, however, I will take into account any representations made to me by Sinn Fein by next Tuesday.
"I will make a decision on whether to extend the financial penalties imposed on the PUP last April when I receive the next IMC report covering all paramilitary groups, which is expected in April.
"The commission's report also refers to other public money which Sinn Fein receives, although recommendations on this are outside its remit. In this context, I am conscious that honourable Members on both sides of the House have raised concerns in the past about the payment of financial allowances to the four Sinn Fein Members who decline to take up their seats here.
"I hope that the House will welcome the opportunity to debate, in the near future, a government Motion proposing that these allowances be suspended on a timescale in parallel with the arrangements at Stormont, in recognition of recent events. The debate on that Motion is for another day, but I should emphasise to the House, lest anyone accuse us of denying the extent of Sinn Fein's electoral support, that the measures we are proposing are designed to express the disapproval of all those who are committed to purely democratic politics at the actions of the Provisional IRA. All in this House recognise the degree of support for Sinn Fein, but we also believe that the actions of the republican movement are letting down everyone in Northern Ireland, including Sinn Fein voters.
"There are those who will argue that these financial sanctions are insufficient as a signal of the Government's and Parliament's condemnation of recent events. They may well argue that I should take steps to exclude Sinn Fein from the political process, or from the Assembly, now. I want to deal with those arguments directly, because they are sincerely made and with a strength of feeling that I well understand.
"The Government's ultimate goal remains the achievement of an inclusive power-sharing executive in Northern Ireland. I need not remind the House that the robbery has set back the timescale for achieving
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that. But the reality remains that long-term stability in Northern Ireland will not come about if we focus on exclusion. That objective requires inclusion: dialogue with Sinn Fein must continue in order to see how that long-term goal can be achieved. But I am clear that this must be inclusion on the basis of a complete and demonstrable commitment to non-violence and exclusively peaceful and democratic means, that fundamental principle of the Good Friday agreement, enshrined in the pledge of office.
"Had the robbery occurred while the Assembly was in operation, however, the decision about exclusion would have been very different. It is inconceivable, in my view, that members of Sinn Fein could again hold ministerial office while the issue of paramilitary activity and criminality on the part of the Provisional IRA remained unresolved.
"The suggestion is made in some quarters that I should restore the Assembly and then, if the Assembly failed to take action to exclude Sinn Fein, that I should take action myself using the powers available to me to exclude it. That would be very difficult in the absence of a clear plan which would see the parties in the Assembly come together on a cross-community basis to form a government for Northern Ireland. However, as I said to the House on 11 January, I have not ruled anything in or out, as we continue to assess possible ways forward for achieving greater local political accountability.
"As my right honourable friend the Prime Minister has said, if we cannot achieve a comprehensive settlement in the short term, we will need to consider other ways forward.
"In the mean time, our focus will remain strongly on dealing with the underlying issue of ongoing criminal activity in all its forms. The police investigation into the Northern Bank robbery is the largest undertaken by the PSNI, who are continuing to follow up every lead. This is inevitably an intense and time-consuming process. In parallel with this, I am taking the opportunity to ensure that our arrangements for tackling organised crime remain fit for purpose, and have asked my honourable friend the Member for Dudley South to review the Organised Crime Task Force to see whether, and how, it might be strengthened.
"We continue to have excellent co-operation at both a political and operational level with colleagues from the Republic of Ireland. I met yesterday with Michael McDowell for a regular bilateral, along with the police chiefs from both jurisdictions. At that meeting, I was pleased to see this co-operation further strengthened by the signing, by the Chief Constable and Garda Commissioner, of protocols that facilitate the movement of officers between both forces in terms of personnel exchanges and secondments with policing powers. This development can only serve to strengthen the existing co-operation between the two police services in tackling terrorism and other crime.

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"Whatever our success in tackling criminality and paramilitary activity, however, the fact of the matter is that the commitment to peaceful and democratic means is not one the Government need to make. As we said in the joint declaration of April 2003,
'ongoing paramilitary activity, sectarian violence and criminality masquerading as a political cause are all corrosive of the trust and confidence that are necessary to sustain a durable political process'.
In the present context, as the Prime Minister and the Taoiseach have both indicated, it is for Sinn Fein and the Provisional IRA to do that. They need to step forward and tell us how they will demonstrate their full commitment to the all the principles of the Good Friday agreement, and how they intend to demonstrate to all the parties in the political process, as well as to the people of Northern Ireland, that the kind of behaviour identified in the IMC report is in the past. Financial penalties of the kind I have described today may signify our strong disapproval of what has happened, but they do not of themselves rebuild the trust that is necessary if confidence is to be restored. That is a matter for the republican movement in general, and for Sinn Fein in particular".
My Lords, that concludes the Statement.
4.13 p.m.
Lord Glentoran: My Lords, I thank the Lord President of the Council for repeating the Statement made by the Secretary of State in the other place. I begin by recognising the tremendously good work that both the PSNI and the Garda Siochana have done in recent days in getting so quickly on to the trail of the Northern Bank robbery and other heists.
Does the noble Baroness agree that the recent acts of murder and bank robbery blamed on Sinn Fein/IRA by the IMC and the British and Irish Governments have significantly changed the ball park for what has euphemistically become known as the Northern Ireland peace process? Furthermore, do Her Majesty's Government share the Irish Government's assessment of Sinn Fein/IRA? Does her right honourable friend the Secretary of State endorse the IMC's judgment that leaders of Sinn Fein were personally responsible for these crimes? Does he agree with the defence Minister of the Irish Republic, who said at the weekend:
"We are no longer prepared to accept the farce that Sinn Fein and the IRA are separate. They are indivisible"?
Does the noble Baroness agree that Messrs Adams and McGuinness will never be trusted again by anyone involved in the democratic processes of government, and that a different method of achieving inclusivity within the devolved process must be found to allow progress without these untrustworthy individuals? If so, what now? The Government have had plenty of time to think about this. I have asked that question on a number of occasions, and even made tentative suggestions from this Dispatch Box. It is time a plan B was unveiled.
I congratulate Her Majesty's Government, albeit on a "better late than never" basis, on the removal of Sinn Fein's block financial assistance from Stormont.
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Many of us felt they should have had it removed long ago. We will also welcome the Government's proposal to suspend all Westminster allowances, which means some £500,000 from Sinn Fein's coffers. Again, many of us felt that awarding them was wrong in the first place, and we said so.
Does the government proposal mean, however, that Sinn Fein Members of Parliament will still get offices at Westminster and be able to give House of Commons passes to their staff, even if staff salaries have to be met from Sinn Fein's other sources of funding?
Regarding the question of the expulsion of Sinn Fein from the political process, we on this side also want to see the achievement of an inclusive power-sharing devolved government in Northern Ireland, but we will not tolerate it being hijacked by one party, especially one that is transparently linked to criminal activities of the worst type.
We welcome the closer co-operation and excellent co-ordination between the two national police forces, and the signing of the protocols allowing freedom of movement of those forces across national borders.
Can the noble Baroness give us an absolute guarantee that the police and all other agencies will have the Government's unreserved support in their efforts to root out paramilitary crime, and that there will be no holding back, wherever or to whomever those investigations might lead? "Whomever" is perhaps the most important category.
Today's Statement is another sad one. I am delighted that the Government are taking serious and positive action in the light of the situation. I am afraid we cannot expect to see much progress until after the general election, but we on this side expect to see new thinking, fresh planning and some progress.
4.18 p.m.
Lord Smith of Clifton: My Lords, I too thank the noble Baroness for repeating the Statement. I also thank the Secretary of State for making the Statement available to us earlier in the day and for meeting us to explain his reasons.
We on these Benches agree with the measures outlined in the Statement, but of course regret the circumstances that have made them necessary. As the Statement says, Sinn Fein, by its contamination with illegal and violent activity, is putting itself beyond the pale of democratic participation. The party cannot pick and mix. Sinn Fein must decide once and for all whether it will fully sign up to pursuing its aims solely by democratic methods. If it does not do so, it is denying its constituents their rightful voice in the democratic process, as the Statement makes clear.
Sinn Fein has a legitimate mandate, but that is confined to lawful political participation. It is most definitely not a mandate to participate in crime and violence as it wishes. The party is wholly responsible for creating the present "High Noon" situation, and the crisis it has engendered.
For some time now, the political situation in Northern Ireland has been akin to a children's boating pool with the parties circling endlessly around in their

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pedal boats. That rather pointless activity may possibly be coming to an end by the import of this Statement, which is saying, "Come in, number two, your time is up". That is also the message coming very clearly from the Irish Government.
I have to say further that, more recently than the bank heist, the murder of Robert McCartney and the subsequent allegations that Republicans have been intimidating witnesses and protecting those who carried out this heinous crime have also caused a great deal of concern in Northern Ireland. We must hope that Sinn Fein will genuinely reform itself and totally eschew violence and criminality so that the devolutionary process can be resumed.
I conclude by asking the Minister: where do we go from here? How will momentum be resumed in Northern Ireland and, in the mean time, what firm proposals will be made to enable the Westminster Parliament to scrutinise adequately Northern Ireland legislation? While it obtains, direct rule must be better scrutinised than it has been since the suspension of the devolved institutions.
4.21 p.m.
Baroness Amos: My Lords, some general themes have threaded through the comments of the noble Lords, Lord Glentoran and Lord Smith of Clifton. I agree with the noble Lord, Lord Smith of Clifton, in regretting the circumstances that have made today's Statement necessary.
Turning to the specific questions raised, the noble Lord, Lord Glentoran, referred to the comments made in the IMC report regarding Sinn Fein and the Provisional IRA. As my right honourable friend the Secretary of State for Northern Ireland said in another place, there is no reason to deny the IMC report. We have been consistent in saying that Sinn Fein and the IRA are inextricably linked.
I agree with the noble Lord, Lord Glentoran, that trust has broken down, but I should also say in response to his question "What next?"—a question also put to me by the noble Lord, Lord Smith of Clifton—that our goal remains the same. We seek an inclusive, power-sharing executive in Northern Ireland. Clearly there are huge challenges and difficulties associated with how to get there, but because it is our strong view that the process has to remain inclusive, we are sure that at this point we must continue to talk to Sinn Fein—although we have made it clear that inclusion in the Northern Ireland political process must be on the basis of a complete and demonstrable commitment to non violence.
The noble Lord, Lord Glentoran, asked whether the police and the agencies have our unreserved support. I can assure him that that is the case. They have our total support. Indeed, the noble Lord will know that the agencies have been reconfigured to give them greater strength, and the Secretary of State for Northern Ireland has asked Ian Pearson to look again at one of the agencies.
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The noble Lord, Lord Smith of Clifton, is right to point out that there is no mandate in Northern Ireland politics for parties to participate in crime and criminality. We are absolutely clear about that. He also asked about the scrutiny of Northern Ireland business, in particular Northern Ireland legislation. A number of suggestions and proposals have been made and my right honourable friend the Secretary of State is looking at them. We are well aware that issues of accountability, transparency and consultation become even more important in the context of direct rule and we will do all we can to try to ensure that scrutiny takes place in a way that parliamentarians would wish to see.
4.24 p.m.
Viscount Brookeborough: My Lords, I wish to put a few questions to the Minister. First, accepting that the Government of this country have access to exactly the same information and evidence as that of the Republic, can the Minister confirm that our Government agree with the public statement of the Irish Minister of Justice that Gerry Adams and Martin McGuinness were members of the Provisional IRA ruling army council? I have often heard the noble Baroness accept that the IRA and Sinn Fein are two sides of one coin, inextricably linked, and the same business. However, I should like to know whether she agrees with the statement of the Irish Minister. Secondly, is she comfortable with the fact that such people—we know how the Irish Government view them—may wander around this Palace, free to enter and leave it as they wish—confirmed terrorists?
Thirdly, can the Minister tell me whether any members of Sinn Fein in Northern Ireland—that is, what we accept as the Sinn Fein Members of Parliament for Northern Ireland, and members of councils—might have been arrested if in this country we had admissibility of evidence gained by intercept?
Baroness Amos: My Lords, the noble Viscount's second question about access to Parliament gives me an opportunity to answer a question which was raised earlier. With respect to what form any further sanctions against Sinn Fein might take, that is a matter to be debated in another place in the coming weeks. The decision is for the other place.
The noble Viscount asked a specific question about individuals. I hope that he will forgive me if I say that, in accordance with longstanding government practice, I do not want to comment on individual cases. However, I will repeat what I said before: we have no reason to deny the IMC report and we have been consistent in saying that the IRA and Sinn Fein are inextricably linked.
I hope that the noble Viscount will also forgive me when I say to him that he really cannot expect me to answer his third question.
Baroness Boothroyd: My Lords, is the noble Baroness aware that, as Speaker in 1999, I refused Sinn Fein admission to the House of Commons? The decision I took at the time was not based on the politics of Northern Ireland or Sinn Fein, rather it was based

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on the rule of law. Sinn Fein Members refused to take the Oath of Allegiance to the Crown. That oath is underpinned by the Parliamentary Oaths Act 1866 and I would neither bend nor break it for anyone.
Failing admission to the Commons, Sinn Fein took my ruling to court in Northern Ireland, which upheld it. Sinn Fein then took my ruling to the European Court of Human Rights, where all seven judges upheld the decision I had taken, stating that the Parliamentary Oaths Act was the only written constitution that this country has.
Is the noble Baroness further aware that in December 2001, if my memory serves me, after I left the Speakership, a Motion was placed on the Order Paper to grant all the facilities, pay, salaries and demands which had been made of me by Sinn Fein? I do not think that the noble Baroness has yet responded to the following question and I shall understand if she is not able to do so. What will be the position regarding offices in this place for Sinn Fein Members, along with salaries for their staff? Lastly, will the Motion that is now being considered by the Government and which is to be placed on the Order Paper be amendable?
Baroness Amos: My Lords. I am well aware of the history that the noble Baroness, Lady Boothroyd, has just outlined. On the question of possible sanctions, that is a matter for the other place. It will be debated in the coming weeks and the nature of the Motion to be tabled by the Government is currently being determined. Once it is agreed it will be printed on the Order Paper, but I shall be happy to draw it to the attention of the noble Baroness when it is ready.
Lord King of Bridgwater: My Lords, the Minister said that she regretted the events she had described. Is there not one sense in which. to those who believed that Sinn Fein/IRA were not yet totally committed to non-violence and exclusively peaceful and democratic means, what happened as a result of this robbery is quite valuable? The facts are as they have been reported, and the guilt is as attributed by the British and Irish Governments, revealing that Sinn Fein/IRA have not moved as the Government had hoped they had moved.
The interesting reference in the Minister's Statement, repeating the IMC report, is that this is the fourth bank robbery to be attributed to the IRA, but this one was so big that nobody could ignore it. It does give the impression that people were prepared to ignore the previous ones because it would be inappropriate or inconvenient for the process of achieving the comprehensive settlement. Is it not also clear that this has been a serious wake-up call in Dublin, as well as London, where, in the determination to achieve this settlement, there had previously seemed to be a certain tolerance of some of the activities of Sinn Fein/IRA?
The Minister has referred to the need to consider other ways forward, and her right honourable friend the Prime Minister has made that clear. Is it not clear, given the gravity of the situation, the allegations that have now been made and the serious bad faith, that we
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had better move forward pretty quickly with that consideration, or other people will fill the vacuum in what may be very unattractive ways?
Baroness Amos: My Lords, we all recognise that we are at a crucial stage. Action taken now will determine what happens in the future. But the Government's commitments remain absolutely clear: first, to work towards an inclusive, power sharing agreement for Northern Ireland; secondly, absolute clarity that crime and criminality cannot he a part of that process.
If the noble Lord, Lord King of Bridgwater, looks carefully at the previous IMC report, with respect to the other incidents that the noble Lord has referred to, he will find that it made reference to those incidents, but made it clear that it did not have sufficient information at that time. But in paragraph 9 of this report the IMC states:
"Since completing work on that report we have been able to consider in depth the significant further material which has become available about some of these incidents."
It goes on to set out the incidents where it thinks there has been paramilitary involvement, particularly by the IRA. So the noble Lord's statement that these incidents have been ignored is not actually true. The whole purpose of establishing the IMC was precisely to have a commission investigating these incidents and making recommendations to government.
Baroness Harris of Richmond: My Lords, my question will, rather predictably, be on policing. In replying to a question about reviewing the Northern Ireland Organised Crime Taskforce, the noble Baroness said that she would look at one of the agencies of PSNI. There are other officers who will be involved in the investigation, and parts of Northern Ireland have very severe problems of criminality. In order to ensure that the PSNI has the resources it needs to tackle these matters, will she seek to extend the review of the Northern Ireland Organised Crime Taskforce to include the entire Police Service of Northern Ireland?
Baroness Amos: My Lords, the proposed review is of the Organised Crime Taskforce, as the noble Baroness, Lady Harris of Richmond, has outlined. With respect to extending the review and looking at the issue of resources—the noble Baroness has raised the issue of resources on other occasions—she will be aware that we consult with the PSNI and the chief constable on a regular basis. The issue of resourcing is a key element of those discussions. We have been assured that the resources currently available are appropriate to the task, but this is obviously something we will keep under constant review. I shall ensure that the comments of the noble Baroness are referred to my honourable friend the Parliamentary Under-Secretary of State for Northern Ireland.
Lord Hylton: My Lords, the murder of Mr McCartney—incidentally, a father of two—has already been referred to. Is the Minister aware that we were very lucky not to lose a second life, after a very

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serious assault? Has there been progress in these cases? Have there been any arrests? Can the Minister confirm or deny that there has also been intimidation of witnesses?
Baroness Amos: My Lords, the noble Lord, Lord Hylton, will understand that I cannot comment on the specifics of a live investigation. However, the chief constable has publicly said that, at this stage, PSNI does not believe that the Provisional IRA, as an organisation, was responsible for the murder of Mr McCartney—even if it turns out that those who committed the murder were members of the Provisional IRA. A distinction is clearly being made between individuals and the organisation.
The important point to note is that, whether or not members of a paramilitary group were involved in this or any other crime, PSNI will follow the evidence where it leads, making every possible effort to bring to justice those who are responsible, whoever they happen to be.
Lord Hylton: My Lords, will the Minister add a further word about witnesses?
Baroness Amos: My Lords, I am not aware of the point being made by the noble Lord, but I shall, of course, write.
Baroness Park of Monmouth: My Lords, I suggest that we now need to raise some issues on which Sinn Fein can, or cannot, show good faith. One would be to ensure that people who were exiled from their communities in Northern Ireland by the IRA paramilitaries over the past several years should be allowed to return. I seem to remember that that issue was raised with Mr McGuinness about 18 months ago. He said that he did not think that it would be for the good of the community. Could that perhaps be one of the tests we apply to whether they wish to reform their ways in terms of restricting and abolishing the powers of the paramilitaries to run communities?
The second point is about Omagh. About two years ago, Gerry Adams was asked whether—since he had said it was not a Provisional IRA crime, but that of some horrible dissident group of which he knew nothing—he would encourage witnesses in the nationalist community to come forward. He was asked that by the people of Omagh. He refused because he said that he did not recognise British justice. I have recently asked him that question again, and he has repeated that answer. He says that British justice is an oxymoron. Are we now going to say to them, "Do what you can to bring witnesses forward, even at this late date"?
Lastly, will Her Majesty's Government produce some money for the people of Omagh? I know they have produced some in the past. I should just like to be reassured that it is enough to enable them to bring a case to court, particularly if the witnesses can at last be allowed to come forward.
Baroness Amos: My Lords, I recognise the strength of feeling of the noble Baroness, Lady Park of
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Monmouth, on this matter. She has suggested two tests. In complicated discussions and negotiations, like the ones in which we are currently engaged, it would not necessarily be helpful to set out the detail of the issues which are being discussed. However. I note the noble Baroness's points.
I understand that some funds have been provided for the court case. I do not have a figure in front of me but will write to the noble Baroness setting out exactly how much it is and over what period of time.
Lord Stoddart of Swindon: My Lords, the forthright and absolute condemnation which has emanated from the Government and the financial penalties which are being imposed on Sinn Fein/IRA are welcome to many who have not trusted the IRA over a very long period. Does that mean that the period of appeasement is now over and that Northern Ireland can get back to real politics so that there can be proper devolution? That, of course, means proper elections to the Assembly, and the people who attain a majority will govern, either by themselves or in co-operation with others. I say that advisedly, because it really is clear now that power-sharing is unattainable in the short term and even the long term. It is only right that Northern Ireland should get back to having devolution to decide most policies in the north of that island.
Baroness Amos: My Lords, we are trying to achieve the restoration of devolution but let me repeat what I said in the Statement. It is very difficult, given the state of the parties in the Assembly. and in the absence of a clear plan which would see those parties come together on a cross-community basis, to form a government of Northern Ireland. I remind the noble Lord, Lord Stoddart of Swindon, that there have been elections and that part of the process was to try to find a way to restore devolution. That has not been possible in the current political climate.
Lord Fitt: My Lords, there cannot be anyone in your Lordships' House or in the House of Commons who can feel any degree of optimism about the present situation in Northern Ireland. Let us analyse what has brought this about. It was the enormity of the money stolen from the Northern Bank coinciding with the brutal murder of the young IRA man.
We have been here before. That was one murder of a young IRA man, but one must think of the scores of IRA men and others whose bodies were found just on the border area of Armagh over many years carried out by the IRA. There was not the same talk about governments wielding sanctions against it.
As for the hank robbery, if one were to accumulate the amount of money that was stolen over a period of time from lots of banks, it might amount to the total that was taken from the Northern Bank.
The last time I spoke in this House, someone told me later that I was expressing the view that I did not see any hope for Northern Ireland. I have no intention of changing my opinion of what has happened over the past two or three weeks. I hear from the government in the Republic and from the Government here that the

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only way we can have a restored devolved government in Northern Ireland is by inclusivity. If you insist on inclusivity, meaning bringing the IRA and Sinn Fein back into Northern Ireland, you are bringing about a further exclusion of the majority of people in Northern Ireland. I cannot see the members of the Unionist Party, at any time in the future, under any circumstances, in any year. being willing to sit down with Gerry Adams and Martin McGuinness, who have been quite aptly described as members of the army council of the IRA.
If the Government insist on bringing Sinn Fein back into the fold, as it appears from what the noble Baroness has said, they will be excluding at least two of the major parties in Northern Ireland. To insist on such a development will ensure that there will not be restored devolution in Northern Ireland.
I put it to the Government that now is the time to take a stand against Sinn Fein and to say that under no circumstances will it be permitted to take part in a devolved government if that means the exclusion of the other political parties. The Government will have to live with the realities of the situation as it presently exists.
Baroness Amos: My Lords, I say briefly to the noble Lord, Lord Fitt, that even if you take out Sinn Fein, the other parties in Northern Ireland have not worked out a basis on which they might work together.

Electoral Registration (Northern Ireland) Bill [H.L.]
4.45 p.m.
Baroness Amos: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
In moving this Motion, may I say a word about procedure? Report stage will take place at the end of the Second Reading of the Gambling Bill. I understand that the Public Bill Office has asked that any amendments be tabled as soon as possible and at least within two hours of the end of this Committee stage. Third Reading will follow at the end of the day.
Moved, That the House do now resolve itself into Committee.—(Baroness Amos.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Viscount Allenby of Megiddo) in the Chair.]
Clause 1 [Restoration to electoral register of names previously removed]:
Lord Smith of Cliftonmoved Amendment No. 1:
Page 1. line 18, leave out from "Officer" to end of line 19 and insert "shall conduct an additional canvass in respect of such former electors"
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The noble Lord said: The amendment would allow the chief electoral officer to carry out an additional canvass of those 83,000 people who were on the register in 2003 and did not re-register during the autumn canvass of 2004. The canvass would have to be completed by 18 March to allow time for an updated register to be produced for 1 April. That would concentrate the effort of encouraging people to register to those 83,000 whom the Bill affects. We hope to see a very vigorous campaign from the Chief Electoral Officer for Northern Ireland to achieve this, including sending individual canvassers to call at the homes of each of these electors to persuade them to complete and return their forms. By stipulating a date of 18 March by which the process has to be completed, we anticipate that the register could be updated and published on 1 April. I beg to move.
Baroness Amos: The amendment would fundamentally change the nature of the Bill by requiring the chief electoral officer, as the noble Lord, Lord Smith of Clifton, indicated, to conduct a canvass of the 83,000 former electors before adding them on to the register. Currently, the Bill permits reinstatement on the register of individuals who were on the register prior to the publication of the register on 1 December 2004 but did not re-register during the annual canvass in 2004, provided the chief electoral officer has no information to suggest that they are no longer eligible to be on the register. The effect of having a canvass would be to require the chief electoral officer to send forms to all those people asking confirmation of their name, address, date of birth, national insurance number and signature. Only upon receiving satisfactory answers to those questions would they be added back on to the register.
It would be impractical to conduct an additional canvass on those electors before the deadline for publication of the register, 1 April 2005. As I think I said to the noble Lord in our discussions on Second Reading yesterday, we are confident that the anti-fraud measures we have put in place have been working well. Those are people who were already registered and have gone through that process.
We do not believe that the amendment is necessary. On that basis, I hope that the noble Lord will feel able to withdraw it.
Lord Smith of Clifton: If all the stops were pulled out, I believe that it would be possible to do this. However, I accept that within the bureaucracy there is no inclination to pull out all the stops and it is, therefore, probably impractical. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 2 not moved.]
Clause 1 agreed to.
Clause 2 agreed to.
Lord Shutt of Greetlandmoved Amendment No. 3:
Insert the following new clause—
"ROLLING REGISTRATION

(1) For purposes of this Act, the last day for an elector to register under the rolling registration process shall be the day on which nominations for election close.

(2) An updated register shall be published no later than one week after the relevant date in subsection (1)."

The noble Lord said: Noble Lords will recall that yesterday I alluded to the fact that there was potentially another way forward in terms of the rolling register. At present, the deadline to get on the 1 April register is 10 March. The amendment would move forward that deadline. I very much regret that yesterday I misled the House by indicating that the nomination date for local government in England was 11 April. However, the date is 7 April. Therefore, I hope that no one who reads Hansard and relies on that date—I cannot blame the Hansard writers; the date was in my notes—misses his or her nomination in England. If there were to be a general election, the date may be later.
The amendment would give people more time to register. The register is published a week later; and there may be an amendment sheet to the register. The provision would apply to anyone in Northern Ireland who believes that he or she is not on the register. It would be important for young people—for first timers. The noble Lord, Lord Glentoran, said yesterday he believed that only 25 per cent of young people had registered. If the date were moved forward, I believe that in the fervour of a potential election—we know that there will be a local government election—and with the work of the electoral commissioner, that longer period could well energise people to register.
The noble Baroness, Lady Amos, spoke to me yesterday and then wrote to me stating, first, that the date cannot be changed because of the UK-wide position and the 1 April date used in the May elections; that Northern Ireland would be out of step with the United Kingdom. Secondly, she says that the parties would not want this change. I should be surprised if the parties in Northern Ireland were to deny more young people in particular the opportunity to register.
What is the other side of the argument? One argument is that the position would be different from the remainder of the UK. But in three kinds of elections out of four Northern Ireland has an entirely different electoral system. There is PR under STV. I do not think that the noble Baroness suggests that local elections are under the STV system in England. The systems are very different. The register has been compiled on a very different basis. One of the reasons for the lack of youngsters on the registers in Northern Ireland is that parents do not have a duty, as we do in England, to place their adult children on the register.
Another argument relates to the workload of the returning officer. However, as I reminded the House yesterday, the postal vote deadline is not until 26 April. If about 15 per cent of the electorate were to seek a postal vote, consider all the work that that would involve.
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If the amendment were agreed, there could be an increase of those on the register of 2 or 3 per cent. The returning officer should be able to cope with such an increase bearing in mind that he copes with all the work involved with postal votes at a later stage. For local government the date would be 7 April. A general election might push it to a different date.
In response to the amendment, the noble Baroness may say that we do not have the wording right and that it can be improved. Alternatively, she may respond that she understands the point of the amendment and that the Government could give until 1 April. The register would then be made up to 1 April even if it were published a few days later.
I give these opportunities. This is Committee stage. I know that we are all in a hurry. But there are about 20 speakers at Second Reading on gambling and within that period there will be time to come forward with another amendment if the Minister does not like the wording of this amendment. I beg to move.
Lord Glentoran: I was not going to speak but the Front Bench opposite may guess as to why I am on my feet in the interests of the continuation of the business of the Committee.
The noble Lord, Lord Shutt, has moved an interesting amendment. I have particular interest in and care about young people coming on to the register. I spoke on that subject this morning to one of the Ministers. I believe that every effort should be made by the Government and the powers that be to facilitate at least the first-time entry of young people on to the register. I would go so far as to suggest that consideration be given to some form of mandatory requirement for first-time voters coming on to the register. Therefore, I have some sympathy with the amendment. Whether the noble Lord's amendment helps in that regard, I am not sure.
As the noble Lord says, we have two hours before debate on another amendment on Report. Perhaps the noble Baroness the Leader of the House will have an opportunity to debate again in the corridors with the noble Lord, Lord Shutt. That is probably all that I should say at present.
5 p.m.
Lord Maginnis of Drumglass: In my brief comments at Second Reading I indicated that the Bill was less than helpful to the conduct of elections in Northern Ireland and to the integrity of the electoral process. I have some sympathy with the point raised by the noble Lord, Lord Shutt of Greetland. I can see that he is endeavouring at least to bring forward proposals to help reduce the lack of registration. However, what he proposes would not succeed.
The reality is that we have an electoral office and a chief electoral officer in Northern Ireland who must have advised the Government in respect of the Bill—indeed, I have tabled a question on this issue—and yet I can see no evidence that the chief electoral officer has embarked on any pilot scheme to try to ascertain exactly why there is a deficit in the number of people who register.

1131
I indicated yesterday, and I reinforce that view today, that because of the situation in Northern Ireland—and we have just heard a Statement from the Lord President about the way in which Sinn Fein abused the electoral process, but I shall not go down that road—young people are fed up and are saying, "Until we get something sorted out we are not going to bother. We have no tradition of voting; we are new voters. When we have something worth voting for, we will register. Until then, we will not do so because we are not prepared to allow Sinn Fein and parties like it to steal our votes".
There is still that fear in our society but the electoral office and the chief electoral officer have done nothing to alleviate it. They have had canvassers on the ground who have gone out, returned and done nothing to encourage people to use the system as it was intended to be used when we brought forward the Electoral Fraud (Northern Ireland) Act in February 2002. So, while I have a great deal of sympathy and respect for the noble Lord, Lord Shutt, I believe that the amendment will not achieve what he hopes it would do.
Lord Fitt: Yesterday, when I first noticed that 83,000 people had failed to register to vote, I thought that was a very high and inflated figure. Northern Ireland has only a small electorate overall and 83,000 people who registered the previous year have refused to register this year.
Did the electoral officer go down any road to ascertain why those 83,000 people did not register or did not want to register? If I had the register of electors in Northern Ireland now, I would be able to tell by looking at it the possible outcome of an inquiry into the absence of those electors from the register.
When the electoral officer sent out his enumerators, as we used to call them in my day when we were fighting elections, did they go around the various homes and speak to the individuals involved? Did they give any information about why they were not prepared to vote or were they left a form? The district in which those people live could tell a story and give the reason why they did not vote.
It used to be that the electoral officers—or, at that time, officials of the rates department of the Belfast Corporation so far as concerned the Belfast constituencies—were employed all the year round visiting different households to inquire about the number of people who lived there, their names and whether they were qualified to vote. If those people then gave the wrong information or, in the case of an individual who was absent, did not fill in the requisite form, they would be excluding themselves. Is it possible that a majority of those 83,000 people did not want to vote; that they excluded themselves by not filling in the registration?
Has there now come a time when there will be compulsion in Northern Ireland as there is in Australia and other areas? Are we going to tell those people, "Whether you like it or not, whether you vote or not, you are going on this register"? That is compulsion, but so far in this country we have not gone down that road.
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I still find 83,000 a very high figure. Is it possible, in line with the amendment moved by the noble Lord, Lord Shutt, even at this time, that a number of people in Northern Ireland, who can read and write and who are unemployed at the moment, could visit the addresses of those who have excluded themselves from the register? They would not have to go to 83,000 different addresses because many of the people who have excluded themselves live in the same households. Given the knowledge that I have of Belfast, I am quite certain that if the electoral officer was determined to ascertain the reasons for such exclusions and why people want to keep themselves off the register, it could be done within the time limits illustrated today by the noble Lord, Lord Shutt.
Can the Minister indicate to the House why those people excluded themselves? Did they give any reason for doing so? How did the returning officer get the names and addresses of the individuals? I have a feeling—again it is a feeling that I have had over many years of political life in Northern Ireland—that, whether or not they have excluded themselves, many of those 83,000 people will have someone voting for them at the next election purely illegally.
Lord Kilclooney: I can offer the noble Lord, Lord Fitt, a couple of reasons why people have not registered. Among young people there is total dismay and lack of interest in the political process in Northern Ireland because of the Government's continual demand that there must he inclusivity for devolution to be brought about in Northern Ireland. They know that that is no longer possible; they have lost interest in the political process and they are not interested in voting.
The other reason is more serious from a terrorist point of view. In recent years we have introduced what is called the "marked register" in Northern Ireland. This register shows to the terrorist organisations and their political supporters those who did not vote. It used to be that you never knew who did or did not vote; now you know exactly who did not vote in your republican or loyalist area and you become the subject of intimidation. That is another reason why people are dissuaded from putting their names on the electoral register.
Baroness Amos: I am sorry to disappoint the noble Lord, Lord Shutt, but, despite the different possibilities he has presented to me, the amendment is not required.
Concerns have been expressed about why a number of people have not put themselves forward on to the register. Let me deal with those first and, in particular, with the questions asked by the noble Lords, Lord Maginnis, Lord Fitt and Lord Kilclooney, who referred to the dismay and lack of interest of some people.
I begin by saying that in our view the introduction of individual registration reduced the inflationary factors that had been created by the old household registration system. So there are other factors at work that have led to this further removal of names from the register. We believe that voter apathy is an element of that. The

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Electoral Commission is undertaking research to find out why people are not registering but we should also remember that the chief electoral officer's powers and duties are prescribed by legislation, and the legislation is strict regarding what questions may be asked of electors. However, the chief electoral officer wrote to all those who did not return a completed registration form and encouraged them to do so.
An Electoral Commission report commented that while the register is accurate and robust, individual registration has tended to have an adverse impact on the disadvantaged, the marginalised and those in hard to reach groups, including young people. It has taken action in a number of areas to try to address that, including a wider distribution of registration forms focusing on the young and other under-represented groups and a high level publicity programme. That should have a positive effect and cancel out the negative gap. I believe that the noble Lord, Lord Shutt, talked about a growth in the register of more than 5 per cent. If these initiatives have the impact we want, we estimate that the register will grow by more than 5 per cent with a carry-forward facility reinstated.
I turn to the amendment put forward by the noble Lord, Lord Shutt. The power conferred by subsection (1) states that the individuals to be put back on to the register must be reinstated by 1 April 2005. Therefore, it would be possible to put them back before that date. However, following advice from the chief electoral officer, we believe that the most effective way to complete this task is to ensure that the names are put back in time for the publication of the register on 1 April 2005. The noble Lord, Lord Shutt, raised the issue of postal votes. The postal vote deadline of 26 April applies only to those who suddenly become indisposed; it does not apply to ordinary postal votes, as I understand it.
Since the chief electoral officer will so far as possible check that the details remain accurate, shortening the deadline for the task gives less time for the checks. Despite the comments of the noble Lord, Lord Shutt, and the valiant effort of the noble Lord, Lord Glentoran, it is my view that this amendment is not required and I ask the noble Lord, Lord Shutt, to withdraw it.
Lord Maginnis of Drumglass: Before the noble Baroness the Lord President sits down, will she expand on what she said about the chief electoral officer having carried out research? We are not aware of that and it would be helpful if we knew what that research comprised.
Baroness Amos: I said that research is currently being carried out. However, I also said that we have speculated on a number of reasons for the 83,000 people not reregistering. Undoubtedly, individual registration raises difficulties as regards the disadvantaged, the marginalised and those in so-called hard to reach groups. The chief electoral officer has put in place a range of measures to try to address that issue. Research is being
1134
conducted as part of that. I shall, of course, write to the noble Lord with details of that research if that would be helpful.
Lord Shutt of Greetland: I thank Members of the Committee who have spoken on this amendment for the various views that they have expressed, which have by and large been supportive. I say to the noble Lord, Lord Fitt, that although there may well be 100 categories of people, in my view there are two categories in particular. I refer to those who have written themselves off the register. They have been written to, canvassed and everything else, but their names are not on the register. As this Bill has not yet been amended, they will be put back anyway. This amendment would assist those who were never on the register in the first place. That includes young people in particular. Many of those young people may not understand that there is such a thing as an electoral register. They consider that when they are 18 they ought to be able to vote. They may go to a polling station and ask why they cannot vote as they have reached the age of 18. This amendment constitutes an opportunity to address that situation.
I appreciate that there will be a rush, but all elections are a rush. Think of the leaflets that will have to be drafted and published with regard to all the candidates who will take part in the local government elections, and possibly in a general election, in May. We know that the whole thing is a great rush but I think we are quite good at managing those rushes.
I am disappointed as there is a problem with regard to this rushed Bill. In other circumstances there would be more time to discuss the possibility of amending it, but more time does not seem to be on offer. There is a principle at stake here and I should like to test the opinion of the Committee.
5.16 p.m.
On Question, Whether the said amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 61; Not-Contents, 140.

Division No. 1

CONTENTS

Addington, L.

Harris of Richmond, B.

Avebury, L.

Hooson, L.

Ballyedmond, L.

Howie of Troon, L.

Bonham-Carter of Yarnbury, B.

Hylton, L.

Clement-Jones, L.

Jopling, L.

Dholakia, L.

Kilclooney, L.

Dykes, L.

Livsey of Talgarth, L.

Eden of Winton, L.

Lucas, L.

Erroll, E.

Lyell, L.

Finlay of Llandaff, B.

Maclennan of Rogart, L.

Fitt, L.

McNally, L.

Forsyth of Drumlean, L.

Maddock, B.

Fowler, L.

Maginnis of Drumglass, L.

Garden, L.

Methuen, L.

Glasgow, E.

Michie of Gallanach, B.

Glentoran, L. [Teller]

Monson, L.

Goodhart, L.

Neuberger, B.

Greaves, L.

Newby, L.

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Northover, B.

Smith of Clifton, L.

Oakeshott of Seagrove Bay, L.

Steinberg, L.

Park of Monmouth, B.

Stewartby, L.

Phillips of Sudbury, L.

Taverne, L.

Redesdale, L.

Thomas of Gresford, L.

Roberts of Llandudno, L.

Thomas of Walliswood, B.

Roper, L.

Tope, L.

Russell-Johnston, L.

Tordoff, L.

Sandberg, L.

Trefgarne, L.

Sandwich, E.

Vallance of Tummel, L.

Sharp of Guildford, B.

Wallace of Saltaire, L.

Shutt of Greetland, L.[Teller]

Walmsley, B.

Watson of Richmond, L.

NOT-CONTENTS

Acton, L.

Hayman, B.

Ahmed, L.

Henig, B.

Allenby of Megiddo, V.

Hogg of Cumbernauld, L.

Amos, B. (Lord President of the

Hollis of Heigham, B.

Council)

Howarth of Breckland, B.

Andrews, B.

Howe of Idlicote, B.

Archer of Sandwell, L.

Howells of St. Davids, B.

Ashton of Upholland, B.

Hughes of Woodside, L.

Bach, L.

Hunt of Chesterton, L.

Barnett, L.

Hunt of Kings Heath, L.

Bernstein of Craigweil, L.

Irvine of Lairg, L.

Bhattacharyya, L.

Janner of Braunstone, L.

Blackstone, B.

Judd, L.

Borrie, L.

King of West Bromwich, L.

Bragg, L.

Kirkhill, L.

Brennan, L.

Layard, L.

Brooke of Alverthorpe, L.

Lea of Crondall, L.

Brookman, L.

Leitch, L.

Brooks of Tremorfa, L.

Lipsey, L.

Burlison, L.

Lockwood, B.

Campbell-Savours, L.

Lofthouse of Pontefract, L.

Carter, L.

McDonagh, B.

Chorley, L.

Macdonald of Tradeston, L.

Christopher, L.

McIntosh of Haringey, L.

Clark of Windermere, L.

McIntosh of Hudnall, B.

Clinton-Davis, L.

MacKenzie of Culkein, L.

Colville of Culross, V.

Mackenzie of Framwellgate, L.

Corbett of Castle Vale, L.

McKenzie of Luton, L.

Crawley, B.

Mason of Barnsley, L.

David, B.

Massey of Darwen, B.

Davies of Coity, L.

Maxton, L.

Davies of Oldham, L. [Teller]

Merlyn-Rees, L.

Dean of Thornton-le-Fylde, B.

Mitchell, L.

Desai, L.

Morgan, L.

Dixon, L.

Morgan of Drefelin, B.

Drayson, L.

Morris of Aberavon, L.

Dubs, L.

Palmer, L.

Eatwell, L.

Parekh, L.

Elder, L.

Patel, L.

Evans of Parkside, L

Patel of Blackburn, L.

Evans of Temple Guiting, L.

Paul, L.

Farrington of Ribbleton, B.

Pendry, L.

Faulkner of Worcester, L.

Pitkeathley, B.

Filkin, L.

Plant of Highfield, L.

Fyfe of Fairfield, L.

Prosser, B.

Gale, B.

Prys-Davies, L.

Gibson of Market Rasen, B.

Ramsay of Cartvale, B.

Giddens, L.

Rendell of Babergh, B.

Golding, B.

Richard, L.

Goldsmith, L.

Rooker, L.

Gordon of Strathblane, L.

Rosser, L.

Goudie, B.

Rowlands, L.

Gould of Potternewton, B.

St. John of Bletso, L.

Grantchester, L.

Sawyer, L.

Grocott, L. [Teller]

Scotland of Asthal, B.

Harris of Haringey. L.

Sewel, L.

Harrison. L.

Sheldon, L.

Hart of Chilton, L.

Simon, V.

Haskel, L.

Smith of Leigh, L.

Haworth, L.

Snape, L.

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Stone of Blackheath, L.

Turner of Camden, B.

Symons of Vernham Dean, B.

Wall of New Barnet, B.

Taylor of Blackburn, L.

Walpole, L.

Tenby, V.

Weatherill, L.

Thornton, B.

Whitaker, B.

Tomlinson, L.

Whitty, L.

Triesman, L.

Williams of Elvel, L.

Truscott, L.

Williamson of Horton, L.

Tunnicliffe, L.

Woolmer of Leeds, L.

Turnberg, L.

Young of Hornsey, B.

Young of Norwood Green, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.27 p.m.
Clause 3 [Duration of Act]:
[Amendment No. 4 not moved.]
Clause 3 agreed to.
Clause 4 agreed to.
House resumed: Bill reported without amendment.

Gambling Bill
5.28 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time.
I want today to explain why the Bill is important and urgent and how it delivers new protections. I also want to make proposals for some further improvements to the Bill.
The House will know that when this Bill was published, it was greeted by a frenzy of media alarm about the coming invasion of mega casinos on every street corner. An innocent observer could also have been forgiven for concluding that the Bill was concerned only with casinos. But it is about a good deal more.
We need the Bill now because controls on gambling are being undermined by technology. As the House knows, the principal Acts of Parliament dealing with gambling were passed in the 1960s. Because of the age of the legislation, the Government and the regulators are losing control and, if we do nothing, there will be more and more abuses.
The Government's objective in the Bill is, therefore, to put in place a framework of new regulation that delivers strong new protections for the public and allows a gradual and controlled evolution of the gambling industry. The philosophy of the Bill is set out in its licensing objectives. They are: to exclude crime and disorder, to ensure fairness and to prevent harm to children and vulnerable adults.
At the centre of the system is a new national regulator for all commercial gambling. The Gambling Commission will police the development of commercial gambling with new powers enforced through a system of operating and personal licences. The Bill also provides a new, comprehensive set of criminal offences that combat illegal gambling and require children to be excluded from gambling that may harm them.

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The Government also want local communities to have a stronger role in deciding how gambling should develop in their areas. Local authorities will therefore have new strong powers under the Bill. They will be able to reject individual applications if they believe that the gambling proposed might represent a danger to the Bill's licensing objectives.
The House will agree, I hope, that the proposals for a new structure of regulation enjoyed a fair degree of consensus in the House of Commons. However, equally, I accept that the new choices for adults in the Bill have caused controversy. The Bill takes a different approach to gambling from that adopted in the 1960s legislation. At that time, gambling was seen as a rather seedy activity. Gambling today is a broadly accepted leisure activity, which a significant proportion of the adult population enjoys regularly.
The overwhelming majority of those who choose to gamble appear quite capable of having fun and walking away when they have spent enough, whether they have won or lost. We therefore take the view that adults should be able to access the full range of gambling products in carefully regulated environments. Of course, that does not mean that gambling can be treated like any other leisure pursuit. It obviously brings risks that need control. Some of those controls will have to be strict. But the Bill provides those controls and gives the regulators wider powers to impose tougher standards. When I say tough standards, I think it is important that we understand the scope and strength of these new powers.
The Bill gives us powers to control the speed of play on gaming machines. It can control the design features of gambling premises to remove features that reinforce incentives to repeat play. It can require information about odds and actual wins or losses to be given to players at specified intervals. For Internet gambling, it can require operators to interrupt play so that the user has to confirm that he wants to continue playing. If licensees fail to live up to those tough standards, their licences can be modified or revoked.
I now move from general principles to the specific, and say something about the Government's approach to different types of gambling. Turning first to casinos, there is no clearer demonstration of our precautionary approach. At each step of policy development, the Government have taken the more cautious route. Sir Alan Budd recommended a minimum size for new casinos of 200 square metres. We thought that too risky because it could have led to many hundreds of new casinos. We wanted a lot fewer, so our minimum size is 750 square metres, more than three times the size recommended by Sir Alan. This drove down the number of new casinos likely to emerge under the new regime.
The Joint Committee on the draft Bill recommended that unlimited prize gaming machines he permitted in each of the three categories of casinos, subject to caps. We accepted the recommendation on caps, but also decided that only the largest casinos should be permitted unlimited prize machines. We did that in part because of the evidence about the causes of problem gambling. By
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common consent, the evidence base is patchy. But what coherent evidence there is points to accessibility and game characteristics as important drivers of problem gambling behaviour. As I said, the Gambling Commission will have new powers to interfere in the detailed operation of machines. We, for our part, have been very cautious about the accessibility of new types of gaming machine.
Of course, we want a far better research base for policymaking. We are working together with the Responsibility in Gambling Trust to deliver an extensive programme of new work. But for the time being, we are acting on what the research tells us to protect the public. The evolving picture on research is another good reason why we need to keep the flexibility that the Bill provides, so that we and the commission can respond effectively to evidence of new problem gambling threats.
When the House of Commons considered the Bill, it asked the Government for a still more cautious approach on casinos, and we delivered it. The Bill has been amended to limit the number of new-style casinos to no more than eight each of new small, large and regional casinos. There will be no increase before Parliament is content that those casinos have not increased social harm. While the test is in progress, existing casinos will have to continue operating largely as they do now.
The licensing authority areas that may license new casinos will be selected by the Secretary of State, taking into account the views of an independent advisory panel. The panel's job will be to propose a range of locations that it believes will provide an effective test of the new style casinos. Subject to that primary criterion, it will be able to take into account which areas might benefit particularly from the regeneration potential of new casino developments. In that, the panel will take into account the advice of regional planning bodies. It will recommend up to 24 licensing authority areas to the Secretary of State. That work will take a little time, but we hope that the panel will be able to propose areas to the Government towards the end of next year.
I want to make clear to the House that any local authority that does not want to be considered for new casinos can resolve not to license any new casinos. If it makes such a resolution, that decision is final, even if the Government may have considered that authority an appropriate area for new casinos.
Those areas selected for new casinos will be able to invite applications for the premises licences allocated to their area. Where there are more applications than licences, the authority will have the power to choose between the applications for each licence. It will be able to take into account the range of benefits that the applicants are willing to offer in addition to the gambling facilities. Those benefits may well involve specific regeneration projects and other investment in the local area. The authority will have all the powers it needs to make sure that its area benefits.
The House will know that there have been loud and expensive complaints of late that the British casino industry is being damaged by our proposals. I have to say that I completely disagree with that view. First, existing

1139
casinos can and will benefit from the removal of membership and advertising restrictions. Secondly, British operators can—and, I am sure, will—apply for all the new licences under the Bill. They have experience of British customers. They have a long history of fair play and freedom from crime. They already have large market capitalisation and can raise capital just as well as foreign companies. They will have a head start in applying for new operator licences.
It would be an insult to British casino operators to suggest that they are incapable of taking full advantage of any new opportunities. I shall not insult them in that way.
Some have demanded that all existing casinos be allowed to become new-style casinos, with many more gaming machines—up to 10,000. I have to say quite categorically that the Government cannot accept that proposal. We must be cautious about new casinos. I am sorry that that involves disappointment for some casino operators, but I fear that the public interest and the precautionary principle must come first.
The Government have been in detailed discussions recently with representatives of the British casino industry. One aspect of these discussions has been the treatment of fully automatic roulette terminals, a hybrid casino product that has emerged under the present regime. The Government are considering whether these products can be controlled effectively through a bespoke regime, rather than through the standard regime for gaming machines. If that approach were adopted, it would of course be necessary to ensure controls on numbers, design and speed of play. Those discussions continue and I will provide a further update to the House.
The Government have also reflected on the views expressed in the House of Commons on the matter of credit cards in casinos. The Bill already bans the use of credit cards in gaming machines and the direct offering of credit by casino operators to customers, but the Government also acknowledge the concerns expressed about the use of credit cards to purchase casino chips. We agree that customers in casinos should not be able to turn to their credit card if they have used up their available cash in their wallet or on their debit card. Again, I will move an amendment to achieve that.
Let me move on to lotteries. The Bill provides, for the first time, a statutory definition of a lottery, which will ensure a clearer distinction between lotteries for charities and commercial prize competitions. Only the larger lotteries will need to be licensed by the Gambling Commission. Those that are licensed will be allowed to offer rollovers. The Government also moved an amendment in the Commons to ensure that so-called ticketless lotteries will be able to continue as now. I understand that this point was of particular interest to the charity sector, and I hope that that clarification will be welcomed.
The House will know that one of the more controversial issues surrounding the Bill is the extent to which children may play gaming machines. For more than 100 years, children have been allowed to play on some low-prize gaming machines. On balance, the
1140
Government have taken the view that children should be allowed to continue playing on these machines. But we propose in the Bill that the Government hold in reserve a power to impose an age requirement if more compelling evidence emerges about enduring harm to children.
In the House of Commons, Richard Caborn pledged that the Government would reflect on the need for that power. Earlier this month, my officials chaired a most useful round-table meeting with industry representatives, faith groups and interested academics. The meeting was a fruitful and constructive occasion, and as a result I want to make some new proposals today.
On the general principle, we remain of the view that there should remain a power for the Government to ban children from all gaming machines, so we will keep a reserve power. But I want to reassure the House that we will not use that power without wide-ranging consultation and on the advice of the Garbling Commission. I therefore propose to table an amendment to Clause 58, adding a requirement on the Secretary of State to consult the Gambling Commission, representatives of relevant businesses and persons concerned with the social impact of gambling before she can propose to Parliament a minimum age limit.
I also propose to amend the Bill to give Ministers power to limit the effect of any new age requirement for playing machines to particular types of gaming machines. We will be able to exclude other machines, such as penny pushers and crane machines, where there is general agreement that no harm can arise. I emphasise that gaming regulation covers only a proportion of the amusement machines available in seaside arcades. We do not regulate dancing machines or computerised driving machines. We are talking only about genuine gaming machines, which need careful regulation. The risks that there may be for children demand that we ensure that the Bill has all the powers that we need to give children the protection that they need.
Lastly, the House will want to know that the Government have listened carefully to the many concerns of the family amusement industry about machines with non-monetary prizes. They are played mostly by children and often give prizes such as teddy bears. The Government recognise that the £8 prize available in such machines has not caused significant problems. We are confident that the Bill provides strong controls over machine gaming. In the light of those controls and the concerns expressed, the Government now propose that the maximum value for such prizes should remain at £8 rather than be reduced to £5.
I know that there have been some concerns about integrity in horserace betting. The Government are completely with those who believe that strong action is needed to weed out cheats. In that context, I welcome the recent report of the All-Party Betting and Gaming Group, many of whose recommendations are addressed in the Bill.
The Government propose to require every user of betting exchanges to be registered, so that we can have information about everyone using the exchange and share that information with sporting regulators. There

1141
have been constructive suggestions, not least from the All-Party Group, about how a registration procedure might work in practice. I want to make clear that the Bill as drafted, in Clause 77, can encompass all the proposals that I understand have been made to the department.
On the greyhound industry, I want to be clear that the Bill will maintain the exclusive right of the occupier of a track to conduct pool betting on that track. It also allows betting offices to accept pool bets on greyhounds, opening up a new market for the industry to sell its product.
On a final specific point, the Government appreciate the strong feeling that Christmas should be off-limits to commercial gambling. We intend to move an amendment to prevent licensed gambling premises offering facilities for gambling on Christmas day.
The Bill is essential if we are to protect the public. It will restore effective regulatory controls on an industry that needs to develop in a way and at a speed that is acceptable to the public and to Parliament. Central to the acceptability is a confidence that the public interest can resist commercial interests and ensure that social harm is minimised. I am certain that the Bill delivers those powers. I commend the Bill to the House.
Moved, That the Bill be now read a second time.— (Lord McIntosh of Haringey.)
5.45 p.m.
Lord McNally: My Lords, perhaps it would be best if I started with a non-declaration of interests: I once worked for a public relations company, but I no longer do so. For anybody looking for ulterior motives for the speech that I am about to deliver, there is none—although there is a passion, which I shall come to later.
I welcome the spirit in which the noble Lord, Lord McIntosh, introduced the Bill and his emphasis on the three key aims: excluding crime, promoting fairness and protecting the vulnerable. About 15 years ago, I did some work for the Rank Organisation on the reform of gambling. During that work I had talks with some senior officials in the Home Office, which was then responsible for the matter, about possibly reforming the betting, gaming and lotteries Acts of the 1960s. I was told frankly that such legislation would be so large and complicated that it would be easier to deal with the matter in a piecemeal fashion under various deregulation powers. That was certainly the pattern of the 1990s.
However, underlying the piecemeal changes was a fundamental change in public policy and attitude, to which the noble Lord, Lord McIntosh, referred. For successive governments there was no longer an attempt to use the law to try to make moral judgments about how people should use their leisure time and disposable income. Over time it meant, among other things, gradual changes about when people could watch sport and other forms of entertainment, when and where they could buy a drink and where and how they could gamble.
1142
Those changes made us a freer, more relaxed—dare I say it to some of my noble friends?—and more liberal society. But they have also brought social challenges in their wake. I do not underestimate the scale of those social problems. As we have seen with binge-drinking and 24-hour drinking, some of this still has to pass its way through our society. But I do not believe that we can respond to those problems by a return to the nanny state.
With this Bill, the DCMS has now gone where the Home Office angels of the 1990s feared to tread. It is, as my Home Office advisers warned over a decade ago, a large and complicated piece of legislation. Nevertheless, the Government are to be congratulated on introducing the Bill. The 1960s Acts are no longer fit for purpose, in terms of either the sociological or technological challenges of the 21st century.
The Government are also to be congratulated on the very thorough pre-legislative approach that they have adopted, with widespread consultation, a very full report from the committee under the chairmanship of Sir Alan Budd and two excellent pre-legislative scrutiny reports from the Joint Committee under the chairmanship of John Greenway.
The Bill has also had a full passage through another place, with a majority at Third Reading of 198. My honourable friend Don Foster said at Third Reading,
"many parts of the Bill have a great deal of support on both sides of the House … for example, the provisions concerning Internet gambling, tougher social responsibility requirements. and a tougher regulator in the shape of the gambling commission".—[Official Report, Commons. 24/1/04; col. 130.]
He went on to say that much needed to be done in this House but concluded that the Bill was now far better than the one first introduced by the Government. We will have a chance today and in Committee to improve the Bill still further.
Given that the Bill was not opposed at Third Reading by either the Conservative or Liberal Democrat Front Benches, and comes to us with a majority in excess of the Government's overall majority in another place, I hope that our approach in this House will be to seek to improve rather than wreck or truncate the Bill.
From the lobbying that we have received on all sides of the House it is clear that we were looking at issues such as the prize value of slot machines in seaside arcades and the need for ID cards, issues relating to greyhound racing and wider issues about the protection of the vulnerable. I am pleased to hear from the Minister that we will also have the chance to discuss the size of teddy bears that can be won as prizes.
My noble friend Lord Clement-Jones will indicate our priorities in his summing up. I am also aware that a number of my noble friends will voice more fundamental objections to the Bill. Some of them do not gamble. Neither does my wife. I like the odd flutter but, as the Minister indicated, so does a very large proportion of this country and it is difficult to legislate for one's own prejudices. I hope that the Minister will listen to concerns which are real and valid but which can be met in other ways, rather than stopping this legislation becoming part of the law.

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I would like to use the remaining few minutes to make a personal plea on behalf of my home town of Blackpool—this is where the passion comes in. I relate it to the Minister's introduction by his emphasis that this will be a local authority decision. Anyone who has seen those marvellous films unearthed in a Blackburn shop from over 100 years ago and shown in pristine condition on BBC2 will know that 100 years ago, Blackpool was already a major tourist attraction.
The civic leadership and individual entrepreneurs who showed such amazing enterprise fully lived up to the town's motto, "progress". The building of the tower, the building and expansion of the Pleasure Beach by the Thomson family, the construction of an electric tramway, the introduction of the illuminations and the building of over 20 theatres and cinemas along with three piers to accompany seven miles of golden sand made Blackpool Europe's most successful resort.
Lord Wallace of Saltaire: Hear, hear!
Lord McNally: They even came from Yorkshire.
But cheap air travel to the sun and the decline of kings cotton and coal and other staple industries removed the core market for Blackpool.
Now, at the beginning of the 21st century, a new leap of the imagination is needed to enable Blackpool to revitalise and regenerate itself. I believe that the resort or destination casinos provided for in this Bill provide just such an opportunity. And it is this regeneration argument which is the tipping point in favour of this Bill.
For Blackpool, casino development is not what it might be for a major city—an attractive cherry on the cake of regeneration. For Blackpool, casino development, along with the hotel and other leisure facilities it would bring with it, would transform the whole nature of the town's tourism offer. No town has done its homework better or more thoroughly than Blackpool in preparation for this legislation. Neither is casino development seen as a one-shot solution. An ambitious redevelopment master plan has been produced to improve the town centre, the airport, the tramway, the sea defences and seafront amenities. Blackpool and Fylde College is already embarking on courses which will provide enhanced career opportunities and enhanced quality of service throughout the leisure industries.
There has been widespread consultation with the local community and all-party support on the local council. Local police and other bodies are involved in addressing the social and other possible downsides to casino operations. The whole regeneration master plan adopted by the council benefits from the guidance of Professor Peter Hall, one of our greatest town planners.
Blackpool has also completed a market testing exercise and established that international and UK-based casino industries look upon the resort as an attractive investment opportunity: 22 companies have registered interest and indicated that they would make multi-million pound investments in Blackpool as long
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as there is a limited development across the UK and a genuine UK commitment to regeneration, tourism and destination casinos.
I make it clear that in no way do I wish to anticipate the judgment of the advisory board. If this Bill does pass it will be a great opportunity for Britain to provide a resort experience which will attract visitors from far and wide. Blackpool has spent five years looking in detail at the social and economic condition and has concluded that the level of regeneration required has to he transformational. The creation of a self-sustaining resort economy in Blackpool will only arise if there is urgent and fundamental change.
About 110 years ago Alderman Bickerstaff went to the Great Exhibition in Paris where he saw the Eiffel Tower and said, "We'll have one of them". I believe it is that spirit that exists today in Blackpool. Film buffs among us will know that great Kevin Costner film. "Field of Dreams". The message in the film is "If you build it, they will come". I passionately believe that if Blackpool builds it, they will come and we will have in the 21st century a resort to match the leadership Blackpool gave in the 20th century.
5.56 p.m.
Lord Jopling: My Lords, I will come to the issue of Blackpool in a few minutes. However, I remember as a boy my father once taking me to Blackpool and going to a show in which Charlie Chester was addressing the audience. He was talking about the neighbouring town of St Anne's. He said, "St Anne's—yes, it is beautifully laid out. I don't know how long it has been dead, but it is beautifully laid out."
I dislike this Bill very much. However, I am not opposed to its tightening up and cleaning up of regulations. Anything that improves the regulation of gambling has my support. My dislike of the Bill comes principally from my dislike of gambling as an activity. That is due partly to the fact that I detest using my resources where I know that the odds are that I shall be the loser at the end of the day. However, I dislike it much more because I hate seeing the devastation that an addiction to gambling can create. Such devastation can affect the rich—I could, but I will not, name large estates that have had to be sold as a result of addiction to gambling—or occur on a more modest scale.
I remember an old farm worker from my own village who used to frequent the village pub. He was a pensioner with little money. He used to trot off continually to the fruit machine and put huge sums into it. I used to say to him, "George, for goodness' sake don't waste all your money on that damnable machine. You cannot win. It is there only for the benefit of the landlord". But still the old boy went on. He was unstoppable. He paid a huge price in his own life and the way that he had to support himself because of his addiction to gambling.
I have no doubt that the casino and other elements of the Bill will increase the amount of gambling opportunities and therefore the volume of gambling in the United Kingdom. It will therefore inevitably increase the number of people addicted to gambling. I

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have seen a current estimate of the number of those addicted to gambling in this country which puts the figure at 300,000. I also have a note from a report by Professor Griffiths, professor of gambling studies at Nottingham Trent University. When the Bill was first introduced, he estimated that its effect—I know that the Bill has been changed—would be to increase that figure by between two and four times. I ask the Government, "Do you really want that? Do you really want to increase dramatically the number of people in this country who are addicted to gambling?".
What is the evidence that there is any demand for such an extension of opportunities to gamble? I have here a note that came to me from a Dr Raabe. I do not know him, but he sent me a note in which he quotes the Guardian of 19 October last year. He says that a recent NOP poll done for the Salvation Army showed that 93 per cent of the British public thought that there were already enough opportunities to gamble. I agree. To my old friend, the noble Lord, Lord McNally—I should declare an interest in that I worked for him in the public relations business many years ago—I say that it is no part of the nanny state to oppose the extension of gambling when there is little demand for that extension.
I am also alarmed about what the 24 new casinos will look like. I have visited casinos. I am glad to tell your Lordships that I do not think that I have ever walked out of a casino more than £20 out of pocket, so it has not affected me much. However, I have seen some of the huge operations in Las Vegas.
I recall visiting, not terribly long ago, an exceptionally beautiful casino in St James's Street here in London. However, I was president of the organising body for the TT races on the Isle of Man, and I used to go to the races more or less every year. One year, many years ago, I visited a casino on the promenade in Douglas. That casino may have changed; I do not know. Having gone once, I never wanted to go again. I can describe it only as a squalid hell-hole, where one needed a pair of stout shoes to stop one's feet getting wet from all the beer swilling about on the floor. I shall need a great deal of convincing that a casino in, say, Blackpool, would not turn out much more like the one in Douglas than the one in St James's Street. I cannot conceive that it would be different from what one would find today in a place such as Douglas. I remain to be convinced.
If we are to be saddled with such developments, I am opposed to the terms on which they would happen and the effects that they would have on the existing operators. I cringe at the thought of the big, Las Vegas-type operators moving into the United Kingdom. I have a note from the same Dr Raabe in which he names some of the big organisations that, he tells me, are poised to come here from places such as Las Vegas. They include MGM Mirage, Caesar's Entertainments, Las Vegas Sands, Isle of Capri—another Las Vegas-based casino operation—and the owners of Sun City in South Africa. All I can say about that is that, when I was a member of the government many years ago, we were all instructed to have nothing to do with Sun City
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as members of the government. I cringe at the thought of some of those big, American-style casino operations moving into this country.
I cannot understand why there appears to be a freeze on existing operators in the United Kingdom—with regard, for instance, to the number of machines that they may have—and limits on bets and prizes. How can that be fair, if the newcomers in the eight largest new casinos are allowed to have, say, 1,250 machines with unlimited bets and prizes? It is no good the Minister telling me, if that is what he is of a mind to do, that not all the 1,250 machines in the biggest casinos will have no limits in practice. The point is that they can have limits in practice, although the market will, of course, cause the size of bets and prizes to find their own level. While that is going on, the existing operators are limited to £1 stakes and a maximum £2,000 prize. Why not impose on the newcomers the limits that exist for casino operators already here? That would be the only way of creating a level playing field.
I suppose that the Minister will say, "If you put the same limits on the newcomers as exist on those already here, they may not come". I can only say, "So what?". Do we really need them? I hear no demand for such an extension of organised, big-money betting.
The Government's proposals seem to me to be a reincarnation of what I would describe as the worst sort of cheap Harold Wilson gimmickry. I do not want to see the Bill being used as a first step back to the gambling cult in this country that so ruined parts of our society at all levels. I do not know how many Members of your Lordships' House have read that extraordinary book Georgianu: Duchess of Devonshire, by Amanda Foreman. It relates the activities of that lady and all her gambling friends and shows how there was widespread misery and bankruptcy at that time. We do not want to go back down that path. That is why I feel so hugely uncomfortable about the Bill.
6.7 p.m.
The Lord Bishop of Coventry: My Lords, I am pleased to be able to speak on this important legislation. We are all aware of the controversy that it has generated in the country at large, and it is good that we can finally turn our attention to some of the proposed measures.
Like all Members of the House, I willingly acknowledge that new gambling legislation is overdue. Technology has outpaced the law, and new and potentially dangerous forms of gambling exist in a completely unregulated state. The formation of the Gambling Commission is a welcome step and should enable social responsibility to be put at the heart of all future gambling regulation. However, we must be clear: the Government are not simply re-regulating an existing industry. They have used the opportunity to open the doors to potentially dangerous forms of gambling that do not exist in this country, such as the high-value fruit machines in Las Vegas-style casinos that have been mentioned. That has been done as a deliberate policy choice, despite the fact, as has been

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said, that opinion polls show that 93 per cent of the population think that there are already enough opportunities to gamble in the UK.
While the debate has raged around the new super-casinos, there has been relatively little comment about another important aspect of the Bill: child protection. I applaud the fact that one of the stated objectives of the Bill is the protection of children. The protection of the young and vulnerable must, of course, be one of the primary factors in any new legislation. What is more, the Government have made some welcome moves in this area, particularly the removal of fruit machines from unlicensed premises where they could be accessed by children and young people.
However, there is one area where the reality is failing to live up to the Government's rhetoric. The Secretary of State for Culture, Media and Sport has said that,
"children and gambling don't mix".
I wholeheartedly agree with that statement, as I suspect do the vast majority of Members of this House. But the Bill allows children to gamble and I believe that it is a situation that must be remedied.
While the focus has understandably been on the high-value category A fruit machines, very little attention has been paid to the fact that children of any age will continue to be allowed to play on category D fruit machines, which have a top prize of £5. That is not a vast amount of money, but it is not an insignificant amount of money to, for example, an eight year-old who may get £3 a week pocket money. These machines share many of the same addictive characteristics of the higher value machines, including flashing lights and rapid play, differing only in the amount that they can pay out. The only regulation on who can play the machines at present is simply a person's height. If someone is too short, he or she cannot put the money into the slot.
I am very glad to hear from the noble Lord, Lord McIntosh, of the possibility of some further amendment to that aspect of the Bill. I would urge that it goes beyond reserving the power to impose an age limit, but that children should emphatically not be allowed to continue to play those machines.
Category D machines also include the so-called teddy bear grabbers, machines that were referred to in another place in a somewhat surreal manner—I have read the report of the debate. That is highly unfortunate for it means that there was virtually no discussion of the potential problems associated with addiction to category D fruit machines among young people—and addiction is not too strong a word.
The research that has been done in this area suggests that as many as 5 per cent of adolescents exhibit behaviour that would categorise them as problem gamblers. That is potentially one in 20 young people with a gambling problem, which is more than five times the rate of adult problem gambling in the UK and should give all Members of this House cause for alarm. Judged by calls to GamCare's helpline, fruit machines are one of the most addictive forms of
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gambling for adults. If adults are unable to control their gambling behaviour on a fruit machine, why are we surprised that children find it difficult?
It may come as a surprise to Members of the House that the UK is the only country in the developed world that allows children to gamble at all, let alone on fruit machines. It is an historical anomaly which, I believe, is having a damaging effect on young people's lives. Problem gambling during adolescence causes immediate problems, including truancy and criminal activity, but it also has knock-on effects. Missed schooling and a possible criminal record can lead to severely reduced life chances, even after a gambling addiction has been conquered.
I know that many Members of this House have been surprised and disturbed when they have found out the truth; namely, that category D machines include fruit machines, which are not banned to children. It is a fact that has passed many people by. Their categorisation as amusement machines is unhelpful and, I suggest, deeply misleading.
However, the public have strong views on this issue. Again, polling shows that 82 per cent of people think that children and young people should not be allowed to play on fruit machines. The experts are in agreement: children should not be allowed to play fruit machines. The Joint Committee on the draft Gambling Bill heard evidence from the Royal College of Psychiatrists, as well as from internationally renowned academic experts from Nottingham Trent University and Birmingham University. All said that category D fruit machines were dangerous for children and that the Government should take this opportunity to stop children playing on them. Concerned faith groups that carry out a lot of work with children and young people, including the Salvation Army and the Methodist Church, have said the same. Even the 2001 Gambling Review Body chaired by Sir Alan Budd said that if it were creating the regulations from scratch, children and young people should not be allowed to play on gaming machines.
Given the strength of opposition to children playing these machines it is almost unbelievable that the Government are set to allow children to carry on playing them. Category D fruit machines form only one part of the activities offered by amusement arcades and could be replaced by other category D machines. Moreover, while the amusement arcade industry has been quick to point out the potential damage to their business of stopping children playing fruit machines, they have been rather slower in coming forward with actual figures regarding the amount of their income that is derived from children playing those machines.
Ultimately, this must be seen as a child protection issue. Legalised gambling for children makes a mockery of the Government's claim that,
"children and gambling don't mix".
The case is clear: gambling is an adult activity. Fruit machines, regardless of their size, can he addictive. There is already convincing evidence that a significant number of children and young people have gambling problems arising from category D fruit machines. So

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what is the answer? Surely, children should be prohibited from playing such fruit machines and that the UK should put itself on the same footing as the rest of the developed world.
The Government have taken a risk with regional casinos. If the level of problem gambling goes up as a result of their introduction into the UK, then the Government will rightly be held accountable. On the issue of children and gambling, however, the Government have come so close to implementing a thoroughly robust framework. The problem now is that they are failing to follow through their own logic. If, as the Secretary of State says, children and gambling do not mix, why are children still allowed to gamble on one of the most addictive games in the gambling industry?
It is time to match up the rhetoric and the reality. It is the duty of society and the Government to try to protect children from harm. Here is a wonderful opportunity to separate children from a potentially damaging activity. I urge the Government to take it.
6.17 p.m.
Lord Pendry: My Lords, I rise to take up one or two points of concern about the Bill. I recognise immediately that the Government have been listening to legitimate concerns during the passage of the Bill, which has been improved as a consequence. However, there is much more to be done to improve the Bill further and even at this late stage I am hopeful that further concessions can be made following this debate.
As a boy, I grew up at the seaside in the towns of Broadstairs and Ramsgate on the Isle of Thanet and I have many fond memories of those seaside towns. Indeed I frequently return to them. I remember well playing in the arcades of Ramsgate, known then as Merrie England. Although Merrie England is no longer there, traditional seaside arcades are still an important part of the economy of the Thanet towns today. The towns in Thanet—Ramsgate, Margate and Broadstairs—are like other seaside resorts in having traditional arcade economies, but that is not recognised by the Bill.
These arcades are not just about fun but are very important for many areas which have high unemployment and deprivation levels. In recent decades these areas have suffered greatly. Although the work being done by the current Government is helping them to get back on their feet, they certainly do not need another challenge to overcome. The loss of seaside arcades would indeed be a challenge too far.
In the case of Ramsgate and Broadstairs, the implications are even more serious. Your Lordships will have seen that among the most popular machines in a seaside arcade is the "pusher". To play these games you roll a coin on to a moving paddle, and once enough coins have built up on the paddle one or two are knocked off as prizes. What your Lordships probably do not know is that these machines were invented, and are now largely made, in Thanet. The world's two leading makers of these machines are in
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Thanet and they are very successful export businesses. The development work they do—the work that underpins their export business—is based on revenues from the British market.
If seaside arcades are no longer viable because of changes introduced in the Bill, then the traditional British seaside resort will disappear with them. If the seaside arcade is undermined, then pusher sales will be undermined. If pusher sales in the UK are undermined, then the export business for these machines will no longer be viable. Export business will decline and the high levels of unemployment in places such as Thanet will end up higher still. So whatever we do in the Bill, we must not undermine the seaside arcade.
Your Lordships will also know that the Budd report produced ideas that seriously challenged the viability of the seaside arcade. Those ideas were based on a view—a mistaken view in my opinion—that exposure to machines like cranes, pushers and low-stake fruit machines at a young age led to problem gambling in later life. That is nonsense, despite what has been said. There is not a shred of evidence to that effect.
When the Budd report was published, the campaign to ensure that seaside arcades remained viable was led by the Member for South Thanet in another place. He is now a Minister in the Department of Health and so no longer able to speak publicly on this issue. He put together a cross-party alliance to make the case that small-stake gambling in family centres did not create problem gamblers and successfully demonstrated that some of what Budd recommended would threaten the economic viability of low-stake machines and, by implication, threaten seaside arcades and seaside resorts. And the Government accepted that view at the time. Ministers agreed that low-stake machines could have a 30p stake and an £8 prize. The industry argued that these figures must be raised in line with inflation and Ministers agreed that, subject to future research showing no link with problem gambling, they would look at the issue again.
Ministers also promised that today's arcades would be able to continue as arcades and that councils could not retrospectively take decisions that would stop people selling their businesses as going concerns.
These promises largely satisfied the industry. They were made in another place, in private meetings and in speeches by Ministers to the industry. They are a matter of public record. And yet, on the face of it, the Government are now largely reneging on many of those promises. Although the Minister was helpful earlier, we are going to look for the amendments that he mentioned.
Will the Minister consider making a commitment that the Government will do nothing to undermine seaside arcades or machine manufacture, to honour the promises made to maintain the viability of small-stake machines and protect the grandfather rights of existing businesses and that he will attempt to rebuild a dialogue with the trade association BACTA to ensure the continuation of arcade businesses?

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I am pleased, as I am sure the House will be pleased, that the Minister is prepared to look again at the issue of prizes of £5 and £8 for different sizes of teddy bears. One would be 6 inches high and the other 14 inches high. Is it really the business of government to restrict the size of children's teddy bears? Do the Government seriously think that by forcing children to have a smaller teddy bear they will save them from gambling problems in later life? Yet that is what, in effect, the Government are proposing. By so doing, they will limit the attractiveness of harmless amusement machines and thereby undermine the seaside amusement industry itself.
It is no good the Government saying that the Bill is protecting children. What it is doing is stopping children doing something they have always done and which does them no harm. And if by doing that they destroy an important part of the British seaside, they will have done neither children nor adults any favours.
It is also no good the noble Lord saying that resort casinos will bring regeneration to places such as Thanet to make up for the loss of arcades because no one is likely to build a resort casino, say, in Thanet—and if they do, it will only replace the district's two existing casinos.
I played in seaside arcades as a youngster and it did not turn me into a gambler. The most I have ever done is dabble on Littlewoods Pools and have the occasional flutter on the lottery when I remember to do so. Surely if anything can be said to be an example of harmless fun it is a young child trying to win a Winnie the Pooh doll in a seaside arcade.
If anyone develops a problem with gambling in later life, it will have had nothing to do with them playing pusher machines for 2p a time or winning a cuddly toy with a crane when they were children. I implore my noble friend to reinstate all the promises made to the seaside industry just a few years ago and to ensure that this harmless business can continue.
Before I sit down, I should perhaps mention that, despite what the Minister says, it is not just arcades in seaside resorts that are being unfairly treated by the Bill. British casinos, which have a proven track record of over 30 years of social responsibility, are being unfairly frozen out by the new regulatory environment—relegated to becoming second-class businesses by being denied the ability or right to compete with the new casinos.
That point made was made clear by the chairman of the Joint Committee, John Greenway, when he urged the Secretary of State for fairness to the existing industry. As the noble Lord, Lord Jopling, pointed out, a level playing field is all our British casinos are asking for.
Perhaps I may briefly bring to the Minister's attention another important issue that affects one of my other passions—football. The House will know that I am president of the Football Foundation. It has recently been brought to my attention by the football leagues in both England and Scotland that various betting companies—including pools companies and bookmakers—are refusing to pay copyright fees for use of their football fixture list when offering on-line fixed
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odds betting or running pools competitions. Such action could threaten the future of many smaller clubs. In the Scottish Football League, revenue secured from betting and pools companies is 21 per cent of the league's annual income.
Copyright in football fixtures was secured by the leagues in 1959, yet the pools companies have recently decided unilaterally not to pay. Such an issue would normally have been the subject of commercial dispute between the two parties. This issue has however been complicated by a recent judgment of the European Court of Justice regarding the database directive. This is a decision which is subject to legal scrutiny.
My time is up. However, I ask the Minister to look at this issue. I urge him to review the situation urgently in order that he can consider in detail the full range of options that we have to tackle on this issue and, we hope, introduce measures on the face of the Bill or in secondary regulations to the Bill.
I hope that the Minister will refer to those points in his reply.
6.28 p.m.
Lord Mancroft: My Lords, as one of those who pressed the Government to commission a review of the gambling industry as far back as 1997, it would be churlish of me not to welcome the Bill—and I do.
I was, too, largely supportive of the general thrust of Sir Alan Budd's report—although I did not agree with every detail. I did not totally agree with the Government's response in A Safe Bet for Success, although it, too, contained some proposals that were pretty bizarre. I was, however, largely supportive.
I was happy to join the scrutiny committee because I was keen to ensure that the area of gambling in which I have an interest and have been involved with for 10 years—society lotteries—was not forgotten. Amidst the furore about casinos, betting exchanges, fixed-odds betting terminals and all the other headline-grabbing parts of the Bill, I was very concerned that the smaller part of the gambling industry—society lotteries—should not be forgotten.
The scrutiny committee was a fascinating experience. I hope that the House has noted that its members—from both Houses and of all parties and no party—agreed on virtually all of the key issues. I am delighted that the Government accepted most of our recommendations. It is interesting to notice that they have got into trouble—over casino numbers and machines, for example—in the areas where they ignored us.
Although there are not any votes in gambling—this remains an issue that does not divide the political parties—it is important. The UK gambling industry is significant; it is large; it is an important part of a growing leisure industry in Britain; and it provides jobs. But it is true to say, as the Minister said, that the laws governing it are now old-fashioned, in part because of the advent of so many technologies. When the Government want to modernise something, one should always look at it with great suspicion. But, in this case, modernisation is called for.

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It is also true to say that the existing Gaming Board does not have the resources or the powers to operate in a way that a modern regulator should operate. That is not meant as a criticism. In fact, I should like to take this opportunity to pay tribute to the work of the Gaming Board, the chairman, Peter Dean, the retiring secretary, Tom Kavanaugh, and their teams, who have done a first-class job with great care and courtesy in their regulation of the industry. Nevertheless, we need the new commission.
I commend, too, the Government for their decision to regularise and regulate the new remote gaming industry—those which operate by Internet, mobile telephony and interactive television. Without the Bill, the remote gaming sector will continue to operate a free-for-all, which is not a good idea.
However, your Lordships will want to look at that part of the Bill closely. The balance between what is in the Bill and what can be addressed in codes of practice is not absolutely correct. I am not convinced that it is perfect. We will want to look at that carefully in Committee.
I start to part company with the Government in their handling of the casino question and in the detail of some of their proposals. I should make it clear that I have absolutely no interest in casinos. I do not gamble or visit them, except when, as during the past year, very kind operators invite me for dinner, which is very nice. I do not go to casinos because I do not find them entertaining.
I listened very carefully to what the noble Lord, Lord McNally, said about Blackpool. I wish Blackpool well. I listened carefully, too, to what my noble friend Lord Jopling said about St Anne's. I reflect that, apart from Blackpool, Manchester just down the road wants its own casino. I wonder how well they will go together. I remember that the great American, Mark Twain, once said that he would like to die in Manchester because the transition between Manchester and death would be so small as to be hardly noticeable. But I am not sure that that is very fair.
I recognise that casinos are an extremely important part of the British gambling industry. No one has said yet that in the UK we have an extremely efficient, demonstrably honest and well regulated casino industry, which conducts itself with commendable responsibility. Budd recognised that the restrictions surrounding casinos are largely based on 1950s morality and are inappropriate for the 21st century. It is difficult to disagree with that. I thought that the Government agreed with it: the scrutiny committee certainly did. It appeared that the Government recognised that, bar a few details—some of which are important and some less so. I believe that the industry was content with what the Government proposed, subject to the recommendations of the scrutiny committee.
But on 16 December that apparently changed. The Government's new proposals from that date—cobbled together, I may say, under fire—have resulted in the
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complete alienation of the industry. Frankly, that is a pity. To try to modernise an industry that has turned against you is silly, a pity and highly unnecessary.
I welcome, as I hope that any noble Lord would, any foreign investor who wants to bring business and create jobs in the United Kingdom. I do not think that the UK casino industry fears competition from the United States or anywhere else, provided that it is fair competition.
By the Government's current handling of the Bill, they have disadvantaged the existing industry. Any new casino, regardless of whether it is owned by an American, a South African or an existing UK company, will have a significant advantage over an existing casino and, if opened within its catchment area, will inevitably offer more attractive products.
The Minister said that he does not agree with that, but he is wrong. I do not know which of us is right, but there is little chance that this House will be able to make the progress that it needs to make if this Bill is to reach the statute book before the general election unless the Government are prepared to look at the UK casino industry's concerns rather more favourably than they have up to now.
We cannot all agree on every detail in a complex Bill like this, but it needs to achieve a greater degree of consensus if I am to give it my wholehearted support. I shall be looking for early signs of that consensus during the Bill's passage.
I hope that your Lordships will have seen the report of the All-Party Group on Betting and Gambling, to which the Minister made reference. The group was very ably chaired by the noble Lord, Lord Faulkner of Worcester. I am delighted to hear that the Government will be taking its recommendations into account, some of which are already catered for in the Bill and others I hope we will see coming forward.
I should like to focus the remainder of my remarks on my main concern; namely, society lotteries. The company of which I am founder, chairman and a shareholder is a certificated external lottery manager. We have managed daily lotteries, weekly lotteries, instant lotteries and frequent-draw lotteries for 30 charities over 10 years in Britain. We have raised more than £10 million for different charities. I think that we are now the largest and most experienced society lottery manager in Britain—our two largest competitors having given up the struggle and having packed up. But there are a plethora of charities and sporting clubs for which lotteries are a vital source of income.
The Government have repeatedly stated that they recognise the role of society lotteries. But after so many committees, reports and extensive consultations in the past few years, it remains a source of frustration to us that the key issues identified by Budd are the same key issues that are still outstanding today. Perhaps your Lordships will allow me to flag them up quickly, before we look at them in greater detail in Committee.
Our main concern is that the Government have still not fully dealt with the issue of prize competitions. It is a difficult issue, of course. For those of your Lordships

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who are unfamiliar with prize competitions, they can be legitimate and reasonable. They are skill-based competitions with a variety of prizes. But all too often the skill test is not a great test. I wonder how many of your Lordships could answer the question: where is the Tower of London? It does not take a lot of skill to answer that one.
In effect, a great number of them are pseudo lotteries. Whereas society lotteries are registered and are highly regulated, prize competitions are unregistered, unlicensed, unregulated and free to do much as they like. I accept that it is difficult to find the right wording to define them separately, but both the Lotteries Council and the Gaming Board are of the view that as the Bill stands it is still open to abuse. In Committee, we shall have to look at ways of tightening that up.
Your Lordships may consider this a side issue, but perhaps I may put it into context. The regulated society lottery industry in Britain turns over about £126 million every year. The casino industry, about which we have just been talking, turns over about £4 billion. But the prize competition industry, which the Government are content to leave wholly unregulated, is estimated to be worth about £5 billion a year. I am not sure that £5 billion a year is a side show, particularly when children and other vulnerable groups that the Government profess to be so concerned about are encouraged to buy entries without controls. That is why we will have to come back and look at it.
The Budd report and the scrutiny committee recommended the abolition of stakes and prize limits for society lotteries. The Government have removed the limit on stakes, which is the easy bit, but have maintained arbitrary limits on prizes and pool sizes. There is also an annual limit on the number of tickets each charity can sell. I have asked every Minister and official that I have come across in the past 10 years why such a limit exists. I have yet to receive an answer, whether silly or sensible. I have received no answer at all. I shall ask again in Committee.
The Government believe that an increase in prizes will undermine the National Lottery. I accept that the Government have a reasonable and legitimate desire to protect the National Lottery, but it needs to be reasonable, which I do not think that it is at the moment. We would like to come back to that in Committee.
As an alternative, we can look at the business of triennial reviews. The Minister in another place thinks that they work. But in my view, in order for a triennial review to take place, it needs to happen every three years: in our part of the industry, we have had two since 1994. That does not sound like triennial. The solution is to put that in the Bill. If the Government do not like it, let us go the Budd and scrutiny committee route and abolish them. We need to look at that, too, in Committee.
The Government propose to allow societies to sell tickets by machines. This is a modernisation Bill, and that is a sensible thing to do. However, in seeking to differentiate a lottery terminal from a gaming
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machine, the Bill, at clause 229(2)(d), insists that the draw is not "determined by the machine". That is right, as lotteries require a pool of players. The clause also says that the machine cannot display the result. The object of this last point is to prevent instant lotteries being played like a gaming machine—not that that has ever happened anywhere in the world.
However, there is a drawback. I do not know of any game in the world, played either for pleasure or for money, in which the player cannot determine the result. Why would I play? Can you imagine a machine where, having played and won, I cannot collect my prize; where the operator does not know if I have even won a prize, and cannot even tell how many tickets I have sold? I did a bit of research for my own entertainment, and there are somewhere between 500,000 and 750,000 lottery terminals in the world. Every single one of them displays the result. We need to congratulate our good old British Civil Service for the remarkable feat of finding a potential problem that has so far not occurred anywhere in the world. We might want to look at that at Committee.
There is a wider concern that the language of the Lotteries and Amusements Act 1976 is a bit archaic, and needs to be brought up to date. That is why the Government removed the phrase "ticket or chance", as the Minister mentioned, to try and allow for ticketless lotteries, which is clearly sensible in the 21st century. The Minister believes he has resolved that problem, but I am not certain he has. That too is an issue we can come back to in Committee.
Finally, Clause 258 gives the Secretary of State a reserve power for either himself or the commission to restrict the frequency of lottery draws. There is a case for allowing the commission—or, at a stretch, the Secretary of State—a reserve power, in case for some reason a lottery, or any product, becomes unacceptable or undesirable. This, however, is not that power. In a letter to the chairman of the Lotteries Council in December, the Minister appeared to confirm that the order-making power would be used immediately to restrict lotteries to once every hour.
I do not propose to rehearse the arguments today, particularly as I see the numbers on the clock. Suffice it to say that these lotteries are completely harmless, and the Government know it. I know it, because mine is the only company in Britain that has ever run such lotteries. We are quite experienced in them now. We have run 150,000 of them since 1997 through 2,000 outlets, and sold 10 million tickets. Do your Lordships not think, if the potential problem feared by the Government were going to appear, that it would have done so by now? We might want to consider that in Committee as well.
Of course, I should be delighted, as always, to sit down with the Minister to find a way of meeting the Government's concerns. I do not think that would be difficult, and it would avoid needlessly destroying an important source of charitable fundraising.
We are all aware of the Government's three main priorities, but it is worth pointing out that that is where we are today under the present legislation: protecting

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children and the vulnerable, keeping gambling crime-free, and ensuring that it is conducted in a fair and open way. The object of the Bill is to modernise that regulatory system without jeopardising those goals. In the process, the Government need to explain why some areas of the industry should be relaxed while others should be further restricted.
The modernisation part of the Bill requires a framework piece of legislation that gives the commission the power to regulate flexibly as circumstances and technology change over time. If there is too much on the face of the Bill, the legislation will be out of date before it hits the statute book. If there is too little, neither the Commission nor the industry will know where Parliament stands. I am not sure the balance is quite right yet, or if the Government have been able to resist the temptation to over-regulate. It will be your Lordships' task to find that balance.
I will be unhappy unless I see the UK casino industry demonstrably treated fairly. I would hope, too, that I have said enough to convince the House that we need to see some changes in the regulation of lotteries. These are changes not of principle but of practice, and without them the Bill remains unacceptable. The Bill's fate lies in the Government's hands. Regardless of any statements put out by the Department for Culture, Media and Sport, if the Bill falls, it will be because the Government have mishandled it. It is that simple, and the whole world knows it. Fortunately, the Secretary of State has an extremely able and experienced deputy in the shape of the noble Lord, Lord McIntosh, who, if allowed to by his Secretary of State, can get the Bill through.
I wish the Bill well, but it will require a great deal of give-and-take on all sides of the House if we are to get it on the statute book before the general election.
6.45 p.m.
Viscount Falkland: My Lords, first of all, I apologise. I missed the first few minutes of the debate today as I was unexpectedly delayed in getting to the House. I shall read the Minister's speech, although I think I am familiar with much of its content, having served on the pre-legislative scrutiny committee, as mentioned by the noble Lord, Lord Mancroft. I do not know how many of your Lordships have read the report of the committee. A great deal of water has passed beneath the bridge since the report was published and the Bill has substantially changed.
There is one principle with which none of us could disagree. The Minister alluded to a statement from the Department for Culture, Media and Sport that,
"almost all relevant British gambling legislation predates the Internet. Nobody had such a powerful communications system in mind when that legislation was being enacted".
That to me is the main reason why the Bill should go on to the statute book in short order.
The 1968 legislation, excellent though it was, is quite unable to deal with new technologies. Although there is pressure on government to catch up with new
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legislation, it would have been preferable if they had dealt solely with new technologies before taking on the Budd report on casinos. I am not saying so in hindsight; I thought so then, and so did others. The Bill is more complicated than I would have wished when I heard the Government were planning to introduce draft legislation on gambling.
Destination casinos would have the effect of drawing in big investment and, principally, regenerating seaside resorts. That is an interesting idea. Not many of us agreed with the idea of having casinos all around the coast of Britain, but the concept of having casinos in several large resorts was well worth exploring. One problem was identified by many people involved in the casino business, both here and the United States. They said, "You will find it extremely difficult. The idea that you can regenerate through gambling alone is very short-term thinking". Even in Las Vegas, where gambling was the principal motor for generating great profits, it is now entertainment that generates those profits, and gambling is only part of that.
I would have preferred it to have been clearly stated right from the outset that in Blackpool, for example, which was referred to so eloquently and in his usual humorous style by my noble friend Lord McNally, we would be seeking investment for entertainment, possibly including casinos where appropriate. Blackpool is an obvious place for such a resort casino development.
That is the situation that pertains, for example, in France. France, being a very dirigiste country, has tackled gambling in a way we could not possibly attempt. In fact, there is a curious anomaly in world legislation, or at least in Europe. In France gambling is illegal, but the system allows exceptions to he made. Thus certain activities are allowed without destroying the general public policy on gambling. France operates the pari mutuel system in horseracing—for which our equivalent in horseracing is called the totalisator, a word that originated in Australia—and for many years has permitted casinos to operate in resorts and spas. I wish that that simple principle had been more plainly incorporated in this Bill.
The French system of allowing casinos to operate in spas and casinos, which only recently has been extended by the Chaban-Delmas law to allow towns and cities with populations of over half a million to operate one casino, is based on the idea that opportunities for gambling may be extended only where the people make a deliberate decision to do so. The principle is that people should not gamble by chance simply as a result of walking down the street. Someone must go and stay in a resort with, presumably, a limited amount of money. The money is spent on gambling while one eats well and stays in good hotels before going home again. That is preferable to someone playing on slot machines that are available on every street corner. I think that the Government agreed with the basic principle, so I was surprised and a little disappointed to see that around half way through the committee deliberations the notion of the regional casino was introduced. That is quite a different idea from the casino resort, now wrongly being described as the "super casino".

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A large regional casino sited in an urban area is deemed desirable for economic reasons, but that notion seems absolutely to go against what the Government and the committee agreed; that is, that any widespread intentional increase in gambling facilities should be carefully constructed and limited as much as possible in order to take account of the very real problems associated with gambling, which I shall address in a moment.
The Gambling Commission is a key part of the Government's plans as set out in this legislation. It is to have a manifold role with huge responsibilities. While I am sure that the commission will be well led and adequately staffed—those who have been following the development of the Bill know that it will be a new form of the existing Gambling Board for Great Britain, which has done such a good job since 1968—I am worried about how it is to be funded.
I cite, for example, the huge growth in sports betting and the use of mobile telephones. Sophisticated mobile phones with screens allow people to be entertained and to gamble. One study has forecast that by 2010 the profits generated by mobile phone betting alone will be around $20 million a year. Indeed, it suggests that that may be an underestimate. In his speech, the right reverend Prelate referred to the dangers of exposing children to gambling opportunities. Children use mobile telephones and will have greatly increased access to gambling opportunities. If the forecasts are correct, mobile telephone gambling will put the dangers of the slot machine in the shade.
Because of the proper and fundamental concern of the DCMS on the fast rate of technological change and the need to keep pace with it, it is essential that the Bill is not delayed on its way to the statute book. No doubt when we consider the provisions in Committee, many noble Lords will be particularly concerned about the growth of casino provision, but the Gambling Commission will have to deal with all kinds of other matters as well. I mention one that we could not deal with all that satisfactorily. The committee and the Government fully intended to come up with a solution to the problem of betting exchanges, but could not do so.
For those noble Lords who are not familiar with them, I should explain that the betting exchange is a very simple concept, one that predates bookmakers by providing a service whereby people can place their bets. Using sophisticated software, betting exchanges allow people to bet collectively even though they do not know each other. The exchange matches the investments made by various people for or against a particular event taking place. It has caused a great deal of concern, particularly in horseracing, because the concept of someone actually backing a horse to lose is one that has not entered anyone's thinking. It certainly had not entered mine and I have been following horseracing years. I wish that I had thought of the idea, but if I had I would not be addressing your Lordships. I would be a millionaire on a sun-drenched beach. Spread betting is a wonderfully simple idea taken forward by complex technology.
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The committee felt that it was best to let things run, and I think that the Government feel the same We shall see what the Treasury thinks of the taxation system for betting exchanges. We shall also await the decision of the Gambling Commission about them. If I were a bookmaker I would be energetic in opposing this new form of competition, but it is clear that betting exchanges are here to stay. Indeed, I expect that many bookmakers will themselves now consider becoming betting exchanges, so profitable is this new area of the business. Ideas are being mooted to register those using betting exchanges in order to limit the danger of securing information about horses that are going to lose or being privy to other insider knowledge. However, singling out betting exchanges for a registration regime should be approached with the greatest caution. I do not see why people should be registered as punters—and certainly those betting below a fairly high figure—any more than should those who place bets with fixed odds bookmakers. That is a discussion for the future, but it is important.
Sports betting has exploded in this country. Most people betting recreationally on sporting events use not only fixed odds bookmakers and betting exchanges, but also deploy spread betting, another area we have not touched on. Spread betting is now a very popular means of following football, tennis and other sports.
All that brings us to address the question of cheating. I am afraid that cheating is always found in the presence of large sums of money, as well as in sport and gaming. The noble Lord, Lord Faulkner of Worcester, ably chaired a group which produced an excellent report on this issue. He invited the noble Lord, Lord Condon, to submit evidence on the incidence of international cheating in sport. The noble Lord, Lord Condon, asked us a most interesting question: globally, which sport did we think was the origin of the most widespread cheating? We all considered the obvious ones, but curiously enough it turned out to be cricket. I had always thought cricket to be a gentle game, one where I used to pick daisies while at longstop on a pleasant afternoon. Apparently, however, in the Far East and other places it is a hotbed of skullduggery.
We shall be discussing matters of this kind in Committee. However, as I have said, other jurisdictions such as France keep a tight control on gambling activity through strict public policy. The Ministry of the Interior holds gambling tightly by the throat. Indeed, taxes on casino operators in France are very high. They are visited by police officers—they may not be in uniform, but they are police officers nevertheless—on a regular basis to see that they are operating correctly. You cannot get a slot machine in France, even though you have permission to operate, unless you have operated satisfactorily for one year. This means not just operating a clean house but producing good restoration, live entertainment and all the other matters.
I have never thought that the strategy for large casinos could be left to the market, whether they be regional casinos, which I personally hope will not

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happen, or casino resorts, which I hope will happen for the reasons mentioned by my noble friend Lord McNally. Blackpool is an excellent place to start, with its huge tradition for entertainment and enormous energy, although the future is uncertain. Because of the economic displacement and social problems, however, there needs to be a central strategy. I do not see how this can be left to the market without creating even greater problems than we have now. Many of the existing operators who depend on grandfather rights—previously supporters of the Bill—are now shouting very loudly because they are worried about the larger jackpot machines which will deprive them of business. I entirely sympathise with them. The Government have a great deal of work here, and I am sure that we shall be able to sort some of that out in Committee.
In so far as children and gambling do not mix, I do not know. I could play poker, vingt et un and back horses on a regular basis before I was 12. I wish I had not. I am delighted that none of my children has shown the slightest interest in gambling. My parents, who were not gamblers, told me, "Beware, there is gambling in your family". My grandmother was a compulsive gambler. Gambling is done for psychological reasons. Perhaps it provides excitement and fantasy, things which people need in their lives to lift them from possible depression. I do not know what it is. I am standing here today, however, and I am not bankrupt. In my day things were very different. There were no slot machines, which are a great problem at the moment, to tempt young people as there are today. One cannot talk down to children in this area any more than any other.
Lord Evans of Temple Guiting: My Lords, I apologise for interrupting the noble Viscount, Lord Falkland, but if we look at the Companion to the Standing Orders it is recommended that speeches should be kept to 15 minutes.
Viscount Falkland: My Lords, I am sorry. I did not look up at the clock. Anyway, children represent a very large problem in regard to gambling. Whether it is possible to stop children gambling in amusement arcades, I do not know. I honestly think that the culture is too deeply ingrained. Children ought, however, to be taught about gambling and its dangers. Having said that, I shall take the advice of the noble Lord and sit down.
7.3 p.m.
Lord Walpole: My Lords, I declare, as did the Minister, an interest: I was a sitting magistrate for 20 years, including six years at Great Yarmouth. I am not sure whether it is the Blackpool of the east coast or whether Blackpool is the Great Yarmouth of the west coast. I am not sure. I am also vice-president of the East Anglian Tourist Board, and still keep up with tourism interests. It is from that background that I worked as one your Lordships' members on the pre-legislative committee. I was the only Cross-Bencher. I
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was not, as a noble Lord referred to me a moment or two ago, a "non-party member"; I am a Cross-Bencher. I think I was the only person on that committee who did not own at least one part of a horse.
The objects of the Bill are extremely good: the protection of children, the prevention of gambling becoming a source of crime and disorder and ensuring that gambling is fair and open. It is an ambitious Bill, because it repeals most of the existing legislation and starts with an absolutely clean sheet.
When I started to write my speech, I decided to try and choose a few points that no other noble Lord had said. As they have made most points, I should, with luck, be able to finish my speech by about 7.10 p.m.
I certainly welcome the increased powers of the Gambling Commission and the appeal tribunal. Quite honestly, however, I am concerned that the commission will not cover the National Lottery at the moment, and feel that, after the next round of operator appointments, it really should. The commission should include spread betting, which, for the moment, will stay with the Financial Services Authority. The full integration of all three, with the close co-operation of the sports ruling bodies, is an ideal we should be striving for. I look forward to secondary legislation, which will achieve this in the long run.
I still prefer the phrase "destination casino" to "regional casino", which keeps being used. Great Yarmouth wants them, as does Blackpool. Both places would be absolutely suitable, because they want them for exactly the same reasons. The Commons amendments keeping the numbers down are a very good idea. The Australian experience shows that if you let people have things, you cannot take them away from them afterwards. If we are going to have regional casinos—big casinos or little casinos—eight at a time, all over the place, for heaven's sake do not go beyond that. It is almost too high a number until we are absolutely clear what we mean.
The Minister and I are different. I am a mere scientist, and he is an economist. What I do not understand—no doubt he will able to explain it to me—is where the enormous amount of extra money for all this increased gambling is coming from. I fear that it will come from other sections of the tourism industry, leaving aside the problem gamblers. I share the unions' concern that all these extra jobs that will be created will be lost elsewhere, especially in the tourism industry. The Government, of course, are going to collect more money, but a very nice report from the National Audit Office—HC188, Session 2004–05, published on 14 January—suggests that Her Majesty's Customs and Excise has great difficulties collecting all gambling duties. From what I understand, that is not from the very nice casino operators. Their chances of not being accurate are less than some other areas of betting.
I also notice that local authorities will have many more duties under the Bill. I hope they will be able to cope. My experience is that I hold a justice's restaurant licence, and have done for some 20 years. As noble

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Lords will know, administration of this has now been transferred to our local authority. Last Friday, we received a letter from our local authority, inviting us to a seminar on how to fill in our form for an application for renewal. Whether the forms are appallingly badly designed, or we are incredibly stupid, or the local authorities cannot cope, I am not clear.
I have been encouraged, however. What am I encouraged about? I scribbled it down, so I cannot read it. I know it was Christmas Day, for one thing. There was an encouragement about teddy bears as well. I did not think teddy bears were anything to do with gambling. It was only when I got on to the committee that I discovered they were. I like penny falls as well.
At this stage, however, the Bill is a curate's egg. So let us try, together, to improve it.
7.10 p.m.
Baroness Golding: My Lords, the British gambling industry is well respected and well regulated. Our 136 casinos have given little or no trouble, and neither have our betting shops, bingo halls, seaside arcades or adult gaming centres. But times change; gambling has changed, in part driven by technology. With the advent of remote betting, online gambling, betting exchanges and new machines, the industry has moved with the times, and the Government need to as well.
The Government urgently need to bring our laws up to date. This is not the 1960s; it is 2005. Technology will not stand still while we dither and try to put every little and dot and comma on the face of the Bill.
The pre-legislative committee on which I sat had the advantage of being able to look at the industry in some detail and talk to the people who work in it and are affected by it, whether they are trade unions, Churches, gamblers, bookmakers, casino operators or local authorities. Whoever we spoke to recognised that gambling had changed and that we needed laws to deal with that change.
Many people have failed to grasp how out of date the law is. How, for example, can a law passed in the 1960s be expected to cover the opportunities that unregulated Internet gambling offers for unrestricted gambling in your own home? Gambling is fairly easy to regulate in casinos and bookmakers' shops where people are seen, but if we do nothing, the big growth in problem gambling will be behind closed doors in front of computer screens.
People who criticise the need for the Bill should realise that it is overwhelmingly about regulation and not deregulation. It is about supplying a coherent framework that will give confidence to the consumer and the industry while allowing people to spend their leisure time in a variety of ways. Very importantly, it will help to protect people from addiction and put a coherent framework in place to help those who slip through the net.
That is not to say that there are not issues to be resolved. I know that there are. The Gambling Commission—the tough new independent regulator—has yet to be set up. How long will it take? Will it delay
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the implementation of the Bill? Can places such as Blackpool afford to wait? Given that local authorities have only just taken over power under the Licensing Act 2003, how long will they need to be ready to take over the additional powers of licensing gambling premises?
The bookmakers are concerned about licensing, or the lack of licensing, on the exchanges. They say that a bookmaker who has been refused a permit to operate can still lay bets on the exchanges, even though he has been deemed to be not a "fit and proper person". The question they reasonably ask is at what point does a layer begin to act as laying in the course of business, and should he or she then come under the same fiscal and licensing regime as bookmakers? Perhaps the Treasury should be looking at the question and showing an urgent interest in it.
Some people have expressed concerns about children continuing to be allowed in seaside arcades because of addiction. The pre-legislative committee found no evidence to support that point of view. If it were true, we would have more problem gamblers in this country. We do not have any more problem gamblers than other countries—indeed, we have far fewer. I hope that the Government's amendments will give the seaside arcades the reassurance for which they have asked.
The casino industry continues to have some concerns, as do the small lotteries and greyhound racing operators. I look forward to dealing with those issues in Committee.
In conclusion, after a lot of hot air, the Government have got the Bill almost right. I hope that your Lordships will allow it to proceed without too much delay. The question we should be asking is not "Should we pass the Bill?" but "Can we afford not to?".
7.15 p.m.
Lord Steinberg: My Lords, I wish to declare several interests. I am currently the non-executive chairman of Stanley Leisure plc, a company that has been in the gambling business for practically 50 years, as have I. I am also a large shareholder in the company, and have been involved in various trade organisations over the same period.
I am very grateful to the Minister for his concession about not having racing on Christmas Day. I hope that his same good graces can extend to Good Friday. Equally, on behalf of the racing side of my company, I am grateful for his comments about requiring betting exchanges to register all their clients. This is good progress.
I shall talk purely about casinos, the issue that has caused the Bill's main controversy. I should like to make my position clear at the outset. I do not intend to enter into the debate of what is right and what is wrong with the Bill, nor do I intend to criticise the Government or any other bodies concerned with the progress of the Bill, or the lack of it. I simply want to give the benefit of what little knowledge I have

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acquired over the years so that some of the misconceptions your Lordships may have can be laid to rest.
The first issue I shall tackle is money laundering. Let me start by giving a few statistics. Under the current voluntary money laundering code of practice introduced in 1996, the following transactions must be recorded: single transactions of £25,000 or more, or multiple transactions in one gaming session of £10,000 or more. The records are retained for five years. When the Money Laundering Regulations 2003 are implemented, the above trigger amount will be lowered to 1,000. There does not have to be any suspicious activity connected with the above transactions; the mere fact that the transaction takes place means that it must be recorded. An estimated 100,000 such reports are generated across the estate per annum. That number will be quadrupled when new regulations are introduced.
There is no lower monetary limit in connection with suspicious transactions. If a player exchanges £100 at the cash desk for gaming chips, does not play and later returns to the cash desk to exchange those gaming chips for a win account cheque, that could be regarded as suspicious and, if it is, it must be reported.
During 2003, our money laundering reporting officer submitted 96 suspicious transaction reports. During 2004, there were 103 such reports. In relation to those reports, there has been no prosecution of any person. I can also state that there has been no prosecution in Great Britain of any casino operator for money laundering matters. We have no knowledge of any prosecution resulting from a criminal attempting to wash his money via casinos by, for example, coming in with £10,000 in dirty money and walking out with £10,000 in clean money.
Money laundering is, with respect, carried out by transactions which are used to conceal ill gotten gains from criminal activity and from drug activity, which forms by far the greater part of the criminal proceeds. There is no opportunity for any transaction being handled through a casino which could result in money laundering. May I explain?
Each person who comes into a casino is either a member or a guest of a member. Each member has to sign in, and signs in for the guests. The guests have to produce identification separately from the member. This procedure has not helped people coming into casinos because of the need to produce passports, driving licences or utility bills to show their residence. But when these regulations were made, there was a small drop in attendance which has since been corrected.
If a person coming into a casino were intent on money laundering, he would have to conceal his identity; otherwise he would risk prosecution. The casino in no way helps individuals to do that. In order to change cash for chips, either at the cash desk or the table, a note is made of the person engaging in the transaction. If a substantial amount of cash is changed for chips, and the activity of the player is very minor in
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relation to the amount of money he has exchanged for chips, it is a sign that something is amiss. On cashing in his chips, if he has given in large amounts of cash and requests a cheque, he will not receive it. He will receive his cash back in exactly the same way as he gave it and the transaction will be reported.
Our company, with 41 casinos throughout the length of the country including four in London, has never been faced with a problem which has resulted even in an investigation. It is so important to understand that casino operators handle their transactions in an open and transparent way and that that ensures the prevention of money laundering in casinos. Everyone in the business is very aware that one of the arguments raised is that casinos are targeted for money laundering. Nothing could be further from the truth.
I hope that I have given noble Lords the background on money laundering. It is not for me to say where money laundering takes place. However, the opinion of the casino industry is that it is far more likely to take place through financial institutions than casinos.
One of the Government's headlines regarding the Bill relates to the protection of children. Nobody under the age of 18 years is allowed into a casino. I admit that there have been attempts, but they have been dealt with immediately at the reception area. There have never been prosecutions of any person or casinos where someone under the age of 18 has been allowed on to the casino floor. Like money laundering, it is a reason used to discredit the casino business. It is untrue in the same way that money laundering is untrue.
Betting shops and casinos display notices about people under the age of 18 not being allowed into betting shops and casinos. Reception and management staff are vigilant to ensure that nobody under 18 gets on to the casino floor. Therefore, points raised about money laundering and the protection of children are well looked after by the current industry.
The issue regarding the protection of the vulnerable is important, involving principally those who may have a problem with gambling. The record of the British industry shows that Britain has the lowest number of problem gamblers of any developed country in the world which allows casinos. Incidentally, as has been mentioned, Australia has the highest number of people registered as problem gamblers. What is a problem gambler? A problem gambler is someone who will gamble more than he or she can afford but will chase his or her losses; he is someone who will run up debt and effectively can cause a break-up in family life. It is the same kind of problem as that which faces an alcoholic. Basically, treatment is required by a psychiatrist who is able to deal with this type of disease—because it is a disease.
In Great Britain, fewer than 1 per cent of those who visit casinos have that type of problem. In the main these people identify either with Gamcare, the Samaritans or the National Council for Gambling. We in the casino industry do our part in trying to help refer people who have those tendencies to the correct organisation. The gambling industry recently put £3 million into a trust fund to help deal with the problem. We in the casino

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industry feel that there is nothing worse than having a problem gambler and we try wherever we can to eliminate it.
I hope that I have dealt with the issues of problem gambling, money laundering and the protection of children. I believe that the British casino industry is run in exemplary fashion. Casinos provide over £200 million per year in taxes. The gambling industry employs in total over 100,000 people. Our own company employs 7,000 people, of whom 60 per cent are employed in the casino division.
Gambling has been with us since time immemorial. Going back to Roman times, gambling was spoken of and written about. A couple of quotes from 2,000 years ago will demonstrate what I mean. In 43 BC, Virgil said:
"The God delights in odd numbers".
In 99 AD, Tacitus said:
"The more I reflect upon a great number of events, past or present, the more I recognise the effect of chance in all earthly things".
And, finally, from the same era, Cicero said:
"Probability is the very guide of life".
Gambling has been around for ever. There is a misguided perception that gambling is wrong. It is always shown on television with violence attached. The only good thing about the film "Casino" was Sharon Stone. Those kinds of dramatic events just do not happen. The violence, thuggery and concocted stories are all used in a surreal way but have absolutely no reality in life. But people love gambling. I am sure noble Lords have heard of the famous gambler, Nick the Greek. He said:
"The exhilaration of this form of economic existence is beyond my power to describe".
And he had another famous saying:
"The next best thing to playing and winning is playing and losing. The main thing is to play".
We get innumerable misunderstandings about the gambling business, some of which are laughable and farcical. We know that whenever a programme is likely to be shown on television with a gambling background, it will indicate a gambling problem. The great English essayist, Charles Lamb, said:
"Man is a gaming animal".
And, in 1780, in the House of Commons, Edmund Burke said:
"Gaming is a principle inherent in human nature".
We all try to run our business to provide pleasure and enjoyment in high quality surroundings. The food and service that one receives in London casinos are probably better than any 3-star Michelin restaurant. As I should not wish to be considered as engaging in advertising—even though it will be permitted under the Bill—I shall not mention the names of those casinos.
Perhaps I may give a few more statistics. Our 41 casinos have an average weekly attendance of 60,000 and during each week approximately 20,000 players leave having won money. The approximate average of money exchanged for chips in provincial casinos is
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£230 and the average loss is approximately £40. In other words, for their £230 each person receives back £190, an average margin of gross profit of 17 per cent. Yes, the odds are designed in casinos' favour but people can and do win. It is a form of entertainment. It is a challenge. It is a social activity. It is a place to go for people on their own. It is a place to go with friends and with business colleagues. I shall not be giving away any secrets when I tell your Lordships that my 87 year-old mother-in-law goes to her local casino twice every week where she meets her friends. It is so important for your Lordships to understand that a great many people get a great amount of enjoyment from it.
Michael Pakenham said:
"If you have never gambled, you are precociously rare and probably terminally boring".
I do not suggest that of any Member here.
The former chairman of the Gaming Board was Lord Allen of Abbeydale. He developed the Gaming Board in its current state, which runs well. We are all happy with the way in which the Gaming Board runs the industry.
That is all I wish to say. I could have said a great deal more because I have been in the business just short of 50 years. I have sought hard to give background and information. I hope that noble Lords have found it helpful.
7.30 p.m.
Lord Roberts of Llandudno: My Lords, I am completely overwhelmed by the knowledge with which we have been regaled today; it goes far beyond my experience.
The Bill has certain attractions, especially for folk such as my noble friend Lord McNally who see the situation in Blackpool, the possibility of regeneration and a future that is far superior to the present time. If the Bill is adopted, local authorities will see it as an opportunity for new income and new hope.
However, there is a flip side. We have received letters from many people who are worried about the Bill. The hospice movement, for example, is concerned about how some of the new regulations will affect it. I hope the Minister will be able to set my mind at rest. The movement will have to contact its members and that means that the postage will sometimes be prohibitive. I know that Ty Hafan in Cardiff and some of' the hospices in my part of north Wales hope very much that the new imposition will not reduce their income.
Far more than that, there is also the issue of the whole principle behind the Bill and the tension between freedom and responsibility. It might look attractive to reject long-standing restrictions but we know that if we value our place in society we have a duty to act responsibly. If we all lived individually on little islands we would be all right; we could do exactly what we pleased and it would not affect anybody else. But in a society, in a community, we have to relate to others and we are responsible for the way in which we relate. This means restricting our own actions if they possibly could hurt or damage other people.

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It is clear that gambling does harm. Even the Minister himself, in his evidence to the Joint Committee, admitted that the increased gambling which would follow from the Bill could lead to more problems and more problem gamblers. The amount of gambling is related, of course, to the number of people who suffer in that way. If gambling was not harmful at all, there would be no need for any regulation. The fact that there is regulation means that there is knowledge that gambling is harmful.
Last March, the Secretary of State responsible, Mrs Jowell, stated of the new Bill:
"I do not accept that it will lead to an increase in problem gambling … If this legislation gave rise to an increase in problem gambling then it would have failed and would be bad legislation".
That is not held out by the Minister in this House.
The Joint Parliamentary Committee stated:
"Almost all the evidence we have received points to the fact that this legislation would increase the number of people in the United Kingdom with a gambling problem".
One estimate, for instance, is that if the proposals for casinos were implemented, another quarter of a million people could become gambling-addicted. Figures from the United States show that in the state of Wisconsin an average of 5,300 additional major crimes a year can be attributed to the presence of casinos.
Moving from the high-level casinos to the more humble slot machines, the director of the Rhode Island gambling treatment programme, Mr Bob Breen, said only last week that slot players are more likely to become addicted—and faster. They say, for instance, "It's only a nickel. How much can I blow?". He said that within a year they have lost their investments, they have lost their retirement, they are getting divorced and they are stealing from their employer.
The extended opportunities of the Gambling Bill could have a totally detrimental effect on the lives of hundreds of thousands of people. When the Bill states that it will safeguard children from excessive gambling, how are we to safeguard the children of the families of gamblers? They will suffer deprivation, and all because of the Bill.
Who will benefit from the Bill? A street survey in my own part of north Wales, Llandudno, and in the university of Bangor found that only a handful of people were in favour of the proposed mega-casinos. But the Government carry on regardless of opposing voices. It seems from certain reports that the Government want positively to encourage gambling. In the Department for Culture, Media and Sport document of April 2003—The Future Regulation of Remote Gambling—paragraph 133 stated:
"It will need to bear in mind the Government's desire to see Britain become a world leader in the field of online gambling".
If that is not encouraging gambling I do not know what is. The only people who will benefit are those who have already made their fortunes in similar ventures in other places.
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We are in for an interesting time debating this measure. But I would ask the Government—a Labour Government—whether this is part of their socialist vision. Does it assist the poor? Does it protect the most vulnerable? Is it a Bill that shares out the wealth of the nation in a more equitable way? It is time for the Government to think. This is not a part of their vision. It is totally contradictory to anything the Labour Party has ever stood for.
It would be well if this measure was defeated, or withdrawn by the Government at this stage, and another Bill introduced, after the election, which will deal with its weaknesses but which will also make certain that the number of people who suffer from gambling will not increase.
7.37 p.m.
Lord Lipsey: My Lords, I must start by replying to a couple of points made by the noble Lord, Lord Roberts of Llandudno. The figures he gave for the increase in problem gambling that can be expected as a result of the Bill were both scary and without foundation. I am a member of the advisory board of the Centre for the Study of Gambling at Salford University. To summarise the views of Peter Collins, the well respected professor there, if you have more casinos alone you will have more problem gambling; if you have more casinos with the measures contained in the Bill to deal with problem gambling in place, you will not have more problem gambling. He believes that an increase cannot be expected on the basis of the international evidence, so we should be very wary of the noble Lord's predictions.
The noble Lord, Lord Roberts, asked the interesting question of whether the Bill was a part of the vision of these Benches. My reply is this: it is not in line with the total tradition of socialist thinking in this country. In the days when it was, that vision was not getting the support of the people. In the words of my late boss, Tony Crosland, the people were not happy where total abstinence and a good filing system were the marks of a good socialist. The people wanted a bit of fun and pleasure. That pleasure—which in the case of gambling used to be confined to the ruling class—should be extended more widely so that people could have choice and the freedom to enjoy their leisure. For me, reasonable rules on gambling are very much consistent with the socialist philosophy to which I still adhere.
Before going any further I should declare an interest or two. One is the small investment I have made in my bitch, Tooting Becky, in the 8.15 at Wimbledon tonight—but, judging from the trainer's remarks, I would not recommend that all noble Lords rush from the Chamber, bookmakers' cards in hand, to join me in that investment. More importantly, I am chair of the Shadow Racing Trust which, under the legislation passed by this House, is to transfer the Tote to the ownership of racing, and chairman of the British Greyhound Racing Board. So the noble Lord, Lord Roberts, will understand why I feel strongly about these matters.

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I want to talk a little about procedure on this Bill. For a long time I thought that the procedure was an absolute model of how the country should handle legislation. The Budd committee produced a remarkable and balanced report. A White Paper was produced entitled A Safe Bet for Success. There was the draft legislation and the admirable work of the Joint Committee, from many of whose members we have heard this afternoon—that committee was superbly chaired by John Greenway from another place—the Government's response and some reworking. But then things went awry. They went awry because the Daily Mail in its characteristic fashion launched what I thought was a rather scurrilous campaign against the Bill, but that is a matter for that paper. I sometimes wonder whether we in this country are still a democracy or a "Dacrocracy".
I considered that the result of that was extraordinary and unparalleled in my longish experience of politics. It was not so much that the Government and the Opposition made an immediate U-turn, but it was like one of those fireworks where streamers go off in every direction. The crackle could be heard round the land as the Government and the Opposition tried to find their bearings because the Daily Mail did not like the situation.
There followed a Committee stage and further proceedings in the Commons that cannot be regarded as satisfactory. As I say, the Daily Mail has every right to campaign if it holds certain views, but as a result of its campaign the Government focused too exclusively on the casino question, which is not the sole question of importance in this Bill. Wearing my British Greyhound Racing Board hat I refer to the proposals in the Bill on the future of the track's present monopoly of pool betting. In the opinion of those who know the industry best, the proposals would snuff out the nascent recovery in greyhound racing. I could not recognise the proposals in the Bill very easily from the description given by my noble friend the Minister. However, I do not think that I shall attract his attention to enlighten him even now.
What discussion was there of the proposals in the Commons? It amounted to half a column of Hansard. They were raised quite properly by Richard Page MP. The Minister gave an extremely sympathetic reply; we cheered "Hoorah", but when he got back to the department his officials evidently persuaded him that he was wrong to be sympathetic to the proposals, and that was the last we heard of them. Some 3.5 million people per year attend greyhound racing. Thirty-one tracks and tens of thousands of jobs are about to be torpedoed by a consideration that incidentally runs quite contrary to that in the Budd report. That is just one example. I am grateful to the noble Lord, Lord McNally, and the noble Baroness, Lady Golding, and others for raising the greyhound racing question.
Many of these issues arise in the Bill. We have heard about seaside arcades and society lotteries. Normally in this House we would allocate five or six days to this Bill in Committee, three days on Report and we would stand a very good chance of putting the matter right. However,
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the trouble is I do not think that we have that amount of time. There is something coming along called an election. I hope that my noble friend Lord McIntosh will persuade the Prime Minister to postpone that election so that the Gambling Bill can have proper consideration, but I suspect that that would stretch even his powers of oratory. That leaves the House in a very difficult dilemma. We do not want to lose this Bill. As the noble Baroness, Lady Golding, said, it is terribly important to the regulation of gambling. To be honest, I do not think there is any certainty that it will come back after an election given the Daily Mail's reaction to this Bill. I pity the poor Minister who tries to convince the legislation Cabinet committee that this should be the priority in a new government's first term, whatever that government's political disposition. The Bill may not come back and therefore we want to get it through. But equally we cannot shirk our functions. We cannot let seaside arcades or greyhound racing go under just because an election comes along and things get wrapped up in it. We must address these matters; we cannot just accept the Minister's say-so and the DCMS's views on all these issues.
Where does that leave us? It is now down to the Minister. I am glad that we have such an understanding Minister on this Bill. Ministers are trained to the adage, "If in doubt, resist—resist amendment". One understands the reasons why that is so, which include the belief of all governments and their advisers that they have a monopoly of wisdom. However, if that approach is taken on this Bill, we must resist the resistance. We cannot let the Bill go through without serious changes to address not the fundamental thrust of the Bill but the kind of issues that have been raised. I say to the Minister that, sticking as he must with the fundamental principles of the Bill, he must also exercise a much greater flexibility on the important details of the Bill in order to get it through this House. I believe that there is the will on all sides to reach a fair agreement on what truly represents consensus because in the run-up to an election consensus Bills only can be allowed through. It is necessary to win the support of the noble Baroness and of the noble Lord, Lord Clement-Jones. It is also necessary to gain the support of the great broad mass of Peers who with a few exceptions sympathise with the general thrust of the Bill but have concerns about the details.
I trust my noble friend the Minister to get this right. I hope that his seniors in government will not attempt to stand rigid in the face of the necessary questions that this House will raise. On the basis of the consensus that I believe to exist but also mindful of the changes that need to be made, I believe that if the Bill is lost it will be the fault of Ministers.
7.46 p.m.
Lord Phillips of Sudbury: My Lords, I am afraid that the noble Lord, Lord Wade of Chorlton, is not able to speak and I therefore rise to say my piece. We are confronted here with another giant highly technical Bill comprising 225 pages. It constitutes a licence for us lawyers; we at least will do well out of it. I sincerely hope that by the time this Bill reaches the statute book one will be able to say that of the public as well.

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I realise that this is an extremely difficult area of human activity to deal with and police. I also accept that there are libertarian issues which are not easy; there is no point in pretending that they are. It is certainly not part of my case to be a killjoy, let alone a puritan. I believe that the current state of gambling, given a number of improvements suggested in the Bill, is in many ways acceptable. At least we have a clean industry—I am talking particularly of the casino end of it—and we have an uncorrupt industry. It is partly because I think that those two priceless attributes are at risk from some parts of this Bill that I shall make the following remarks.
I agree largely with the summary of the view of the Casino Operators' Association of the UK. As has been mentioned, there are 131 casinos. Some 115 of those are owned by four public limited companies, which leaves 16 smaller, mainly privately and family-owned casinos, and the Casino Operators' Association represents a majority of them. The Casino Operators' Association states:
"Whilst the Casino Operators' Association (COA) recognises the need to modernise the 1968 Gaming Act and strengthen legislation to protect children and the vulnerable, it has fundamental concerns that the Gambling Bill offers inadequate safeguards against increased problem gambling and crime and money-laundering. Despite changes to the draft Bill, the proposed legislation remains strongly anti competition".
A number of noble Lords—the noble Lord, Lord Mancroft, for one—made that last point strongly.
I should like, if I may, to spend a minute or two discussing the context of this Bill. I suppose that before doing that I should express my history within gambling as one of the founder members of the National Lottery Charities Board—one who, like my noble friend Lord McNally, has an occasional and happy flutter, and, indeed, one who in his early days in the legal profession was required by his principal to spend months of his life deep in the heart of the gaming industry, but I shall say no more of that now.
We are dealing with a context of a country currently spending over £8.5 billion a year on gambling—one of the highest per capita expenditures in the world. We have a huge and growing problem of personal debt in this country—again one of the highest in the world. Statistics from the National Association of Citizens Advice Bureaux, which deals with the problems of more than 8 million citizens a year, show that the highest category of problem is that of personal debt.
I do not wish to repeat the figures given by the noble Lord, Lord Jopling, beyond saying that the work of Professor Mark Griffiths at Nottingham University, which is devoted exclusively to gambling, flies directly in the face of the comments just made by the noble Lord. Lord Lipsey. The professor's statistics, which pointed to there being around 300,000 problem gamblers, were not disputed by the noble Baroness, Lady Golding, or the noble Lord, Lord Steinberg. The gist of their remarks was that that was not too high a figure in relation to the size of the industry and the size of the population.
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The point is that if you hugely increase gambling, as the Bill certainly will, and hugely intensify gambling, as the Bill certainly will, it is common sense that the problem figures will rise in step. The evidence given to the Joint Scrutiny Committee was clear. For example, the Royal College of Psychiatrists said:
"It is clearly a fact that if the facilities for gambling in a population increase, the total amount of gambling also increases. This affects all individuals in that population and inevitably leads to an increase in the number of those who gamble to such a degree that damage results".
Perhaps I may also quote from an eloquent letter that I received from a psychiatrist, Dr Nicholas Land. He stated that,
"like any other psychiatrist I have seen the huge damage gambling addiction can cause to patients and their families. The money that families and individuals need for everyday essentials is instead diverted into the pockets of the Treasury and the gambling industry. One of the key factors for problem gamblers to avoid the temptation to return to gambling is limiting their immediate access to casinos. This is greatly helped by the current 24-hour membership requirement",
which will be scrapped under the Bill. He continued:
"Thus removing this 24-hour membership requirement, together with the proposals to increase the numbers and visibility of casinos, substantially undermines the cognitive strategies used to help problem gamblers".
There is a disproportionate concentration of poor people among those problem gamblers, and they are three-and-a-half times more likely than the well off to have gambling problems. I am referring to statistics from the British Gambling Prevalence Survey of 2000. Those statistics were given to the Joint Scrutiny Committee. The same relationship can be found in research in the United States.
I turn to the demand from the public for the huge extension in gambling proposed by the Bill. What do we find? Nothing. No evidence whatever. My noble friend Lord Roberts of Llandudno performed his own local survey and the results of that would be borne out anywhere in the country. There is no demand or cry for an increase in gambling, let alone on this scale, except from the big end of the industry itself.
The 1968 Act requirement for those seeking licences to demonstrate need is to be scrapped. Why? Surely that is the most profoundly commonsense and useful provision that the 1968 Act had. Yet it will be swept from the board. What is the reality? This will be a charter for hugely increased gambling in all its dimensions—outlets, machines, stakes, prizes, advertising and freebies. That is what this Bill is about. On the evidence that I have seen—and I have no axe to grind—there will certainly be an equal and opposite increase in problems connected with gambling.
I suggest that we proceed extremely gingerly with the Bill. The recent Licensing Bill went through this House with much debate and contention. Various protestations were repeatedly made by the Government about how it would do this and not do that. Now, a year or so down the road, there has been an immense public outcry. That could easily be the consequence of this Bill.
Knowingly and intentionally to encourage a massive increase in and intensification of gambling, when the problems created by it, whether of debt or

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addiction, will increase, as both common sense and research indicate, is an extraordinary step for a legislative House to take. I believe that the more strongly due to the disproportionate damage that it does to the less well-off.
Lastly, I refer to some statistics on prize machines, because the evidence suggests that they are particularly dangerous to the poor and psychologically vulnerable. Under the present law, prize machines can have a maximum stake of only 50 pence; the maximum prize is £2,000; the maximum number of machines in any casino is 10. Under the new law, the maximum stake is unlimited: the maximum prize is unlimited; the maximum number of machines per casino is 1,250. So, one new regional casino can have in it nearly as many prize machines as the whole of the casino industry can currently operate.
We would be fooling ourselves if we believed that the Bill will not create enormous social problems. It is not open to us properly to allow the Bill through in its present form, permitting these super-casinos. Finally, the Bill's third objective states that it is for,
"protecting children and other vulnerable persons from being harmed or exploited by gambling".
The Bill not only does not do that, it actually adds to the harm and exploitation that gambling can cause. I am sorry to be so negative about certain aspects of the Bill, but we ignore these realities at our peril.
7.57 p.m.
Lord St John of Bletso: My Lords, I welcome the Bill, both in its objective of modernising the UK gambling laws and its attempt to do so while addressing many of the concerns of problem gambling. I appreciate the concerns that the noble Lord. Lord Phillips, outlined. I have for the past five years been involved in a web hosting company, with many of our customers being online gaming companies.
There is a widespread misconception that the Bill will open the floodgate to remote gaming. On the contrary, it is a means to regulate and provide protections for something that already exists. Without the Bill, UK citizens are exposed to unregulated and possibly disreputable offshore companies that may be unscrupulous in their business dealings. The Bill will make the operators subject to probity tests and the gaming software and equipment subject to fairness testing. That will certainly build in protections to deal with problem gambling.
There is much detail omitted from the Bill which is left to subsequent regulation to be developed by the Gambling Commission. However, one of my concerns about the equipment for online casinos is that the current proposals require remote gaming operators to be either "all in" or "all out" of the United Kingdom. That will effectively require companies primarily based in the UK with some offshore activities such as call centres to move them onshore. Conversely, it will require primarily offshore companies to obtain licences where they only have limited UK connections and equipment or use UK services such as banks here.
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That may result in some companies moving entirely offshore with the ensuing job losses and loss of Treasury revenue.
That "all in" or "all out" test will create the exact opposite effect of the intent of the legislation, which is to provide a compelling proposition for remote gambling companies to remain in or move to the UK. A better approach is for the Gambling Board to have a worldwide right to audit the equipment and operations of its licensees.
Moving from remote gaming to land-based casinos, I am particularly in favour of the Government's proposal for regional casinos, where the gaming space comprises only 10 per cent of the overall facility, with the remainder made up of hotels, restaurants, cinemas, sporting and conference facilities. I certainly support the cause of the noble Lord, Lord McNally, for Blackpool.
As someone who does not gamble, I have often visited Sun City in South Africa for its leisure and conference facilities. It has excellent family facilities. I do not agree with the negativity of the noble Lord, Lord Jopling, about foreign operators investing in regional casinos in the UK. With each regional casino projected to cost about £250 million, they will inevitably deliver significant regeneration, planning and tourism benefits.
It is estimated that if each of the eight regional casinos are successfully developed, they will not only represent an investment of more than £2 billion over the next three years; they could create more than 50,000 direct and indirect construction and operational jobs.
However, I have reservations about the proposal of some commentators to retain compulsory membership of casinos, particularly the regional casinos. Research on the viability of regional casinos around the world shows that a regional casino must attract between 5,000 and 6,000 people a day in order to succeed. The model is premised on public access.
The argument by those in favour of compulsory membership that such membership will prevent money laundering is disingenuous. All casinos have to comply with applicable European Union money-laundering directives, which do not require membership. Moreover, the industry code of conduct deals with problem gamblers. Any further decrease in the number of regional casinos would further destroy the competitive balance between the different types of casinos, thus further diminishing the delivery of regenerative benefits to the UK.
However, I certainly agree with my noble friend Lord Walpole that eight regional casinos is sufficient for the time being. That would obviously have a detrimental knock-on effect on inward investment.
It has been argued that regional casinos could be detrimental to the National Lottery. I defer to the expertise of the noble Lord, Lord Mancroft, with his operational knowledge of society lotteries, but I understand that the evidence in the United States suggests that lotteries have not gone into long-term decline when other forms of gambling were introduced.

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If any pattern can be determined, it might be that as gaming expands, lottery revenues experience a temporary decline for up to a year, with normal growth resuming thereafter. There is also considerable evidence to support the fact that national and state lotteries in jurisdictions without other forms of gaming often decline for other reasons such as poor product appeal.
I shall leave my views on category A and category B machines to the latter stages of discussion of the Bill.
I commend the excellent report by the Joint Committee on the draft Gambling Bill. With the general election likely in May, we have a tight schedule to complete and improve the Bill. After all the expensive preparatory work, it certainly deserves a smooth passage and I commend it to your Lordships' House.
8.5 p.m.
Lord Faulkner of Worcester: My Lords, I start by thanking my noble friend Lord McIntosh of Haringey for the clear and straightforward way in which he introduced the Bill. Those of us who have been following the subject over recent months or, indeed, years, know that it has not been easy for him or his ministerial colleagues in the Department for Culture, Media and Sport and I certainly pay tribute to him for the way in which he stood up to that criticism and has robustly defended the Bill today.
I cannot recall an issue where there have been so many vested interests at work. Some are promoting change because they see business opportunities. Others are resisting it because they want to protect their own position from unwelcome competition. The straightforward commercial interests are not the only ones who have been busy. Some authorities see the Bill as an opportunity to regenerate and rebuild. On the other side are legitimate religious organisations, such as the Methodist Church and the Salvation Army, which are uncomfortable with any expansion of gambling opportunities. As someone who was brought up in the Methodist tradition, I understand and sympathise with that point of view and, indeed, with what the right reverend Prelate said earlier about the dangers of exposing children to risk in amusement arcades.
I have one commercial interest that I should declare at the beginning. For many years before I entered the House, I was an adviser to Littlewoods Pools, having been retained initially at the time of the Royal Commission on Gambling under the chairmanship of Lord Rothschild in the late 1970s. I continue to be an adviser to Sportech, the current owners of Littlewoods, although I severed that link when I served on the main inquiry of the joint parliamentary scrutiny committee. In my view, it would not be appropriate for me to speak about the clauses of the Bill that cover its business this evening, and I shall not. I also have two unpaid trusteeships that are relevant. One is of the Foundation for Sport and the Arts and the other is of Gamcare. Both are good causes that obtain funds from sections of the gambling industry.
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As I said, I served along with four other members who have already spoken in the debate, on the Joint Scrutiny Committee, which I found an enlightening and fascinating experience. We worked together constructively on an entirely non-partisan basis and it is worth putting on record that the Members of this House achieved an impressively high attendance record during our sittings.
In the main report we made 139 recommendations, of which the Government, to their credit, accepted 121. I would not go as far as the leader-writer in the Guardian of 23 September last year, who claimed that the Joint Committee had,
"saved her [the Secretary of State] and us [the country] from disaster"
because we had,
"stopped many of the bill's worst features in their tracks".
But it is undeniable that the Bill is very different from the draft Gambling Bill that first saw the light of day in 2003.
Underlying that is the Government's repeated determination—we heard it first from the Secretary of State at the Joint Committee—not to pass legislation that would directly increase the number of problem gamblers in Britain, and to regulate properly and fairly the new aspects of the gambling industry that have grown up over the past 30 years.
I agree with the two noble Lords who spoke from the Liberal Democrat Back Benches that the Joint Committee warned that the Bill in its original form would have added to the number of problem gamblers. But the fact that the Government accepted 121 of the committee's 139 recommendations reduced that risk. The risk was reduced further by the additional changes made in the Standing Committee in the other place, when the scale of the Bill was substantially altered.
The crucial objectives of protecting the vulnerable and children will be assisted by measures in the Bill and are the central reason why the Bill must be enacted before any general election. They include support for the Responsibility in Gambling Trust, with the reserved powers to impose a levy on the gambling industry if necessary; removing gaming machines from unlicensed premises such as minicab offices and fish-and-chip shops; carrying out a national survey into gambling participation and problem gambling, and reserve powers relating to the admission of children to amusement arcades.
The objectives will also be helped by the decision to reduce the number of new casinos to 24 rather than allow the market to determine the number. At one point we were looking at the possibility of 20 to 40 very large regional casinos. Although the Joint Committee did not recommend a specific number, the approach that the Government adopted in the other place and that is contained in the Bill is very much in line with the committee's view.
The Government's decision to appoint an independent panel to advise on the location of the new casinos also makes a great deal of sense. It is a pity that the committee was not told about that when it was carrying out its scrutiny because I am sure that all our

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members would have been interested in it and would have welcomed it. I hope very much that the wise people who make up that panel will take seriously the Joint Committee's comments about the need to ensure that regeneration benefits flow from any decisions to approve mega regional casinos. In our first report, starting at paragraph 388, we described what those benefits could include.
I listened with great interest and enjoyment to the remarks of the noble Lord, Lord McNally. The Joint Committee was much impressed with the evidence that it received from Blackpool, which was the only local authority able to demonstrate to us that it had thought seriously about the potential for casino-led regeneration, and had secured the support of its own residents for it. I agree with what the noble Lord, Lord McNally, said on the subject.
The proposal for Blackpool is very different from the dangers, about which we were told, arising from the proliferation of casinos and other high-stake gambling outlets in town centres and on high streets. Even the most cursory examination of Australia's experience with "pokie bars" in pubs, clubs and so-called hotels shows the risks inherent in the easy availability of high-stake gambling of that sort. The closest that we come to the poker machines found in Australia are the fixed-odds betting terminals (FOBTs) now found in virtually every high street betting shop. The Government are right to keep those under review, and the bookmakers, in turn, are wise to maintain limits on stakes and prizes. A lot more work needs to be done on the effect of those machines over the next two to three years.
New technology creates new opportunities for the gambling industry to make money, but it also brings with it new risks for the vulnerable gambler who has a problem. Other noble Lords, including the noble Lord, Lord St John of Bletso, talked about the growth of internet gaming, which is an example of that. The creation of a new regulatory regime administered by a new gambling commission is the most important element in the Bill and the foremost reason why the Bill should he enacted as rapidly as possible. It is central to many of the issues raised in the Bill.
One of the issues that exercised a number of us who are members of the All-Party Group on Betting and Gambling—my noble friend Lady Golding is the chair and other officers include my noble friends Lord Lipsey and the noble Viscount, Lord Falkland—is the effect that the growth of betting opportunities has had on the integrity of certain sports.
The Joint Scrutiny Committee had had drawn to its attention a number of allegations over the integrity of betting and in particular suggestions that the probity of racing could be threatened, partly but certainly not exclusively as a consequence of the establishment and the growth of the betting exchanges.
It was not possible for the scrutiny committee to examine these allegations in detail. The All-Party Group on Betting and Gambling therefore decided to set up its own inquiry to look at the incidence of, and potential for, irregular and corrupt betting on sports
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and the improper use of inside information. The group came to a number of conclusions and made 15 specific recommendations. There is not time for me this evening to describe these in detail, although copies of the report are available. I am happy to make them available to your Lordships and the Library of the House also has copies.
I appreciate what my noble friend Lord McIntosh of Haringey said about the report and also the kind words of the noble Lord, Lord Mancroft, and the noble Viscount, Lord Falkland, about the way in which we went about our inquiry.
We accepted that the betting and gaming industry in Britain is one of the most respected and highly regarded in the world, and compares favourably with a number of other countries. We found no evidence of widespread or systematic corruption in any UK-based sport. However it did become clear to us that the public has become concerned about the integrity of betting on certain sports and needs to be reassured that cheats are prevented from prospering at their expense.
The use of inside information is one aspect of that and we took some particularly interesting evidence from the Financial Services Authority, which left us in no doubt that much of the information made available to bookmakers and selected punters would fall foul of their market abuse regime if the rules the FSA applied to spread betting applied equally to the gambling industry as a whole.
These concerns have intensified since the growth of the betting exchanges, mainly because of the opportunities that they offer punters to bet against each other, with one backing and the other laying any given event. It is of course self-evident that it is much easier to ensure that a horse, for example, loses rather than be certain that it is going to win the race.
This takes us into the realm of cheating, which is the subject of two of our recommendations. One is that a better definition is needed, which is already contained within the Bill. The second—and one which is strongly supported by the noble Lord, Lord Condon, whose evidence on tackling corruption in cricket was immensely valuable—was that the penalties need to be greater than those envisaged in the Bill.
I enjoyed what the noble Viscount, Lord Falkland, said about his discovery of corruption in cricket. Indeed one can read the evidence from the International Cricket Council about the sort of bets that were offered in recent Test series, where bets are taken on players who wear jumpers, those who wear shades and the number of times that bails are taken off during the course of an innings—these are the sorts of things on which bets are being laid. And if the noble Viscount, Lord Falkland, was fielding at longstop and picking daisies, then somebody would probably be betting on the number of daisies that he was picking.
We strongly supported the principle of establishing audit trails in the betting industry. We commended the steps that the betting exchanges had taken to establish those and believe that the online and credit customers of bookmakers should be covered in the same way We also attached huge importance to the memoranda of

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understanding signed between sports governing bodies and the betting operators. We feel that these should be extended as widely as possible so that all sports on which betting is conducted should have memoranda of understanding in place with the people who are accepting those bets. We also feel that the sports themselves should have a say on what types of bets should be offered on their sports, again because of the evidence we were receiving from the International Cricket Council.
Processes need to be put in place to identify those responsible for large or unusual bets. When these arrangements are linked to the memoranda of understanding with the sporting bodies it should also he possible to identify those individuals who are breaching their own governing bodies' rules on who may or may not bet and lay in their sports.
Out of our 15 recommendations, eight involve the Gambling Commission, whose role in all these matters will be crucial, in terms of protecting punters and improving the integrity of sports betting. For the commission to be established, it will be necessary for this Bill to be enacted. I close with what the Secretary of State said on Third Reading in another place on 24 January:
"the Bill is essential because without such legislation, gambling technology is leaving the law in its wake. If we do not modernise, people will not be protected. Without the Bill, there would be no gambling commission with the objective of social responsibility in gambling at its heart, internet gaming would continue to go unregulated, and there would be no powers to deal with roulette machines in bookmakers' shops."—[Official Report, Commons, 24/1/05: col. 127.]
That strikes me as a pretty good reason for passing this Bill and I hope that your Lordships will do so.
8.19 p.m.
Lord Greaves: My Lords, it has been fascinating to listen to the noble Lord, Lord Faulkner of Worcester, my noble friend Lord Falkland and other noble Lords. One thing is clear: the Bill is a good advertisement for pre-legislative scrutiny. I hope that it will also be applied to other complicated measures before they come to us.
I can declare no interests with regard to gambling. It is not something that I do much. On one occasion, about 40 years ago, my girlfriend—now my wife—and I were about the last people to leave the Liberal assembly in Scarborough. We suddenly realised that we had been relying on each other for our bus fare. We thought, "It's either hitch-hiking to Leeds, or there is one of these one-arm bandit things". We put what we had into the machine, and, when we had enough money for the bus fare, we went and got the bus. I remembered that one of my relatives, who was a gambler, had said to me, "When you're ahead, quit". I quit when I was winning, and I have never seen the need to go back and lose the money—four and sixpence or whatever it was—that I had won. So, I am not a gambler.
One of the things that I find interesting about the debate is the fact that few noble Lords have felt it necessary to talk about the ethical issues. That would
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not have been the case in the 1960s, when, I am sure, a lot of people would have talked about the immorality of gambling and the fact that it was an undesirable activity that we should clamp down on. There is a difference now in attitudes towards gambling. The House of Commons Library research paper on the Bill published on 28 October said:
"The underlying philosophy at that time"—
the 1960s—
"was that gambling was a social 'sin' to be tolerated but not encouraged".
I do not consider myself to be an expert in sin. There may be other Members of the House who know more about it than I do, but it is not something that I am comfortable discussing.
The Minister said that gambling was seen as seedy in the 1960s but was now socially acceptable. I am not sure that things were all that different then. My father filled in the football pools, but we were not socially ostracised as a result. My grandfather used to get all his cigarette money—he smoked about 40 a day—from the horses. Plenty of people gambled in those days.
It is not just the technology that is different now; a lot more people have a lot more money. That allows gambling to take place on a larger scale than before. It is not so much a matter of puritans against sceptics, as it was 40 years ago; the puritans have become sceptics, and the sceptics have become enthusiasts. That is the underlying ethical issue with regard to the proposal for casinos. I do not understand why the Government think it necessary to promote the idea of large new casinos in this country. I do not understand why we need them, and I do not understand why the Government—a Labour government—are promoting them. That is the result of the underlying ethical activity.
I do not know whether there are people who believe that gambling is an activity like any other activity—like playing tennis in the park or spending your money at the pictures. I do not think that it is an activity like any other activity. It is one of those things that. in old-fashioned terminology, would be called "vices". There is something about gambling that, if it gets out of hand, creates problems, which puts in along with all the other vices that are alleged to exist.
I have to say that I am not against vice. Many vices are extremely enjoyable. Some of them will kill you if you indulge in them too much—perhaps all of them will, who knows?
I am not speaking with a puritan attitude, but if some activities are allowed to get out of hand and allowed to develop on too large a scale and if we allow people to become addicted or otherwise harmed by them then harm will be caused to society in general. In those circumstances we accept that the Government have to step in and regulate. I do not believe anyone present wishes to criticise the need for the Bill, as the noble Baroness, Lady Golding, suggested, but most of us feel that 80 per cent of the Bill might be improved, although it is good legislation. However, some of us

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have a problem with the large new casinos. There is an ethical dimension to the Bill and a question mark to be put against that.
When I was in the sixth form, the prefects' common room in my school was a gambling den. We used to spend half our time swatting for our A-levels and half our time playing brag and poker. I have not played them since, but if anyone wants a game, who knows? One minute we would be studying Francis Bacon for A-level English and the next minute we would be playing brag and shouting at each other.
One of Bacon's most famous quotes is,
"money is like muck, not good except it be spread".
I believe that that applies generally to vices. As long as vices are spread around among us all and provided each person does not have too many vices for his or her own good, they are all right. When vices are concentrated or when individuals are harmed by them we have to start worrying about them. Underlying the debate there is an ethical dimension and I do not believe that we should avoid it.
I was lectured by my noble friend Lord McNally about who was more liberal—if he wants, I could have a discussion with him for ever on that—and returning to the nanny state. The whole Bill is about the nanny state. It is about regulation. The phrase "nanny state" is a silly phrase. It is not a matter of whether we regulate, but how, what and to what degree we regulate. He also suggested that one should put one's individual prejudices aside. I am reminded of the comment that one person's prejudices are another person's principles with which he does not agree, or vice versa.
The noble Lord spoke about Blackpool and mentioned the wonderful black and white films shown a few weeks ago on BBC2 made by Mitchell and Kenyon from Blackburn. One of the most amazing scenes in those films was one of the mills in Colne, which is the largest mill in Waterside, the ward I represent on the local council, showing the mill losing, as they said, or the mill workers clocking off. From the way they were dressed, it looked as though they were off on their summer holidays to Blackpool. Summer holidays had just been brought in. One had a week off work without pay and they all had to go to Blackpool by train. It is absolutely right that that source of economy and wealth in that town has gone. No one goes to Blackpool now other than for a day trip or on a coach one evening to see the lights—that is all.
However, Blackpool needs urgent and fundamental change. It desperately needs investment and something doing to it. If that depends on Blackpool becoming north-west England's answer to Las Vegas, there is something very wrong with this country and very wrong with our society.
Generally, I associate myself with the remarks made by the noble Lord, Lord Jopling, the right reverend Prelate the Bishop of Coventry and my noble friend Lord Roberts of Llandudno, so I shall not repeat what they have said.
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The fundamental question that can be asked without affecting the rest of the Bill is: do we need 24 new large casinos and eight regional casinos—or super-casinos as they used to be known? Is there an urgent need in this country for these? Or is there an opportunity to think again and ask why we need these and what effect they will have?
Parts of the new Labour Government who we do not see in this House seem to be obsessed and besotted with certain aspects of big business, the glitzier, richer and more powerful the better—and casino operators fit into that pattern. I do not believe that the people of this country are crying out for these. It the Government were to withdraw those parts of the Bill that refer to those new casinos, I do not believe that they would suddenly lose the general election. It might even do them some good.
The Minister said that local authorities will have the final say and that Ministers will not be allowed to override them. That may be the case. But that is not how the real world of local government works. I know that only too well as a member of a local authority in Lancashire that is in the middle of difficult negotiations and discussions over housing market renewal at the moment. That is a very different issue. Millions of pounds are being promised to our authority so long as we toe the line and knock down enough houses, a suggestion that we blanch at.
Regeneration money very often comes with bullying, blackmail and bribery. If a resort like Blackpool refuses to have a casino, will the answer be, "Well, you had your chance for all this opportunity and investment. You do not want a casino. So you are now at the bottom of the list"? That is how it works—and how it will work—in the real world, I am sorry to say.
There are a lot of questions to be asked if these large casinos are to go ahead. We need to he clear what the Government intend to do to make sure that the presence of a large casino in a town such as Blackpool, Weston-super-Mare or Margate boosts the resort's economy and tourist trade and does not either have no effect at all on it or, worse, drain trade and resources from it. It should bring more business to the existing businesses there.
My noble friend waxed lyrical about how people in Blackpool are dancing in the streets at the prospect. There are a lot of traditional boarding house keepers and private hotel owners in Blackpool who are beginning to realise that they may get none of this trade whatever. There may be problems there. That is a matter we will want to probe.
We need to be clear that such a new large casino in such a resort is aimed at bringing in visitors and that local people are discouraged from going there. When the new casinos were first envisaged it was thought that there might be some in large population centres such as Manchester, Salford or Leeds. People said that the problem in such places was that they would get a lot of trade from local residents who could walk in and get addicted. Alternatively, they might just spend too much of their brass which they should spend in the local pub or on their wife or whoever.

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There are at least 100,000 people living in the immediate vicinity of Blackpool. Those people—although not as many as in Greater Manchester—will be at similar risk. We need to be clear that the Government are taking action to prevent casinos in such places from doing their best to get trade locally. We also want a number of other locally based guarantees of that kind, though I doubt that the Government will be able to provide them.
On the role of the state in such matters, William Blake wrote:
"The whore and the gambler, by the state
Licensed, build that nation's fate".
Why is it that the Government want this country to become internationally famous for having the biggest and best casinos, for having the best online gambling and for being the best place to attract people to that kind of trade? Surely, that is not the image, leadership or position that we want in the world. If it is, I am ashamed to be a citizen of this country.
8.35 p.m.
Baroness Howe of Idlicote: My Lords, it has been illuminating to listen to the differing views and expertise expressed on this subject. I have learnt a lot, as, I imagine, have others of your Lordships. There is obviously support for much of the Bill. Clearly, a huge amount of work went into pre-legislative scrutiny and debates in the other place. As a result, many important changes have already been made.
There is clearly a need to update current legislation, not only because—as with the Charities Bill which the House is also considering—40 years have passed since there was any major overhaul, but also, more importantly, because technological advances have led to considerable growth in online gambling, with an absence of any powers to deal with it.
As for the decision to legislate and allow a whole new range of casinos and gambling machines into this country, like many noble Lords who have spoken, I remain concerned and somewhat sceptical about the motivation behind it. We have heard about the very high percentage of those who think that there are enough gambling opportunities in this country already. I shall not repeat those arguments.
Like other noble Lords, I am particularly uneasy about one aspect of the legislation; namely, the possible impact on children and other more vulnerable members of society. Perhaps I may begin by expressing my rather limited expertise on this subject. I am not much of a gambler. I have a certain addiction to playing bridge but I seldom do so for money. If I do, I will do so only for about 10p a 100. Once or twice a year, if I remember, I may have a modest flutter on the Derby and the Grand National.
On the whole, I am mercifully untempted by gambling. I recognise, as the evidence given to your Lordships makes very clear, that gambling is or can be seriously addictive for some who are mainly—not all of them, but mainly—from deprived backgrounds.
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Above all, it can impact indirectly as well as directly on their children. As so often happens, it is the young and even children who are the most easily tempted.
For all those reasons, our society, our customs and even our laws have always—and, in my view, rightly—leant against gambling. As I understand it. even today a gambling debt cannot be recovered through the courts because the law wants no part in that kind of business. As long as we get the balance right and do not try as we once did to drive gambling underground, it will be a perfectly sensible state of affairs.
As the Secretary of State has repeatedly reminded us, the first of the three objectives of the Bill—by reference to which, once it is on the statute book, everything will be judged—is the protection of children and other vulnerable people from harm or exploitation. Now that we are near the end of the debate, I am sure that noble Lords will be pleased that I intend to keep my remarks almost entirely to the first objective, of protecting children and vulnerable people.
The first of the Government's three "locks", as described by the Secretary of State, is designed to achieve the Bill's objectives by requiring all organisations that are based in Britain and operating remote gambling businesses to obtain a licence from the Gambling Commission. I certainly accept that it makes sense to legalise that form of gambling, if only to set clear boundaries on what will and will not be legal in future. It is already estimated that 16 per cent of the British visit an Internet gambling site every month. Those numbers are likely to grow even faster through the escalating use of third generation mobile phones, about whose growth we have already heard from the noble Viscount, Lord Falkland. Apparently, a primary requirement for granting a licence will be for firms to demonstrate precisely how they will exclude children from using their sites and other facilities. The effectiveness of that provision, if it can be guaranteed, is clearly going to be of paramount importance in protecting children, and has been much welcomed. But can we be sure it will be effective?
There will also be new offences that will make it illegal to invite or permit a child or a young person to gamble. Here, again, it is necessary to remember that problems are likely to multiply with unscrupulous Internet operators operating outside UK jurisdiction, and I hope the Minister will tell the House exactly how the Government can be sure that the Bill will deal with them. Already we know how difficult it is to regulate undesirable broadcast content accessed via the Internet.
If we are aiming to tidy up past anomalies in the legislation, surely it is important to make it quite clearly illegal for children to use some of the machines in category D. As others have mentioned, we have all had strong representations from the Salvation Army and the Methodist Church. They are the people who see the results of children's gambling on the ground, and they continue to urge that the category D machines be split in two, with only the non-fruit machines—that is, only those that give non-monetary prizes—available for use by children. I find their arguments and their research compelling.

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As we have heard, no other western country permits children to gamble in this way. There is a serious worry that the seeds of addiction can all too easily be sown by the use of that kind of machine. I realise that the Bill contains power that could be used in the future, but would not the Government be wise to think again about this point and act now rather than waiting until then? I remember well from my juvenile court days the many reports we heard that amusement arcades were all too frequently a magnet of temptation for truanting children.
Moving on from children, I am less clear about the extent to which, if at all, other vulnerable people are to be protected. I have not heard very much about that. As Alan Simpson pointed out in the other place, there are three times as many problem gamblers in households earning less than 15,600 as there are in those with earnings twice as high. The increased gambling opportunities that the Bill clearly offers are hardly going to help to tackle the Government's proclaimed priority objective of poverty elimination. Perhaps the Minister will be able to expand a little on that when he replies.
In the same context, but specifically in relation to casinos, I am also concerned, like others who have spoken, that the Government propose to drop the 24-hour membership rule before one is allowed to gamble, and that they do not apparently consider it necessary for a casino to require some proof of identity. I hope there will be opportunities to pursue those issues later.
Finally, the citizens advice bureaux have drawn attention to a rather unrelated, but important, issue. I refer to the plethora of bogus lotteries and prize draws that assail us all in increasing quantities, either by mail or, often, from other countries, again through the Internet. It may be that caveat emptor should be sufficient, but it is clear that for many it is not. Indeed, it is plain from the cases quoted by the CABs that, once again, it is the vulnerable who are the real victims. Is not this a problem which a Gambling Bill should address? I hope that the Minister would be willing, in the name of the Government, to consider an amendment in Committee to address the problem.
8.45 p.m.
Baroness Thornton: My Lords, the last speaker must face the fact that almost everything has already been said, but on the other hand there is the prospect that you can say anything you like about what others have said and there is nothing they can do about it. This Bill has been a long time coming, and on reading it I wondered why the Government did not save themselves from a certain amount of confusion in the media, already alluded to by my noble friend Lord Lipsey, in having to explain at every turn that 80 per cent of the Bill is about control, protection and regulation by naming it for what it does: the regulation of gambling Bill.
I should declare an interest from my close association with the children's charity NCH. I congratulate the Government on the care taken on the scrutiny of the Bill and their willingness to consult with and take on board
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the concerns of children's and other organisations. As the Minister knows, I have in mind particularly the issue of Internet gambling and the fact that a child as young as 11 could and still can gamble online as long as they have the use of a Solo or other form of debit card. The age verification systems used by most Internet gambling organisations are either weak or non-existent. When this was revealed to the Government, I am happy to say that they took it on board and I understand that the aim is to strengthen age verification systems in the Gambling Commission's guidelines. My noble friend will not be surprised to learn that we will be watching this development with great interest.
So there is much in the Bill on which to congratulate the Government, which is very necessary because in many ways the law is out of date and irrelevant as it applies to the availability of modern gambling habits. I shall not comment on the issue of casinos large or small, and I shall certainly not venture into the area of Blackpool or not. Noble Lords would not expect a Yorkshirewoman to do so, although I am one who for many years went to Blackpool in her childhood. Rather, I shall confine my comments to two fairly discrete areas of concern.
The other day I was introduced to a young man at a briefing meeting held by the Salvation Army and the Methodist Church. He has kindly agreed to allow me to relate his story to your Lordships, and I am very grateful to him for doing so. I shall quote his statement:
"My name is Mark. I am now 23 years old and live and work in South London. I can't remember exactly when I started gambling but it started to be something I specifically remember enjoying when I was about 12 or 13. This was playing on fruit machines in the arcades when we used to go on holiday to Weymouth in Dorset. Even at this stage, the continuous buzz of the fruit machine got me hooked and I often ended up spending most or all of my holiday pocket money.
"When I was 14, I was allowed out of my school grounds at lunch times and would often go to the local bowling alley where there were 5p fruit machines and would spend my lunch money plus any more I could get my hands on. At this stage sometimes I would get lucky and win a jackpot but for some reason I would always end up putting it back in so I guess even then by this stage I was properly addicted.
"As I got older and at 16 went to college I started to go into bookmakers and play on the higher value machines as well as starting to gamble on the horses and the greyhounds. After six months of college I had to drop out as I had not attended college enough as I had been gambling. This was all very secretive because I didn't want people to know how much or how often I gambled because inevitably the question would come up as to where my finance came from. Of course the answer is that it was stolen, from my family, from my friends and from my workplace. I'm deeply ashamed of this and am still trying to pay some of these debts back now.
"I finally hit rock bottom when I spent over £1,000 in 3 days on gambling and was found out by my family. This was when I had to face up to it, and despite a lot of hurt I live my life normally now. I believe that I have been able to turn away from gambling for many reasons including the support I have received but I believe a lot is down to the fact that I am an adult now and am able to understand the consequences of my actions better.
"The addiction still affects me now in that I am still paying off debts due to gambling and because I am still tempted to gamble now. As a child, playing on these fruit machines caused me to steal and truant, and the effects of these things have had a major impact on my life".

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The issue I wish to raise concerns category D machines. I profoundly disagree with my noble friend Lord Pendry and, indeed, BACTA, whose briefings I have received in the last few days. As the right reverend Prelate the Bishop of Coventry said, the only limiting factor to a child using a fruit machine is whether he or she is tall enough to put money in the slots. As other noble Lords have said, if the Government believe that children and gambling do not mix, I feel bound to ask why, then, are they happy to allow children to play on fruit machines. Do the Government not recognise that the use of these machines is gambling? If slot machines are addictive to adults, how much more addictive are they likely to be to children? Why should the amount of the stake matter, either in terms of vulnerability to likely addiction, or for its appropriateness for children? Anyway, I do not think 10p is an insignificant amount for a small child, and winning £5 is certainly a great deal of money.
At present, category D machines include both fruit machines, and the penny falls and the teddy bear grabbers. I welcome—and I hope I understand—what the Minister said, that the Government will be drawing a distinction between these machines and the slot machines. It seems a simple and obvious thing to do. I wonder how many of your Lordships would be comfortable at the sight of your young children, or grandchildren, playing on fruit machines. How young might they he? Five, six, seven or perhaps 10 years old. How much do you think they should stake? 50p, a pound or more? Perhaps you might think they would learn an early lesson if they lost all their money, but what if they won? What is the message that they take away with them? Perhaps, like Mark, they might think it is easy money and come back for more. No, we need to tackle this issue head on.
I found the briefings I received from BACTA yesterday and today both irresponsible and misleading. To suggest that those who wish to protect children and young people from gambling are in some way killjoys, or spoiling family entertainment, is offensive. Indeed, there is evidence to suggest that children are at risk. I realise that some Members in the other place had a bit of fun at the expense of teddy bear grabbers and penny falls, which allowed them to miss the point. I hope that the Government will not do so.
Nor do I believe that not allowing children to gamble will be the death-knell for arcades and amusements in British seaside resorts. It is telling that BACTA refuses to say how much money would be lost by banning children from their fruit machines. Perhaps even it realises that this figure would be an embarrassment, because it would tell us how much it has taken out of our children's and young people's pockets.
Perhaps, like BACTA, I could slightly over-egg this pudding. Throughout history, people who make money from children and young people always fight to be able to continue their exploitation, and they always say that change will destroy business. It is never true—or, at least, if it is true, it is not a reason for not protecting our children. I am sure chimney sweepers
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said the same about not sending young people up chimneys. I am sure gin manufacturers said the same about not feeding gin to babies. I am sure mill owners said the same about not sending children under their mill machines. All those making profit from children should consider this. I ask the Government to bite the bullet on this issue. Like the right reverend Prelate the Bishop of Coventry, I would say they are nearly there, so let us go the whole way.
The other issue I would like to raise is that of identification. Clearly this is a very important issue when protecting young people, with their propensity to see age limits as a challenge to be overcome. I have a 16 year-old, and I can testify to this. As far as I can see, positive ID is not required either to enter regional casinos or, perhaps more importantly, to play category A machines. I asked this question at one of the useful meetings the Minister organised for all Peers, and I am afraid that I completely failed to understand the answer I received from the official concerned. He spoke at length and helpfully about European regulations and money laundering. I am sure it was my own stupidity, but I did not know whether he was saying yes or no, so I am going to have a another go at this question. How will the Government prevent young people—probably in the 15 to 18 year-old range—accessing the new casinos and playing on category A machines?
In conclusion, I congratulate the Minister on his introduction of the Bill, thank him for the discussions that have already taken place, and assure him of my support in getting this important Bill into legislation.
8.54 p.m.
Lord Clement-Jones: My Lords, I thank the Minister for introducing the Bill with his customary forcefulness and clarity. Getting to this point has been a long and tortuous process. As a newcomer on these issues in the House, I pay tribute to the quality of the debate and express my respect for the expertise which has been displayed by, in particular, those who have been involved in the scrutiny process, with the Joint Select Committee and the inquiry into the effects of betting on sport carried out by the All-Party Group on Betting and Gaming under the chairmanship of the noble Lord, Lord Faulkner of Worcester. Noble Lords have today revealed much racier pasts, certainly in the case of my noble friend Lord Greaves, than I ever anticipated hearing.
Although over the years I have been involved with some 20 or so Bills in this House to date. I confess that I have never seen a briefing and lobbying process in which the regulatory and commercial realities were more difficult to discern. Even the Budd report at the time confessed the difficulty of deciding on certain issues. It said:
"We have found the issue of gaming machines to be one of the most difficult we have tackled".
I echo that.
For every point of view on aspects of the Bill. there is an equal and opposite view from all Benches, often based on commercial self-interest—I absolve noble

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Lords from that—from outside lobbyists, with anticompetitive motives occasionally dressed up as moral imperatives. It is very important to distinguish the genuine issues from the special pleading that we have heard.
I believe that the Government have tried to negotiate between the reefs and shoals—notwithstanding the Daily Mail—and it would be easy to criticise them for some initial naivety and—dare I say it?—over-enthusiasm. But they have listened to date, and I hope that they will continue to listen. not least to today's debate. Several issues, however, still need exploring.
One of the most memorable phrases used by the Joint Select Committee was "cliff edge", referring to the sharp differences between the different types of casino and other establishment which it thought existed. There is no doubt that there is still a need to discuss many of those differences, which are enshrined in the Bill, and the reasons for them.
Looking back to the Budd report, I believe that its general approach to regulation was correct. It was, by and large, an enlightened report in terms of its regulatory philosophy, which I share; namely, that the issue of regulation is essentially one of the need to deal with risk, not one of morality. The main aim should be to keep gambling crime-free, be fair to players and ensure protection for children and the vulnerable so that we do not increase problem gambling.
The extension of choice envisaged under the Bill must be seen in the context, as many noble Lords have emphasised, of making sure that there is no increase of risk in these areas. We will have to test the Bill by that very general set of objectives. Seen in that way, the balance of the Bill is still not right.
There are many positive aspects of the Bill. It establishes the Gambling Commission, with wide powers to enforce gambling regulations. It modernises outdated legislation and has the flexibility to regulate new forms of gambling, as many noble Lords have mentioned, including remote gambling and possible forms in the future, such as interactive television.
The Bill provides for the removal of machines from some unlicensed premises. There are tougher laws to protect children and problem gamblers. It improves the powers available to local authorities in respect of licensing gambling premises.
There is also the potential for the regeneration of seaside towns such as Blackpool, mentioned by my noble friend Lord McNally, by not only casinos but additional services such as entertainment, referred to by my noble friend Lord Falkland, and the hotels, shops and cinemas associated with those casinos. Supporters say that this will attract tourists to casino locations, increase land values in and around casino areas and encourage other leisure developments. If there is a demand for such facilities, they will be built. If there is no demand, I am sure that they will not be.
Having said that, I wish to underline, above all, that we need to ensure that the Bill does not increase the risk of problem gambling. I have listened today with great care to my noble friends on these Benches and to other noble Lords. For compulsive gamblers, the
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increased opportunity may impose moral, ethical and social costs on the community and great personal costs on some families. But it is important to remember, as a number of noble Lords stressed, that our problem gambling rates are among the lowest in the world. I do not accept the doomsday scenario put forward by some noble Lords about the outcome of the Bill.
I appreciated the new Labour term coined by the noble Lord, Lord Lipsey, in the context of discussing his gambling experience. The word "investment" was used. I know that it is a much favoured Treasury word. The noble Lord seems to be bringing it into a new context.
Despite extensive discussion of the draft Bill by the Joint Select Committee and in the Commons, there are still aspects which we on these Benches believe must be changed before it leaves this House. There are a number of areas where, quite simply, the Bill gets the emphasis wrong.
First, we have a straightforward issue of definitions in Clause 14. The time to debate the matter in full will be in Committee. Because of the time available I shall not spell out the precise reasons why the definitions are unworkable. But Clause 14(5)(a) aims to define a prize competition. The test set out is aimed at requiring a skill, judgment or knowledge element of a competition to be set at such a level that a significant proportion of active participants gets the answer wrong. The problem is that entrants to a competition are, to a great extent, self selecting. In other words, people bother to enter a competition only if they are pretty confident that they have the correct answer—irrespective of the apparent relative difficulty of the competition.
There are similar objections to Clause 14(5)(b). If those definitions which are now statutory under the Bill, as opposed to being developed under common law, come into effect it could well affect the value of the prize competition market which the Government have acknowledged is an essential part and generator of revenue for media of all kinds, including television and mobile phone operators. I ask the Minister about his approach now in the face of the many objections which have been put forward.
A number of noble Lords have put forward points about the production of identity and membership of casinos which will no longer be required after the passing of the Bill. The Budd report recommended retaining the need for ID cards for casino entry. It appears, however, that when the Government introduce regulations to implement the Draft Third EU Money Laundering Directive these will not follow previous regulations and require ID on entry but will require ID only on purchases of a certain denomination of chip.
Currently, every customer entering a casino must either be a registered member, having registered at least 24 hours earlier, or the guest of a member who can provide satisfactory evidence of identity. Such ID checks have enabled the casino industry to remain relatively crime free since 1968 and have ensured that children and young people cannot gamble in a casino and have allowed for the effective operation of self-barring schemes for problem gamblers.

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Under the new regime, there is no proposal for identity checks for customers entering casinos. I believe that on social grounds it is important for all casinos to retain ID requirements. It would ensure that age of entry is controlled to protect children and under-age young people and that problem gamblers can be excluded.
Although some aspects of the Bill on planning and licensing are welcome, we need further clarification. The nature of the commitment given by the Government on the question of a separate use class for casinos is not clear. Will casinos be sui generis with their own use class, as promised by the Secretary of State at Second Reading in the other place?
Correspondence between Keith Hill of the Office of the Deputy Prime Minister with the Evangelical Alliance has been far more equivocal. I very much hope that the Minister can give greater clarity in that respect. There seems to be much vagueness around the edges of the original undertaking by the Secretary of State.
Even then it may be that local authorities have power either to allow casinos or refuse them all. Local authorities should have the power to decide whether or not to allow particular types of casinos. They should also be allowed to take social factors into account when granting planning consent, otherwise an artificial situation will be set up where licensing authorities assume that as planning consent has been granted they should give a casino licence without examining social factors.
Many noble Lords have referred to the issue of what regional casinos really are. The change of name from resort or destination to "regional" casinos was rightly questioned by the Joint Select Committee and mentioned by my noble friend Lord Falkland and the noble Lord, Lord Walpole. What does this mean? Can regional casinos be in town centres? If not, why change the name? Will there be direct competition with traditional casinos in town centres?
How exactly will the advisory committee operate? Will there be adequate consultation with the local community when the pilots are being agreed?
Turning to the thorny issue of machines, the availability of particular types of machines is at the heart of the debate about whether the Bill is operating correctly in relation to children and with fairness to all operators. My first memories—my noble friend Lord Roberts may approve of this—are of going to arcades in Rhyl and Prestatyn. But that does not alter my view. which conforms much more closely to that of the noble Lord, Lord Pendry, and the noble Baroness, Lady Golding, than it does to that of the right reverend Prelate and my noble friend Lord Roberts.
I believe that there is no evidence that it leads children on to problem gambling if they are allowed to play category D machines. Much has been made of the so-called "giant teddy bear" issue—and, of course, it is a serious problem that needs to be addressed—but I
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believe that the case has been made by the seaside resorts and I very much welcome what the Minister said in that respect.
Indeed, I believe that the Secretary of State's reserve power to ban children from using category D machines should be introduced through an affirmative resolution of both Houses; it should be debated on an evidence basis and we should look at the research at the time we do that.
The thorniest issue is the inter-relationship between category A and category B machines. Is the granting of rights to install category A unlimited prize machines for regional casinos and new large and small casinos disproportionate in that context? Is it right that regional casinos should be allowed, possibly in town centres subject to the Minister's reply, to set up in direct competition with existing casinos without any percentage cap on unlimited prize category A machines of which they will have a monopoly?
There is a strong view that this is undue discrimination against tried and tested UK operators in favour of US operators. My answer is not to give the UK operators of existing casinos the right to operate category A machines; that would lead to proliferation, which would be highly undesirable. However, it would be fair for those UK operators to have the ability to operate additional category B machines to give them something extra in the face of the competition they will face from the other casinos. At the same time we have to be mindful of the knock-on effect of any changes.
Much has been made of the 888 formula introduced by the Government in December. How the evaluation will work is absolutely crucial. How exactly will it operate? Will there be piloting for three years after the first licence has been granted? Surely that may mean that only one casino is in operation. The evaluation should operate when we have a critical mass of casinos actually up and running.
Time is running out. I am glad that the issue of greyhound racing has been addressed by the Minister in terms of the betting pool which will in future be operated by greyhound racing operators. However, it is not clear whether that is a short or long-term solution. We also believe that it would be right to have an affirmative resolution for any regulations that would change the winter opening hours for betting shops. I very much agree with those who want to see a ban on any form of betting on Christmas Day and I am very pleased with the Minister's assurance on that.
We obviously have a substantial game of poker ahead of us in Committee. I look forward to hearing the Minister's reply but I believe that we shall need to make many changes in Committee to improve the Bill.
9.10 p.m.
Baroness Buscombe: My Lords, this has been an interesting and in some respects a difficult debate. So many diverse and often conflicting interests are watching with real concern to see whether this Bill will make the statute book and, if so, the form it will take.

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I should like to begin by paying tribute to my colleague in another place, John Greenway MP, who chaired the joint scrutiny committee so ably. It is a pity that the Government did not follow more of the committee's recommendations or they might have avoided the "kill the casino" Bill campaign. The huge media furore following publication of the Bill masked some of the key reasons for this legislation; that is, to establish a Gambling Commission, to regulate online betting and gaming and to introduce some new safeguards to protect both children and the vulnerable.
I accept the concerns expressed this evening, particularly those of my noble friend Lord Jopling. I do, however, strongly believe that we must now seek to regulate remote— that is, Internet and interactive—gambling, to protect the consumer and particularly children. I agree with the noble Baroness, Lady Golding, that no change is not an option. Without this legislation we will have more problem gambling.
I also want to express my thanks to all those who have briefed me in recent weeks and say that while I do not agree with all the many views presented to me, they have been enormously helpful in developing what we believe to be a cogent and balanced approach to the Bill.
I will not take time this evening revisiting the history of this Bill—a task performed admirably by my colleagues in another place. I want to use this opportunity to focus on some of the more pressing outstanding issues that I believe we should consider in your Lordships' House. That said, I and, I trust, the Government are acutely aware of just how unhappy some—in fact, most—interested parties remain. The exercise so far has been a classic example of the Government trying to please everyone and in the event pleasing no one.
What is of crucial importance is to ensure that this Bill provides a strong and clear framework within which the Gambling Commission will operate—without that aim at the forefront of our minds, we might as well all pack up now. Indeed, we will seek to amend the Bill in order to underpin the duty of the Gambling Commission to follow the Better Regulation Task Force's five principles of better regulation. This duty is similar to one that I proposed, and the Government accepted, for the regulator Ofcom during the passage of the Communications Act. It acts as a practical check and balance to ensure a consistent, objective approach to be followed by the commission and nudges the commissioners to keep the three principal objectives set out in Clause 1 in the forefront of the decision-making process.
I shall deal with each of the key issues in turn beginning with casinos. In short, my focus is upon what is best for UK plc and for the culture of Britain. Much of the wider interest in this Bill has been with regard to the proposed regional casinos. While we welcome the prospect of substantial inward investment in principle, we believe that it is important to proceed with great care. We think it is right to consider the first regional destination casinos as pilots in order to measure outcomes. I am concerned with
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ensuring that we monitor the effects of these enormous leisure resorts— the effects upon individuals and communities at large. In addition and of equal importance is the effect these proposals will have upon the existing industry in all its forms from the high stakes in exclusive casinos to the bingo halls and pubs and other licensed premises. I am not going to argue about the exact numbers regarding whether we should have four, eight or 12 regional casinos. It is all a shot in the dark.
I have some remote experience of the kind of regional resorts which we might envisage, having twice enjoyed the fantasy world of Las Vegas. I used the word "remote" since we should not replicate here either the density of Las Vegas in one area, or the details whereby the whole experience of gambling and entertainment is merged into one. We want to see clear, defined areas separating the gambling experience from family and other adult entertainment and leisure facilities. Without that, one can hardly begin to talk about a "safe bet" for success and protection for children and the vulnerable. In addition, I urge the Government to transcend all the arguments put to them and their officials about how the requirement to present identification in these areas would kill the business. That is nonsense and the operators know it.
Technology is improving all the time and if the Government are serious about the key objectives of the Bill, they must support identification wherever there is gambling, not just in response to EU directives, but in response to common sense. In relation to that, I agree with the noble Baroness, Lady Thornton. Indeed, I am concerned that those who continue to believe that identification would be impractical have not taken on board our insistence that the gambling experience must be physically separate from other leisure facilities.
I have referred to the culture of Britain. Little has been said about the other entertainment facilities that might be offered in addition to gambling. We should take this opportunity to encourage the Gambling Commission and local authorities to look closely at what is on offer and to think strategically about facilities that will support more live music, sport and the arts. It is true that many people in this country are against the idea of regional casinos in principle. Frankly, given the prospect of all-night and binge drinking in their towns and cities, coupled with the rise serious crime, it is easy to understand why people see this as yet another ingredient in the mix that will further undermine our collective quality of life.
I have said before in your Lordships' House, and I say again, that more live music means less trouble. Let us have new facilities for promoting a variety of live shows that could significantly enhance our quality of life and diffuse the "evils of gambling" debate.
The location of these new casinos is extremely important. I note that when the Bill was debated in another place, much was said about the need to locate them away from places where people work and live and, instead, have them, for example, in seaside towns. That is strange—and the noble Lord, Lord Greaves,

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referred to this. The last time that I went to Brighton, it was full of people who lived and worked there. The same goes for many of our seaside towns. In short, much more consideration must be given to the criteria to be applied when determining where the new casinos should be located, be they regional, large or small.
The proposals for an advisory panel, appointed to determine where the new casinos could be based, will make sense only if the Minister can persuade your Lordships that the panel will comprise people with proven calibre and experience in planning and social issues and who have a strong sense of commercial reality, as opposed to filling politically correct boxes or parking places for the quangos set. These decisions are too important for mistakes to be made and I worry that this is another example of where the Government would rather wash their hands of any responsibility by creating another tier of bureaucracy to distance themselves in case it all goes wrong.
In any event, a key factor to be considered must be regeneration, both social and commercial, but, please, where it makes sense, not where it might be nice. I wish to declare my support for Blackpool. I agree with—and am happy to receive kisses blown by—the noble Lord, Lord McNally, that in Blackpool there has been a strong connection between civic leadership and local entrepreneurs. Blackpool has done its homework and deserves our support, but there is more to be done before the Bill can be put on the statute book.
There remain some important questions regarding the extent to which local authorities will have real choice. If the regional spatial plans say "yes", to what extent can the local—I mean local—authority concerned influence the outcome? I agree with the Salvation Army's point that:
"Communities must be given the opportunity to express their concerns and fears in the planning process—and these concerns and fears must be listened to".
Moreover, the planning regime should enable social factors to be taken into account when decisions are made. I would appreciate the Minister giving us some reassurances on that today.
On the issue of large and small casinos and the existing estate, we shall press the Government to accept a more equitable arrangement. Although, as the Minister stated, current UK operators will be able to apply for one or more of the new licences, where existing casinos have sufficient floor space to allow an extension in the number of casinos they should not be prevented from so doing.
The Government's position on that is not cogent; it is anti-competitive and anti-UK plc. The Government say that that could lead to a proliferation of casinos. Well, they should have thought about that before embarking upon this exercise. If their way out of a public relations pre-election hole is to discriminate against the existing estate, we will fight it. My noble friend Lord Mancroft is right: the existing British casino industry is well organised and well run; it does not fear competition but is asking for a level playing field.
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I join other noble Lords in confirming our support for grandfather rights for existing operators in seaside arcades, family entertainment venues, pubs and bingo halls. Those rights should include existing machines, products, stakes and prizes. To that end, I am really pleased that the Government have bowed to Conservative pressure and decided that we are right to insist on maintaining current stakes and prizes. With the prospect of more opportunities for gambling in new and larger venues as well as the growing attraction of fixed-odds betting machines available on the high street, surely it must be right to safeguard grandfather rights for pubs, for example, in the Bill.
In addition, the reduction of the stakes from 30p to 10p as a token gesture to those who believe that children playing those stakes are tempted for life just did not make sense. Either you believe that it is wrong in principle that children should play those games or you do not. Although we appreciate the concerns of those who genuinely believe that gambling and children do not mix at any level, we do not believe that gambling for children in all its forms should be banned.
Although we welcome the proposal to ban slot machines from all unlicensed areas, we shall press the Government to go further than the Minister has agreed tonight and drop altogether the Secretary of State's reserve power to ban children from using category D machines. While we welcome the Minister's proposal to exclude certain machines from this reserve power, that concession does not address the principle. We feel that the existing businesses are being unfairly penalised against the new entrants, which, in contrast, will be licensed to operate an extraordinarily high number of machines with unlimited payouts.
I agree with the noble Lord. Lord Clement-Jones. I just feel that the Government still have more to do to present a balanced and fair approach to their proposals for the casino industry and one that, I hope, could be described as based on a modicum of good sense. At the moment, we have a maximum payout in pubs of £25 for category C machines in one corner of the ring, together with 136 existing casinos, which in all likelihood will collapse over time from their inability to compete in the marketplace. Meanwhile in the opposite corner will be 24 new casinos, eight of which will have unlimited stakes and huge payouts. There will be no requirement for ID, apart from some roving security guys, whom, I suspect could not tell whether many teenage children were underage—especially girls these days. No doubt such casinos could offer huge enticements, way beyond the £8 teddy league, to encourage dad to go off for the afternoon to gamble. I am, however, pleased with the Minister's concession to ban gambling on Christmas Day.
We need practical legislation to regulate the new and developing interactive and Internet gambling capabilities. They are here to stay and are very popular with the punter. It is our duty to the best of our ability to ensure that they operate in a way that is open,

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transparent, protects the integrity of the games with which they are linked for betting purposes and, above all, protects the consumer.
In this context there are further issues regarding offshore gambling. The Bill fails to take account of how offshore gambling operators organise their businesses. That concern was raised by the noble Lord, Lord St John of Bletso. At present some have their service situated offshore while their offices, management teams, administration and banking facilities are based in the United Kingdom. The cumulative effect of Clauses 35 and 87 is that these businesses would be defined as all onshore or all offshore. Operators have warned, loud and clear, that if that is the case they will be driven entirely offshore, in which case there will be no opportunity to protect the consumer or support UK plc.
There are further concerns expressed by the bookmakers regarding the degree of regulation of betting exchanges; the betting exchanges are working hard to reassure us that it is not possible to run a betting business on a betting exchange and that there is a clear and defined audit trail showing who is participating and at what level; in other words, sufficient self-regulation. Of course this may not always be the case for all betting exchanges, depending upon the systems for gaming and betting they may adopt. There is no doubt that the Gambling Commission must be responsible for keeping a very close eye upon the new, and as yet unimagined, methods of internet gaming as technology develops, as it
Turning now to the proposal regarding lotteries and prize competitions, we will be proposing amendments on a number of important issues, in order to try and minimise the regulatory burden, particularly for the lotteries raising moneys for good causes, whilst recognising the priority of protection for the consumer. And here I defer to the experience of my noble friend Lord Mancroft but I agree, for example, that it simply does not make sense to single out lotteries for a reserve power to prevent repetitive play, at least where there is no established evidence that rapid draw lotteries represent a particular risk for problem gambling.
We also believe the test for distinguishing lotteries from prize competitions is at the moment unworkable. I agree with the concerns raised by the noble Lord, Lord Clement-Jones, in relation to Clause 14 of the Bill in this context and the possible impact upon the broadcasting and advertising media. We will therefore be proposing another, better approach for defining games of skill to differentiate skill from chance. This is not easy I grant, given that, what your Lordships may consider an element of skill, could be described as rocket science by some aspiring GCSE entrants who we hear think Cromwell fought at the battle of Hastings.
The Government appear to hold the view that it will be possible to address all the issues of concern via the explanatory notes and guidance notes to be issued by the Gambling Commission at some unknown point in the future. As I said at the beginning of my speech, it
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is for Parliament to introduce a clear, unequivocal framework within which the commission will then operate.
There is still time to get this Bill right, even though we do not know what the Prime Minister may be thinking about a general election or, more correctly, what Alastair Campbell will decide. I want, At this point, to thank the Minister who has already given me and others the opportunity to discuss matters relating to this Bill. More importantly I look forward to our debates in Committee when we will have further opportunities to encourage and hopefully persuade the Minister that our concerns should be met.
9.28 p.m.
Lord McIntosh of Haringey: My Lords, this is a difficult debate to sum up because there has not been a consistent thread throughout it. There have been, of course, those whose views I strongly respect who are against gambling altogether and wish we were not doing any of this. I have to address those noble Lords but I do not have any significant hope of converting them from a lifetime's convictions.
I take heart from the noble Lord, Lord Greaves, who like me was, at a very young age, started off on the wrong path. In 1949, I think, my parents took me to the Derby where I bet on a horse called Galcador to win and it won seven to one, yielding me 35 shillings. I should therefore have been doomed to a life of addiction to gambling thereafter. I take heart from the experience of the noble Lord, Lord Greaves, and from my own experience. Not all of us get caught in that way. I take heart as well from the motto of the South African Responsible Gambling Trust, "Winners know when to stop". I think that that is the lesson that we should all take. So, I declare an interest, I suppose, as one who is really rather frightened of gambling.
I am not just a non-gambler but would be nervous about being involved in gambling in any other way. I knew nothing about it until I took on these responsibilities in the summer of 2003. It has been an eye-opener for me. I have met some very nice people and have enjoyed the time that I have been engaged in the matter, but it is not something that I will continue with when my responsibilities in the area come to an end.
I take the view that the debate has identified four major issues that the House will want me to deal with more thoroughly. First, there is problem gambling; secondly, there is gambling and children; thirdly, there is what is called the level playing field for British casino operators and those from abroad; and, fourthly, there is the more general issue of why we have casinos in the Bill. I will, if I may, race through the other issues before coming back to those important points. At the end, I shall sum up by saying what I feel to be the balance of advantage in the Bill and why we believe that the Bill should go through much as proposed. Then, I shall talk about the way forward and how we can resolve any outstanding issues that may arise.
I shall deal with the other issues first. The first is relatively simple: Internet and remote gambling. All of us agree that Internet and remote gambling is capable

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of being the most dangerous of all. As my noble friend Lady Golding said, it takes place behind closed doors and in front of computer screens. Worse than that, it can take place on your mobile phone. The issue is not whether we approve of it—it is happening—but whether there is any chance of it being controlled or any chance of bringing such activities onshore, so that they can be regulated by the Gambling Commission.
I heard what the noble Baroness, Lady Buscombe, said about having "all in or all out". It is a serious issue, and the noble Lord, Lord St John of Bletso, made the same point. I doubt whether we could have what he asks for by way of worldwide rights for the Gambling Commission. but there are things that we can do. We could, in some ways, control advertising from outside the European economic area. We will work on the question of having all in or all out, and we will discuss that with noble Lords who are interested between now and Committee stage.
I do not think that there is a great deal of disagreement about regulation and the Gambling Commission. I was grateful for the tributes to the Gaming Board from the noble Lords, Lord Mancroft and Lord Steinberg, among others. My noble friend Lady Golding asked how long it would be before the Gambling Commission was in operation. My answer is that it will be in operation in good time. The noble Viscount, Lord Falkland, asked how much money it would need. We have set aside money for the early stages. After that, the Gambling Commission will be funded by the industry and will be covered by licence fees. We have no fears on that score.
There were several questions about premises licensing and the burden on local authorities. I think that the noble Lord, Lord Phillips of Sudbury, referred to it. The number of licences that are new, other than the renewal of bookmakers' premises licences, for example, will be much smaller than the number of alcohol and entertainment licences under the Licensing Act 2003. I do not foresee particular difficulties with that. We are working closely with the Local Government Association to ensure that local authorities are ready for their new responsibilities. I categorically confirm to the noble Lord. Lord Clement-Jones, that there will be a separate use class for casinos and that planning permission will be required for other premises to become casinos.
All I would say about the transition to the new system is that I agree with the noble Lord, Lord Phillips, that on such issues we have to take changes extremely gingerly. That is the thrust behind what we are doing and the thrust behind our decision to limit the number of what we call regional casinos and what one could call destination casinos or resort casinos. There is no difference in the names; what matters is how they are defined. I believe it is recognised that we are taking that extremely gingerly.
I say to the noble Baroness, Lady Buscombe, that of course in the end the decision on location has to be taken by the Secretary of State. But she made a good point about the composition of the panel, that it should contain people with experience of social
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conditions and planning matters and not simply be a recycling of quango queens or kings—although she did not say that.
The fundamental point is that when the process has been completed and a decision has been made on up to 24 locations, local authorities will have all the powers that they need to take into consideration the benefits that they are offered in terms of the facilities in and around casinos. That was the point made by the noble Baroness, Lady Buscombe, about encouraging the arts and music. If that is what local authorities want, they must bargain for it and it is good that they should do that. It is not just that there should be sports halls and hotels, but they must decide what they want. They can take into account the regeneration effects and the benefit or otherwise of what is being offered in addition to the casino premises. They have all the powers that they need to run a competition to their best advantage. I agree with the noble Viscount, Lord Falkland, that the benefits that will come from that are not in gambling alone, but in the associated benefits for local authorities.
On money laundering, I agree with the noble Baroness, Lady Buscombe, that the issue of identification is wider than the European directive. I believe there is some confusion about the European directive. The default position is that identification should take place when money is taken in or out. The Commission says that identification on entry is an acceptable alternative. We are still negotiating about that. I believe that the description of the noble Lord, Lord Steinberg, of the money laundering situation as it is at the moment was entirely accurate. The noble Lord, Lord St John, is right that identification of customers, record keeping and the reporting of suspicious transactions is a matter on which we have to continue to negotiate within the context of the money laundering directive, but also in the context of the way in which casinos are run.
I have no fears that casinos of the kind that we are describing will allow children in to gamble. Under the Bill it would be specifically illegal to do so. My experience, such as it is, is that operators will be desperately keen to keep children out and to avoid that kind of distortion.
Very little was said on betting exchanges. I believe that there is general agreement that registration of all users of exchanges is the right thing. If there is to be an issue, as raised by the noble Baroness, Lady Golding, in relation to users of exchanges in the course of business, as in all matters—this is a tax issue—the courts will decide and of course we are in consultation with the Treasury on that. I fear that any attempt to define a threshold for non-recreational users, which some have urged us to do, would prove arbitrary and would fail. No one has found a wording.
Some interesting points were raised about lotteries and prize competitions. There have certainly been criticisms of the problem of the skill test in the Bill. The noble Lord, Lord Mancroft, and the noble Baroness, Lady Buscombe, both referred to this matter. I promise that we have been listening to everybody who

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has raised these issues. Our starting point is that the level of skill should not be derisory but I appreciate that it is different for different audiences. Our discussions are continuing and I sincerely hope that we will be able to bring forward amendments to those clauses in Committee.
I should tell the noble Lord, Lord Mancroft, that we have already doubled the prize limit to £200,000. We cannot scrap the prize limit because that would risk affecting the National Lottery. I can reassure the noble Lord, Lord Roberts, that the changes we made at a late stage in the Commons affecting ticketless lotteries and hospices have been generally welcomed. Those fears have now been put to rest.
I have taken 12 minutes to get to the major issues. It is generally recognised that we have a low level of problem gambling. Levels of gambling are undoubtedly rising and there is therefore an increase in the risk of problem gambling. In looking at the outcome of this legislation, we have to balance two elements: the effect that the Bill might have in increasing the total amount of gambling—and I suspect that any increase in casino gambling will be much less than the continuing increase in on-line gambling; and the protection that the Bill provides through the greater powers of the Gambling Commission and the industry's voluntary undertaking to encourage research, treatment and publicity against problem gambling.
How can this be measured? I am convinced that if we abandon the Bill now, problem gambling will increase faster than if we enact it as it is now envisaged. I cannot prove that but, having evaluated the different elements of the Bill, that is my conviction. We do not know everything we should about problem gambling, but we do know that accessibility of gambling is an important consideration, as is repeatability. The Bill—and the way in which the Gambling Commission will approach it—shows that this has been at the forefront of our thinking.
The views expressed on children and gambling have been so contradictory that it would be impossible to reconcile them. I respect the views of those who say that children and gambling should not mix at any level. But the experience of children engaging in commercial gambling—that is gambling in seaside arcades and family entertainment centres—does not indicate any significant risk of increased addiction either in children or adults. If there is any subsequent evidence for that, I say to the noble Baroness, Lady Buscombe, that we must keep the reserve power. I profoundly disagree with her on that matter. It would give the wrong message to say that there was no reserve power to stop children from commercial gambling. The people of this country would not thank us if we did that.
The noble Baroness, Lady Golding, said that we have children gambling in this country. That is unusual. We also have a low adult gambling problem. Those facts have to be taken into account and reconciled. We will think about those matters when we make these judgements which, I accept, are very difficult. My instinct
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is that non-commercial gambling—such as the sixth-form room brag and poker games described by the noble Lord, Lord Greaves—is a good deal more prevalent among children than limited commercial gambling in seaside arcades.
I had hoped that I was explicit in my opening speech about British casinos and the level playing, field. I rewrote it a number of times to ensure that I would be explicit. The noble Baroness, Lady Buscombe, recognised that we cannot allow the 137—or however many there are today—existing casinos to have unlimited or even a significantly large additional number of machines. That would completely disrupt the pilot number, which she emphasised, of the "8, 8 and 8" regional, large and small casinos.
Baroness Buscombe: My Lords, perhaps I may interrupt the Minister. I said that we should have a more equitable arrangement. I am not looking for parity between existing casino estate and new entrants, but I would like to see a significant increase in the number of machines. The noble Lord, Lord Clement-Jones, referred to a significant increase, but not for category A, only for category B.
Lord McIntosh of Haringey: My Lords, I am very resistant to that. A simple calculation tells you that if you have 137 casinos, with a limit of 80 for small casinos, you would have more than 10,000 more machines in 137 locations. That is not what I call approaching the matter extremely gingerly or the precautionary principle. But let us talk about whether there is anything between those that we can do.
Fundamentally, I have every confidence that the British casino industry cannot only take advantage of the changes proposed for existing casinos—the abolition of the 24-hour membership rule and the abolition of the ban on advertising, which will be enormously advantageous to existing casinos—but also will have at least as good a chance as anyone else and, in my view, a much better chance, of obtaining the licences for the "8, 8 and 8" new casinos.
For example, if an area is designated for a new small casino, and there is already an existing casino that is capable of becoming a small casino, the local authority would have to take that into account and accept an application from that small casino. It would have to be considered alongside any application from a new location in the area. It is a perfectly level playing field.
The British casino industry has the money, if it wants it. It has the investment potential. It has the understanding of the UK market. It has all of the advantages that, in my view, give it at least a level playing field, if not a tilted playing field in favour of existing operators. It would be insulting to say anything other than that.
The final and perhaps most important point is why we do not drop the casino section in order to save the Bill. The noble Viscount, Lord Falkland, the noble Lords, Lord Jopling, Lord Roberts and Lord Greaves, and the right reverend Prelate the Bishop of Coventry have

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advanced that view. The noble Lord, Lord Clement-Jones, made a wise comment when he said that if there is no demand, they will not be built, which I am sure is correct. If, of their own volition, people in this country should not want them, we would not have any new casinos.
But there are five reasons why it is necessary and desirable for the casino section to be in the Bill. First, there has been much agreement today about regeneration. Many local authorities want the inward investment. They want the new jobs and visitors that casinos will bring. They want the range of gambling facilities and the other facilities that will be available as a result of new casinos.
The second reason is ethical and philosophical; I make that point to the noble Lord, Lord Greaves. People enjoy gambling as a mainstream leisure activity. We want to ensure that they are protected, particularly the small minority for whom gambling becomes a problem, but we think it is right to ensure choice for everyone.
I was challenged by the noble Lord, Lord Roberts, as if he were the socialist and I were something different. I will be glad to welcome him to the Labour Party, but he should look behind him to his noble friend Lord Greaves, who is throwing him out, as far as I can see.
Lord Greaves: My Lords, I am sorry to intervene, but I was merely pointing out that the number of socialists left on the Labour Benches diminishes by the day.
Lord McIntosh of Haringey: My Lords, there are many of us who are proud to call ourselves socialists, and always have been. However, I would remind the noble Lord. Lord Roberts, of the wise saying of his countryman, Aneurin Bevan, "Nothing's too good for the working class". If it is acceptable for the sons and daughters of gentlepersons to gamble in high-priced members' clubs—in streets that I had better not name, as the Gallery is full of casino representatives; I certainly will not name any streets where Stanley Leisure is represented—then it is good enough for the working class, and I do not apologise for that.
Thirdly, the casino industry has proved itself worthy since the reforms of the late 1960s. New technology, the new games and changes in society mean the industry is different from how it was in 1968, but it is capable of developing. If we were to refuse to amend the law so that the industry can continue to develop, we would be doing something against nature. It is right that we should recognise the changes in society and technology, and allow them to occur.
Fourthly, there is a fundamental point, which the official Opposition are constantly making, about unnecessary regulation. Outdated regulation is unnecessary and undesirable, and that is just what the casino industry has had, along with large parts of the gambling industry. I agree with anyone who says that the Gambling Commission should abide by the tenets
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of the Better Regulation Task Force—although that does not need to be on the face of the Bill, as it will have no choice. It will have to do so because that is what the law says. We have to ensure that regulation, along with interference with people's lives and their businesses, is kept to the minimum. That is as applicable to a socialist as it is to anyone else.
Finally, let us consider what the alternative would be. If we took out the casino section from the Bill, we would be left with an industry whose regulatory regime was created for a different industry at a different time. Development would be permitted only in an arbitrary number of urban areas. The membership and 24-hour rules, I can assure the House, would have to remain; we cannot pick and choose. There would also be strict limits on the number and type of machines casinos could have. I would not urge anyone to pursue the issue of removing casinos from the Bill.
The Bill is coherent and stands up as a whole, and deserves to be considered in the form that I present it to the House tonight.
On the way forward, we have a provisional Committee date of 10 March. There will be plenty of opportunities to discuss all these issues informally, in private or in public as noble Lords wish. I have written to the Front Benches to describe the nature of the government amendments that we have agreed to put forward so far and I will copy those letters to all noble Lords who have taken part in this debate. My door will be open between now and 10 March. I have every hope that the issues we have been discussing tonight will be capable of resolution and that we shall end this process with a Bill we can all be proud of.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Personal Statement: The Lord Fitt
9.56 p.m.
Lord Fitt: My Lords, I wish to make a personal statement. Earlier today I inadvertently stated that the murder of Robert McCartney in Belfast was the murder of a young IRA man. What I had intended to say was that it was the IRA murder of a young man. I apologise to the House. I was of course talking about the IRA and the murders it has committed of innocent people.

Electoral Registration (Northern Ireland) Bill [H.L.]
Standing Order 47 having been dispensed with, report received.
Bill read a third time, and passed, and sent to the Commons.
House adjourned at three minutes before ten o'clock.

Official Report of the Grand Committee on the Commissioners for Revenue and Customs Bill
(First Day)
Tuesday, 22 February 2005.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Lord Ampthill) in the Chair.]
The Deputy Chairman of Committees (Lord Ampthill): Before I put the Question that the Title be postponed, perhaps I may remind your Lordships of two points of procedure. Noble Lords will speak standing, and the House has agreed that there shall be no Divisions in a Grand Committee. Unless, therefore, an amendment is likely to be agreed to, it should be withdrawn.
If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Title postponed.
Clause 1 [The Commissioners]:
Baroness Noakesmoved Amendment No. 1:
Page 1, line 4, leave out "Revenue and Customs" and insert "Customs and Revenue"
The noble Baroness said: In moving Amendment No. 1, I shall speak also to the 13 other amendments in the group which are in similar form. They would replace the words "Revenue and Customs" in the title of the organisation to be created by the Bill with the words "Customs and Revenue". The amendments apply to Clauses 1 to 4 of the Bill.
At first sight this set of amendments might seem superficial as we do not customarily involve ourselves with the names of bodies or the names of Bills. But I believe that we should carefully consider the title of the new body and not simply accept without question that it would be called the Commissioners of Revenue and Customs.
Within the name we shall be encompassing a whole raft of important ideas which lie behind the two current organisations and which will be fighting for a place in the new organisation. I apologise in advance for the length of what I shall have to say on these amendments. The name of the new organisation goes to the heart of what the new organisation will be about and it is important that the Committee considers the matter in some detail.
Mergers are generally the coming together of two significant bodies to create one more significant whole. The new body should be much more than the sum of
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the parts. I am sure that this is what the noble and learned Lord the Attorney General meant when he said at Second Reading that:
"Integration is not the same as merger: it is a more fundamental change that brings services together to produce new and better solutions".—[Official Report, 7/2/05; col. 587.]
The noble and learned Lord I think was trying to make some new distinction for mergers, but, as I believe I said at Second Reading, that is what has generally been encompassed within the concept of merger in the private sector. So, for me, there is nothing new and magic in the term "integration" because it describes what businessmen have customarily sought when making business mergers. It is a matter of much evidence that they have often not achieved in practice what they have sought. But that is another matter, and we shall return to what is achieved from this merger or integration in due course.
Mergers are not takeovers where one party is dominant over the other. Takeovers normally entail the loss of identity in whole or in part of one of the bodies being taken over. I am sure that the Government do not intend a coming together of the Inland Revenue and the Customs and Excise to be a takeover by either party. It is intended to be a merger or an integration.
In the private sector, the issue of what a merged body is called is always a matter of considerable interest. A takeover generally results in the loss of the name of the minor party, with, at best, the name of the minor party being reserved for brand purposes. So people look to the name of the merged organisation to give some clue as to where the balance of power lies. Very often, wholly synthetic names emerge in order deliberately to obfuscate where the power indeed lies—for example, when British Steel merged with a Dutch steel organisation, it ended up with the name Corus plc, which had nothing whatever to do with any of the organisations, deliberately so as not to lay bare the organisational issues that lay beneath that.
From my own world, which is accountancy, there are currently four major players—the big four, PriceWaterhouseCoopers, Deloitte & Touche, KPMG and Ernst & Young. Each of them has been formed by one or more mergers and countless takeovers. Each of the names reflects the most delicate positioning, both inside the organisation for partners and staff and externally for customers and markets. That is why the name of the new organisation is so important and why I am taking the time of the Committee today.
It is important that people know whether there is a dominant party in the integration and what that means for those people who have to deal with it. If there is not a dominant organisation, we need to see how that is best communicated. At Second Reading, there was some discussion about the different cultures of the Inland Revenue and the Customs and Excise and the matter was examined at some length by the Treasury Select Committee in another place. Surprisingly, the issue of contrasting cultures received only the most glancing of references in the report by Gus O'Donnell that led to the proposals to create the integrated organisation.

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I shall read out the description of the two cultures given by the Association of Chartered and Certified Accountants when giving evidence to the Treasury Select Committee in another place:
"The Inland Revenue is more prepared to negotiate and has a more human face. By contrast, mention Customs investigators to accountants and businesspeople and exasperation sets in. Once the Revenue has made a ruling, it generally sticks to it. VAT offices change their minds more often—partly because they tend not to commit themselves in writing. The historical background to Customs is that it was not set up as a tax collecting agency, chasing payments from people who are essentially honest. It was set up to chase smugglers".
The issue of what sort of merged or integrated department is being created is fundamental for the taxpayer. The placing of "Revenue" ahead of "Customs" in the title could indicate to the outside world that the more business-friendly Inland Revenue is to be the winner in the new organisation. That would be popular in the business world. Can the Minister say whether that is what the Government are wishing to convey in their choice of name? I hope that the Minister will say something about the way in which the name has been chosen.
It may be that the Government wish no inference to be drawn about the kind of organisation that the new body will be. In that case, the Government should try to find either a new name unrelated to the two existing names—rather like Corus in the steel case—or they should take a more strictly logical approach. I suggest that the strictly logical approach to naming the new organisation would be either to follow an alphabetical approach or an historical approach.
An alphabetical approach would lead to the conclusion that "Customs and Revenue" would be the correct name because "Customs" and "Excise" come before both "Inland" and "Revenue". But an historical approach is more serious because the Customs and Excise is, by a very long way, the more senior of the two organisations. A nationally organised customs service can be traced back over 800 years, to the time of King John. Indeed, the roots of the customs service are said to be in Saxon times. In 1671, Charles II put the service in the hands of commissioners, as it is today. By contrast, the Board of Inland Revenue is a mere stripling, having been formed in 1849, and deriving from the introduction of income tax seven years earlier.
As well as it being logical to put "Customs" before "Revenue", it would show some reverence for the institutions and history of our land. On the other hand, putting "Revenue" before "Customs" in the title of the new organisation is something of an historical affront to the more senior organisation. I suggest that it shows the lack of care for the history and culture of our institutions that the Government have shown in a number of ways over the past eight years.
It is for reasons of historical accuracy and verbal neutrality that my amendments replace the title "Revenue and Customs" with "Customs and Revenue". If the Government wish to keep the title as shown in the Bill. I invite the Minister to lay out clearly and
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unambiguously what the rationale for the judgment was, and what that means for the culture of the merged organisation.
If these amendments are accepted by the Government, which I earnestly desire, a number of other amendments will be required, including the title. I have drafted the amendments in terms of Clauses 1 to 4 merely to facilitate today's debate in Grand Committee. I have not even attempted to amend Clause 1(2) or Clause 4(2) for the simple reason that I find the Welsh language almost impossible to understand and certainly impossible to pronounce. An early experience taught me never to tangle with the Welsh language, and so I hope that for today the Committee will accept the spirit of my amendments as encompassing Clause 1(2) and Clause 4(2). I beg to move.
3.45 p.m.
Lord Campbell of Alloway: I support the amendment. Customs and Excise is the dominant partner in this merger; it is the senior partner. It has coercive investigatory powers that are more draconian than the Revenue has ever had to use. In my Amendment No. 21, I deal with the fact that the cultures and patterns of working of these two departments are wholly disparate.
Lord Newby: This is a fascinating discussion. If the title of the new merged department is to reflect its brand value, as it were, and if by having "Revenue" before "Customs" the intention is that the department should treat taxpayers in a somewhat more flexible way than the average excise man on a bad night, I will be all in favour of it. Therefore, I am sorry that I cannot support the amendment proposed by the noble Baroness.
On a matter of historical accuracy, the noble Baroness said that Customs was set up to chase smugglers—I do not believe that was the case. Customs was set up simply to collect the King's revenue when he had personal control of that revenue and Parliament had nothing to do with it. Smuggling was a relatively late development on a grand scale, which of course reached its height in the 18th century when Walpole, as Chancellor of the Exchequer, employed his own smuggler. In the early days of the history of the department, it had a less flamboyant role.
Baroness Noakes: I was quoting from the Association of Chartered Certified Accountants. I am glad to report that that is not a body of which I am a member. I will make sure that the association is told of its error.
Lord Brooke of Alverthorpe: I am against the amendment. This is a business merger; and of the two parties coming together there is no question that the Inland Revenue is the bigger of the two. If we are following the business model found outside, the bigger of the businesses normally comes first in the title. I do not for one moment believe that Customs and Excise will be taken over by the Inland Revenue; indeed, I

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hear fears from within the Inland Revenue that the new partner is a pretty strong one. Indeed, when it took over the National Insurance Contribution Agency, the Revenue discovered that it was a strong partner too. We do not need to worry on that score. The impression that is given to the public at large must reflect reality, and the Revenue side is the big business piece. That is what people need to know.
Looking some 15, 20, or 30 years down the line, it is the Customs side, if anything, that may not be quite what it has been in the past, or even what it is at the moment. I struggle to see the Revenue side declining. We should stick with something that will hold with time. I hope that we will oppose the amendment.
Lord Brooke of Sutton Mandeville: I am delighted to follow my namesake and—as all Brookes believe themselves ultimately to be related—my noble kinsman as well. I have a very slight declaration of interest to make, in that I was the Minister responsible for Customs and Excise between 1985 and 1987. I apologise to the Committee for not being present at Second Reading. With the amount of business that the Government are loading on us in what I understand to be the last two months before an election, I find that there are manifold diary conflicts, and I am afraid that I had such a conflict on that day. If I offend by making any remark that sounds like a Second Reading remark, I ask to be forgiven.
I have an emotional involvement in the subject. It was said at Second Reading that an enormous attraction of service in Customs and Excise was the enthusiasm that people had for belonging to it. Even the noble Lord, Lord Newby, said that. Having been its Minister. I absolutely concur with the enthusiasm expressed at Second Reading.
I have one or two minor factual observations to make. Although it is perfectly correct that Customs started in the 13th century—the noble Lord, Lord Newby, may well be right in his observations about its purpose—I think that I am right to say that the true origins of Customs and Excise activity occurred in the City of London in about the 7th century AD. In a remarkable reverse of normal procedure, it was at that stage a privatised service. Until at least about 1500, the City of London was the business centre of the kingdom, with Westminster very much for the public sector and the task of government.
When the king and court left Westminster at the end of the 13th century or the beginning of the 14th century to fight the wars in north Wales and against Scotland, the whole centre of gravity of government moved to the north. Tourism takings in Westminster fell off to the extent that, during that period, 30 times as much money was given to St Thomas a Becket's tomb in Canterbury as was given to Edward the Confessor's in Westminster Abbey. When the king brought the court back in the middle of the 14th century, to try to build up the economics of Westminster he established a wool tax, which was to be secured and exacted at Westminster rather than in the City. All exports were to go out through Westminster. Market forces allowed that to continue for only about 10 years, and it then
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moved back to the City. Involvement in that—including that, obviously, of Chaucer —was very much City-based during the ensuing years, before the Revenue began.
Although my noble friend Lady Noakes fell back on some of the language about 1842, I noticed that. at col. 1171 of the report of Second Reading on 8 December, the Paymaster General actually took the Revenue back 300 years. It is not as Johnny-come-lately as we might have thought. Nevertheless, the origins of Customs go back much further than those of the Revenue.
It is obvious that the title as set out is not alphabetical, so it is a deliberate move to place the Revenue as its first item. In moving the amendment, my noble friend is absolutely right to come back to the difference in cultures, which is significant. I shall make one observation about the Second Reading debate. In my experience as a Customs and Excise Minister, the essential difference was that Customs would strike what I will call a business bargain with the sectoral interests with which it had to deal, so that a simple interpretation would be reached in negotiation between the industry and the Excise that would make the tax easier to collect. As a taxpayer, however, I have found a greater preoccupation on the part of the Inland Revenue with the detailed letter of the law. That is a massive cultural difference. I was a little surprised, admirable though I think the O'Donnell review is, that there was not more reference to those differences, which will be a significant problem in terms of negotiations. When I negotiated with the noble Lord, Lord Brooke of Alverthorpe, my namesake and distant kinsman, I believe that, at that stage, he was responsible for the Inland Revenue and not for Customs and Excise. Therefore, my negotiations with him were entirely on an Inland Revenue basis, but I was certainly conscious of that distinction.
The cultural side is important. My noble friend is entirely justified in putting down this amendment and since I have not previously seen any explanation of why the title was written in the way it was, I am much looking forward to hearing the Attorney-General's reply.
The Attorney-General (Lord Goldsmith): I am rather sorry to have to get up, because I have been enjoying this debate enormously and feel that, having already produced a rift politically on matters of historical accuracy, some achievement has been made. However, I do not want that remark to detract in any way from the fact that I entirely accept that the integration of two of the oldest departments in Whitehall is an historic event and that the name of the new department is a serious issue. I will do my best to answer the question asked by the noble Baroness, Lady Noakes, and most recently by the noble Lord, Lord Brooke of Sutton Mandeville, about why this name has been chosen.
The title needs to say clearly and recognisably what the new department does. In that respect, some of the devices that have been taken in the private sector—the noble Baroness, Lady Noakes, referred to one name that said nothing about its predecessors and possibly nothing

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about the business that the new company carried on—are not at all appropriate for a government department. The name also needs to stand the test of time.
Of course, the intended name incorporates first of all the long history of both predecessor departments. It includes key words from each. It places Revenue before Customs but it adopts a similar form to that of the current department of Her Majesty's Customs and Excise. If we had gone further towards the precedent of Customs and Excise and called the department, as the noble Baroness would wish, Customs and Revenue, that would probably do very little to help create a new and separate identity for the new department and it could well lead to confusion and the continued inadvertent use of the expression Customs and Excise. Customs and Revenue, Customs and Excise: one could see how that confusion would arise. Revenue and Customs means a quite distinct and deliberate change of identity.
The new title does invoke the history of the two current departments and I will say a little more about the historical issue in a moment. But it also looks to the future. The title does not reflect the relative importance that people may decide the Government are placing on the two departments and may differ in this respect from what I know happens in the private sector. There is quite a battle sometimes about whose name will be most prominent in the name of the new company, because that indicates that the management of the new company has won the battle and demonstrated that it is the stronger. That is not what this merger or integration is about. The Government hold both departments in equally high regard.
The name reflects better what the new department will actually be doing. Her Majesty's Revenue and Customs will primarily be a revenue raising department and that will be reflected in his name. That does not mean that the Government are not committed to the department's other non-revenue raising functions. Customs' role in securing the frontier is vital to the new department and we firmly believe that the benefits from creating a single department will apply to international trade just as it will to other areas. But primarily revenue raising—and revenue, of course—would include within it duties.
The name of the department will encompass what the department will be doing while maintaining its links with history. So it was that on Thursday 13 May it was announced that my right honourable friend the Chancellor of the Exchequer had chosen this name and that this had been approved by Her Majesty the Queen. It has to be noted, though I do not put it at the forefront of my opposition to the amendment, that any change now in the name would require a further approval by the Queen.
Let me say something about the other ideas that the noble Baroness, Lady Noakes, has expressed about how to put the names together. I hope that I have said enough about the rationale behind why the name was chosen. First, I am not persuaded by the alphabetical argument when there are considerations on the other side—the scale of the two activities and the need clearly to
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distinguish customs from excise. I do not believe that the noble Baroness really put that reason at the forefront of her argument.
As for the historical argument, we have heard already from the erudite and interesting observations made so far that the question of precisely who has the right to claim seniority is not so straightforward. Under their current names, the Inland Revenue has existed since 1849 and HM Customs and Excise since only 1909. On the other hand, the Inland Revenue is a direct descendent of a national government institution which does, as the noble Lord, Lord Brooke of Sutton Mandeville, said, go back to 1694 and the Board of Stamps; whereas Customs can, as the noble Baroness said, trace its lineage further back to the reign of King John.
But again, if one gets even more antiquarian than that, one can find shadowy ancestors of both departments in Anglo-Saxon times. The Income Tax Appeal Commission can trace its descent and in some cases its precise boundaries to the hundreds and wapentakes through which Saxon taxation was administered. A charter of King Athelbald of Mercia has a reference from the 8th century to customs duties. Members of the Committee have made further references. It is very important to the history of both departments but not, I would suggest, ultimately in any sense a clincher as to how the new department should be named.
One point of agreement is that it is wrong to say that the origins of the body to which reference was made, and of which the noble Baroness was ready to show that she was not a member, were related to chasing smugglers. Even in 1203, the non-revenue functions were ancillary to the revenue raising. I am told that the revenue raised in 1203 was £5,000—and huge riches they no doubt were at that time.
A number of noble Lords have referred to the cultural point. As I said on Second Reading, both departments have long and proud histories and we shall not want to lose the best of each culture. There is already a cultural overlap: values centred on integrity, honesty and a focus on helping people to pay the right tax and receive the correct benefits at the right time. There is also a clear determination from both bodies to take robust action against those who seek to avoid their obligations. So there is already a strong shared culture, and we would expect that through time, the incremental approach, having strong leadership, unified communications and the involvement of staff, there will be still greater convergence in the cultures of the two constituent parts of the new department.
The noble Lord, Lord Campbell of Alloway, referred to the practice of negotiation of agreements by way of example, as did other Members of the Committee. It is right to say that both departments currently use a mixture of negotiated agreements and formal proceedings. They have the powers to do so and those powers will be inherited by the new department.
It may well be said that in the past the Inland Revenue has been more ready to negotiate than Customs has been, although the contrary has been

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expressed in the course of this debate. But whatever the historical practice. the new department will need to develop its own policy on this question. I hope that Members of the Committee will agree that ultimately what really matters is how this new department will carry out its functions.
While I am grateful to the noble Baroness for the opportunity to debate this question and to answer the question put to me, I am also grateful for the opportunity to debate the rich heritage of both departments. I hope that she is now satisfied that there is a good, rational basis for the choice of name and that it will provide a sensible banner for the important work the new department will undertake. I hope therefore that she will feel able to withdraw her amendment.
4 p.m
Lord Brooke of Sutton Mandeville: Before my noble friend winds up on her amendments, perhaps I may add a small footnote on what the Attorney-General has said. I find, culturally, that if you examine the ministerial prefaces to government documents, which are frequently written by people other than the people who wrote the report, you find a degree of discrepancy between the ministerial reading of the situation and that of the document published in the Minister's name. I cite as an example the regional assemblies legislation, which was prefaced by both the Prime Minister and the Deputy Prime Minister who referred to directly elected regional assemblies which then never appeared in the Bill. That despite the fact that the two senior Ministers and the Government expressed extreme enthusiasm for them.
Perhaps I may draw attention to the preface by the Chancellor of the Exchequer to the O'Donnell report. There arc references to these titles in the first, third and fifth paragraphs. Asymmetrically, there is no reference to them in the seventh. In the first paragraph, the Chancellor of the Exchequer refers to "HM Customs and Excise and the Inland Revenue". In the third paragraph, he refers to "Customs and the Revenue". In the fifth paragraph, he refers to "Customs and Revenue". He did not have the nerve in the seventh paragraph to go the full distance, which the Bill now goes, and put "Revenue" first. So, like the Cheshire Cat, it simply melted away at the edge of the page.
Lord Barnett: I was delighted to hear the comments of my noble and learned friend the Attorney-General that he had the approval of Her Majesty the Queen for this name change. I do not know whether he gave her the full case as he has done today or how much it would cost to change now. I presume measures have already been taken to use the name currently suggested in the Bill. One might put "Customs" first because of the higher rewards they pay. I have read papers on the Peers' seminar, at which only my noble friend Lord Sheldon and I were present. Understandably, the Attorney-General was unable to be present. He does not have to apologise to me—indeed, I find it astonishing that he finds the time to come here and answer this debate or be here at all.
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I do not understate the importance of our debates and while it is important that the Attorney-General rather than some junior Treasury Minister is here, I am grateful to him, as I am sure are we all. Nevertheless. I find it astonishing that he is here rather than some junior Treasury Minister—although we do not have any in your Lordships' House. We have only one noble friend who replies to all Treasury matters with great aplomb, even though he does not tell us anything.
As I say, the rewards argument could be a good one for the noble Baroness but she did not use it. We were told in the Peers' seminar of 8 February 2005—I did not hear it said then, but I read about it now—which my noble friend and I attended for a short while in the hope that my noble and learned friend might appear. that the rewards that Customs and Excise apparently paid in 2003–04 were £946,300, as compared to one payment of £100 by the Inland Revenue. So far as rewards are concerned, there is a strong case for putting Customs first, although the noble Baroness did not use that argument.
I do not terribly mind which way the names are put. I do not want to waste too much of the time of the Committee, but I think that the noble and learned Lord the Attorney-General told us that the name needed to deal with the test of time, and that it could lead to confusion if we accepted the amendment. I am confused by the whole thing. I am sorry that the noble Baroness has taken up a fair bit of time. As she will know we have only four hours, as we understand that the agreement is that the Sitting will take only four hours, happily. That agreement was made specially so that we could all go and watch Arsenal on television this evening.
I am astonished that the Attorney-General is here at all, but I look forward to hearing him at least tell us what it would cost to accept the noble Baroness's amendments.
Lord Goldsmith: I need to touch briefly on some of those points. I am sorry that I am not a junior Treasury Minister; the former Treasury Minister who has just spoken would plainly prefer to see one in this Committee. The Bill deals with an important issue that relates to a department of mine, which is the creation of the Revenue and Customs Prosecutions Office. That second half of the Bill is my policy and my department; I shall be responsible for it. For those reasons, I am very much personally concerned with the Bill, so I agreed that it made sense for me to deal with the whole Bill rather than troubling another Minister with it. I hope that that will satisfy the noble Lord's curiosity, if nothing else.
I am glad that we held the Peers' seminar on 8 February. Unfortunately, it was double-booked with a seminar concerning an aspect of the Serious Organised Crime and Police Bill that is of some controversy. I was present to deal with that issue, and strode as soon as I could to the other Committee Room to find that the noble Lords, Lord Barnett and Lord Sheldon, had already left. I am sorry about that. I notice the noble Baroness, Lady Noakes, shaking her head about that, so let me say at once that if there is a

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desire for any discussion on the form and terms of the Bill outside the Committee, I shall be extremely happy to arrange it with any Peers who wish to participate.
I have two other short points. I am glad that the noble Lord, Lord Barnett, has returned to the question of rewards, which interested him greatly at Second Reading and he has studied it further. I shall deal with a comment made by the noble Lord, Lord Brooke of Sutton Mandeville. It is not right at all to say that my right honourable friend the Chancellor did not broach the question of the name as it appears in the Bill in the foreword to the O'Donnell review. Consideration of the detail of the Bill has obviously taken place since then. It was his decision that the name be as in the Bill, for the very good reasons that I have sought to outline. I do not at all pray in aid the cost of changing the name, as I made clear.
Baroness Noakes: I thank all Members of the Committee who have taken part in the debate. I have to tell the noble and learned Lord that I was not aware of a Peers' seminar on 8 February. I would have attended or ensured that someone on my team did. Perhaps it was for Peers only from his own Benches. No information was conveyed to me.
Lord Brooke of Alverthorpe: It was for all.
Baroness Noakes: I am sorry. I was not there, and had no knowledge of any such meeting. I do not know what has gone wrong, but I was surprised that no meeting had been arranged by the noble and learned Lord. One is customary, as I am sure that he is aware.
Lord Goldsmith: As I indicated, I do not know why the noble Baroness did not know about it. I understood that details were circulated to all, but I repeat what I said about being very happy to meet her or any other Members of the House who wish to discuss any aspect of the Bill outside the Committee.
4.15 p.m.
Baroness Noakes: I thank the Minister for that. Since we are now into the Grand Committee stage, we might take a view on that after Grand Committee to see whether that is appropriate before Report stage, which we would do in any event.
This has been an interesting debate, partly about the historical background, about which I have learnt even more than I learnt in preparing for these amendments. The intervention of my noble friend Lord Brooke was particularly interesting. His perception of Customs and Excise, probably because he was once responsible for it, is that it is very much better and nicer than the Inland Revenue, when it is clearly the view of the business world that it is the other way around. That will soon be a thing of the past.
One of my reasons for tabling the amendment was to try to tease out what kind of organisation we are trying to create. The noble and learned Lord referred to a strong shared culture. Many outside would find it easier to point to the differences in culture than to the common points
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at which they meet. That is why so many commentators, including the Treasury Select Committee in another place, have focused on this aspect of the different cultures. The noble and learned Lord talked about the need to develop its own policy on how to carry out its functions in the future. That is what concerns the business world and those who will have to deal with the new organisation; what is that new culture? I accept however that in debating an amendment such as this in Grand Committee we will not get to the bottom of that. We may return to some aspects of that as we go through the Bill, because it has considerable importance in the outside world. It is a considerable challenge to the chairman of the new organisation, and to the organisation itself, to bring together these two strong cultures and create something from them. It is also of considerable importance to the outside world, which is why I raised it.
I say to the noble Lord, Lord Barnett, that if he waits around for Amendments Nos. 51 and 52, we will return to rewards. I knew that he would want to do that. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakesmoved Amendment No. 2:
Page 1, line 6, at end insert —
"() There shall be a minimum of five and a maximum of 15 Commissioners.
() Commissioners shall be appointed only after a formal process of selection undertaken in accordance with the procedures for the time being laid down by the Civil Service Commissioners."
The noble Baroness said: This is a probing amendment designed to ascertain how the Government see the new Commissioners for Revenue and Customs Bill operating so far as the appointment of commissioners is concerned. Other amendments will deal with other aspects of the governance of the new organisation, but I will use this amendment to deal with some of the basic points, so that we can deal with the later amendments more efficiently.
The Bill is remarkably vague about how the new organisation is to operate. We are told that it is to be a non-ministerial government department, which I assume is a government department that is not headed by a Minister. I hope that the noble and learned Lord will be able to explain the significance of that in terms of the powers, responsibilities and accountabilities of the people who will make up Revenue and Customs. For example, under Clause 11, the Treasury is able to direct the commissioners. Does that mean that the commissioners are accountable to the Treasury? Is that Treasury Ministers, officials, or both? There is the question of which Treasury Ministers are involved. I hope that the Minister will say something about how that will work in practice and how the organisation will get a coherent sense of direction.
If the Revenue and Customs was being set up as a non-departmental public body, or a public corporation, the enabling legislation would have to contain explicit details about the structure of it and about who is to run it. Amendment No. 2 probes the question of how many commissioners are to be appointed, and why there are

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not limits set down in legislation. The Minister may well say that the existing legislation covering the Inland Revenue and Customs and Excise has no details covering the details sought by this amendment. Of course, the legislation constituting those bodies goes back a long way, as we explored a little in our previous debate. It certainly predates modern thinking on how organisations, whether in the public or the private sectors, should operate in today's more managerial world.
Therefore, Amendment No. 2 seeks an answer to what numbers of commissioners there will be and how they will be selected, because it is inappropriate in today's environment for the Act simply to state that Her Majesty will appoint an unspecified number of commissioners by Letters Patent. An upper and lower limit would be a sensible way to start to define what kind of organisation is being created by the Bill.
The second leg of the amendment refers to the way in which the commissioners are to be selected. The amendment is not intended to be controversial because it simply refers to a formal process of selection. I am sure that some formality of process is necessary prior to Her Majesty issuing Letters Patent. It refers for example to procedures laid down from time to time by Civil Service commissioners which would allow all procedures to change over time and evolve, as they have done, over the years. The purpose of the amendment is to show that there is a proper formal process of selection for those whose appointment may ultimately be formalised by Her Majesty. The steps leading up to that should be more clearly defined. I beg to move.
Lord Goldsmith: This is the first of a number of amendments which address the corporate governance arrangements of HM Revenue and Customs. I understand the reasoning and thoughts behind these amendments. The noble Baroness, Lady Noakes, made clear at Second Reading that she was interested in ensuring that the new department has the right corporate governance arrangements in place. She and the noble Baroness, Lady Wilcox, have experience of corporate governance from their previous roles with the Inland Revenue.
I will first explain the general approach taken by the Bill on corporate governance. HM Revenue and Customs will be a government department, so many of the requirements for its governance are already set out in arrangements that cover all such government departments. For example, there are government accounting responsibilities and other codes that touch on what government departments do and those will apply to the new department. There is therefore no need to overlay the Bill with detailed rules of governance that will often be found in statutes that govern non-departmental public bodies where it is necessary to set those out because there is no general body that applies.
It is right to underline, as the noble Baroness did, that this will be a non-ministerial government department. As the O'Donnell review noted—in paragraph 6.14, I believe—that is to underpin the
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importance of taxpayer confidentiality, maintaining the distance between Ministers and the department itself to which I made reference at Second Reading and to which I know that we will return. I am sure that we will also return to the issue of the wider, more general relationship between Ministers and the department—in relation to Clause 11, for example. If the noble Baroness permits, I will leave my observations on that until we get to the relevant amendments and clauses.
I return to the question of how much detail to set out about the governance arrangements. Given that the requirements on the new department are set by the overall requirements on central government departments, within that framework the detailed proceedings can be matters for the commissioners collectively to determine, as those details will he about their rules and arrangements for the discharge of their statutory responsibility for functions as set out in the Bill.
There is another point: as we have seen, particularly in the area of corporate governance —for example from the Cadbury report up to the current Combined Code on Corporate Governance—that it is a developing and sensitive area where what is best practice may change. So it is an advantage to leave a degree of flexibility in order to be able to adapt to the latest and best practice without being constrained by over-rigorous legislative revision.
Flexibility to develop and implement innovative approaches—which is what the O'Donnell review referred to—indicates the approach that has been taken in the Bill. I want to underline that that does not detract from the commissioners' accountability for their corporate governance arrangements. They will be subject to appropriate parliamentary scrutiny. For example, it is intended that the top-level governance arrangements will be published in the annual and spring reports of the department as part of its good corporate governance practice. The reports will include details of the current commissioners, the membership of the management board and the top-level committees, and details of any changes since the last report. Customs and Excise routinely follow such an approach and that will continue.
That indicates the general approach to corporate governance and what is said in the Bill. If we turn specifically to this amendment, Amendment No. 2 specifies a range of from five to 15 commissioners to be appointed at any one time. There are a number of factors, which will vary over time, that determine what the right number of commissioners will be. I recognise that the amendment appreciates that point by specifying a range.
But the question is whether the Bill ought to be specific on this issue. I do not consider that it needs to be. There will be clarity about the number of commissioners and their top-level governance arrangements, which will be reported to Parliament. But the commissioners will need flexibility to respond to the circumstances at the time—for example, to wider corporate governance issues generally; to the lessons learnt managing the new organisation; and to the skills and resources that are available to the commissioners. I accept that it is likely

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that a number between five and 15 will turn out to be appropriate as the correct number of commissioners in the future. But it is unnecessary to specify that in a statute.
I turn to the second element of the amendment, the procedures for the appointment of commissioners. There are safeguards. Ministers will be consulted on their selection and appointment, which is necessary as part of the process of appointing commissioners by Letters Patent. The consultation will include discussion on any major changes in their number so, to take an extreme example, if there were any risk of the number falling below five, I would anticipate that Ministers would seek assurance from the commissioners that the suggested number reflected the latest view of sound corporate governance practice.
I wish to make two points on the wider issue of the selection and appointment of commissioners. First, as required by Clause 1(5), they must be civil servants and they will act in accordance with civil service codes of conduct. For externally advertised candidates, that includes the full and proper involvement of the Civil Service Commissioners in their selection and appointment, with selection by interview, including independent panel members. One can see that the procedures are incorporated in those circumstances.
There are also instances when an internal candidate, already a civil servant, is selected to be a commissioner. For the predecessor commissioners, that would not require reference to the Civil Service Commissioners, except for the separate and particular arrangements when selecting a permanent secretary. There seems to be no reason for that to change. But I emphasise that, as part of the process of appointing a commissioner by Letters Patent, Ministers would be consulted.
In conclusion. I share the noble Baroness's desire to see that Revenue and Customs has proper corporate governance arrangements in place. But the Bill and existing arrangements outside and off the face of the Bill on the matters covered by the amendment already achieve that end. I hope that those assurances on how this works in practice will persuade the noble Baroness that it is not necessary to press the amendment.
4.30 p.m.
Baroness Noakes: Before I consider what to do with my amendment perhaps the Minister would answer two questions. First, who decides how many commissioners there will be? A linked question to that is: why should there not be any parliamentary limit already placed on that decision? Secondly, the noble and learned Lord said that Ministers would be consulted if there were to be a new appointment. I was not clear on what he was saying about the involvement of Ministers in the appointment. It is very important to ensure that appointments within the Civil Service are free of ministerial involvement. So, what is the nature of the ministerial involvement in the appointment of any commissioners?
Lord Goldsmith: On the first question, as I was seeking to make clear, it would be for the commissioners to consider the number of commissioners needed
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appropriately to run the department. But to do that in consultation with Ministers and subject to the report to Parliament, which would give Parliament the opportunity, as always, to express a view if it was unhappy with how the department was going.
On the extent of the involvement of Ministers in a particular appointment, as I have again indicated in relation to external appointments, there needs to be the full and proper involvement of Civil Service commissioners in the selection and appointment—selection by interview including independent panel members. It follows that the ability and the involvement of Ministers after that process has taken place is necessarily a very limited one. I hope that that reassures the noble Baroness on the process, and that it will produce people of the quality and independence required.
Lord Campbell of Alloway: Perhaps I may ask the noble and learned Lord what the merit is in leaving it to the commissioners to decide how many or who should be a commissioner and so on? It is all very messy and vague. Surely, it is for the Government to decide initially how many commissioners there should be, and there should be some machinery for adapting it to future needs in a very wide fashion. The Government cannot just remove all responsibility for doing anything and say that the commissioners can get on and decide what to do. That is not the right approach.
Lord Goldsmith: The noble Lord asks why we should leave it to the people whose responsibility it is to run the department. That is what the commissioners are there to do. Why should we leave it to them to decide how to run it? With respect to the noble Lord, it seems to me very right and proper to recognise that as the people who have the responsibility for running the department, and in running it as a non-ministerial department. they should be the first to indicate what is necessary in order to run the department well, efficiently and properly. However, as I have said, the Government do not abandon all responsibility for this because Ministers need to be consulted. Appointment by Letters Patent will require consultation with Ministers before those letters can be issued. That seems to me to be a very appropriate combination of government input—in the noble Lord's terms—together with leaving it to the people whose job it is to run the department to determine how best to do so.
What is being proposed is not in any event an amendment which puts a responsibility on government to determine the number of commissioners. it is Parliament putting a straitjacket on what might turn out to be an inappropriate number—inappropriately small or inappropriately large—when one looks at changing circumstances. That ultimately is the critical point. If I may say so with respect, the noble Lord's point does not seem to me to touch on whether it is necessary to state in the Bill what the number of commissioners would be. I hope that the arrangements that I have outlined will provide sufficient reassurance that this department will be run properly and well by

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fully competent, fully qualified and appropriately appointed commissioners. Surely that is what matters Most.
Lord Sheldon: My noble and learned friend will be aware that when civil servants are appointed, there is a certain amount of independence in the method of appointment. Of course, in many departments the Minister will be consulted. That is normal. But when one is dealing with £400 billion of revenue, the involvement of the politicians may be a little less certain in these matters. So should there not be a greater level of independence?
My noble and learned friend mentioned consultation. I was a little uneasy about that word because it looks as though there could be considerable input by Ministers into the appointments process. That could be quite dangerous in situations where substantial sums of money are involved and where there may be a considerable interest by the person becoming involved.
Lord Goldsmith: I have experience of dealing with appointments involving the Civil Service appointments procedure. As my noble friend may well recall from his time as a Minister, it is a very independent process in which, whatever the level of the appointment, Civil Service Commissioners will. following interview, identify the person whom they regard as being the best for the job. The ability of a Minister not to appoint the person who has been put forward is extremely limited. It is certainly not a question of a Minister being able to choose a person for the job. It is an independent process which produces an independent Civil Service, and it is right that that should be so.
I was focusing particularly on the concerns expressed by the noble Baroness and, to some extent, on those expressed by the noble Lord, Lord Campbell of Alloway, about consultation on the number of commissioners—the central point of the first part of the amendment. That requires Letters Patent, and therefore necessarily consultation with Ministers is required before the Letters Patent are issued.
Baroness Noakes: I have found this debate a little unsatisfactory because it seems that the Government have not taken this legislative opportunity to define the central features of the new organisation. Customs and Excise and the Inland Revenue have grown as they have, and I have tabled this and a number of similar amendments in order to tease out how the Government see them going forward.
Basically the Government are saying, "We can do almost anything we like because there won't be any rules written down". For example, no rules will be written down about how people are to be appointed. When an external appointment is made, a Civil Service procedure will be followed, but that will not be the case when an internal appointment is made for a commissioner post. The same rigorous selection process would not be applied other than at Permanent Secretary level, but not all the commissioners will be at Permanent Secretary level if the current practice is followed.
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I was trying to say that we should be setting out features of this new organisation based fundamentally on how it is currently operated so that we can be clear about how it will go forward. I am not clear that it will be enough for the commissioners to decide what their own organisation will be, for them to consult Ministers and then to report that in their annual report. The report is always published at least seven months after the end of the year and therefore, broadly, the parliamentary committee reviews it when almost another year has elapsed. How can that parliamentary committee, which has no powers other than to say, "We don't like it", get involved? The Minister spoke, for example, of the need to remain flexible because corporate governance changes. Yes, indeed it does. However, I do not believe he will find that a single one of my amendments would create inflexibility. I can point him to a number of recent statutes which have created other bodies which have needed to create bodies with sufficient flexibility to be able to cope with anything over a reasonable period of time. I do not believe that by constraining as I suggested I was trying to put a straitjacket around it.
I feel that the Bill has a hole in it; that is, what kind of organisation it is that we are creating? We are saying that we create commissioners and they create their own organisation and somehow, a year and a half after the event, a parliamentary committee might be able to catch up with some of that. I do not believe that that is a satisfactory way, in today's world, for the Government to be creating a major body with major interfaces to the public. I shall withdraw the amendment at this stage because we shall be returning to some of those themes later. However, I record that I find the noble and learned Lord's approach unsatisfactory. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakesmoved Amendment No. 3:
Page 1, line 6, at end insert—
"()The Commissioners shall collectively be referred to as the Board of Revenue and Customs, and one of the Commissioners shall be designated as the chairman of the Board."
The noble Baroness said: As we had an extensive debate on the previous amendment, I will try to take this one at a little more speed. Again, it teases out another aspect of how the organisation is to be run.
The Bill provides merely that there will be commissioners and that they can organise themselves as they like. When one creates an organisation. one should have some sense of how it is to be run. It is relatively clear that both Customs and Excise and the Inland Revenue are organised into boards and they have chairmen. That is perfectly normal for any kind of organisation, whether it is in the public or private sector. Sometimes they are called councils, not boards, but that is the general impression and what we would expect to find for any body being created in any sector.
The Explanatory Notes state that it is customary for one of the commissioners to be designated chairman in the Letters Patent. I am not sure when that first arose, but it now appears to be the practice that one person is designated to be the first among equals to lead the

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organisation. My amendment is therefore designed to reflect that practice. It is difficult to envisage any organisation which does not have a designated leader.
The amendment deals with fundamentals—it does not apply complicatèd, straitjacket corporate governance—providing that there is a chairman and that the commissioners form a recognisable body. This is an opportunity to reflect organisational practice as we find it in the 21st century and has been practised for at least a century if not longer. It is an opportunity to place on the face of the Bill some elements of the organisation so that we do not have to leave it to the commissioners to work everything out for themselves. I beg to move.
Lord Campbell of Alloway: It is almost the same point and I have to support the amendment. I feel that one ought to define the set-up and structure on the face of the Bill. That is a tidy way to do it and, in any event, if matters have to be dealt with in a court of law, which may well arise, any court will want to see the structure and how it is laid out. It is quite wrong—the same point arises—to leave the matter in the air or to the commissioners to sort out. It is the wrong approach.
4.45 p.m.
Lord Goldsmith: The issue raised by this amendment is, in part, the issue we debated a moment ago and also the specific issue of whether it is necessary for the Bill to stipulate both that collectively the commissioners shall be called "the Board of Revenue and Customs" and that one of them be the chairman.
As I said in debating the previous amendment, there are requirements and guidance on corporate governance which flow from the fact that something is a government department. Beyond talking about government accounting issues, I did not indicate what those were. However, they include, for example, the Civil Service code and the Cabinet Office toolkit for boards, which is aimed at maximising the effectiveness of departmental boards. I can add that the Treasury is also reviewing corporate governance in central government departments with a view to producing a code of good practice which provides an overview of the processes and responsibilities within departments. So there will be another source from which the department will find guidance on its operation.
Returning to the two issues raised by the amendment. should the Bill stipulate that the commissioners should be called "the Board of Revenue and Customs"? It is certain that HM Revenue and Customs will have a board of management and I am happy to place that on record. However, this issue illustrates the advantage of not specifying details on the face of the Bill which may be unnecessary and perhaps unhelpful.
Let me explain. The element of the amendment requiring a hoard follows the current arrangements in the Inland Revenue where two or more commissioners acting together are referred to as "a Board of Inland Revenue". Plainly, it is not necessary for the legislation to require the commissioners to be referred to together as "a board". They are not referred to as such in Customs and Excise legislation and it seems unnecessary to
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perpetuate what is in fact a Victorian expression in relation to Inland Revenue which comes from the styling in the Inland Revenue Regulation Act 1890.
Let me take this one stage further. The amendment as it stands would identify the board as consisting solely of commissioners. That in itself may be unhelpful. The appointment of non-executives is a key part of modern corporate governance practices and it would therefore be a restriction of the way in which the department could be organised to say that the board is only and can only be commissioners. That may be a disadvantage in getting the right non-executives in post.
The noble Baroness will recall that she was a non-executive member not of the Board of the Inland Revenue but of the departmental board. For some people, being not of the board itself but of a different and apparently inferior board may be a disincentive. So putting this provision on the face of the Bill may be counterproductive and unhelpful.
As to how this will work in practice, the chairman designate of HM Revenue and Customs is yet to finalise the arrangements, but the intention is for the board of management's initial membership to be drawn from a combination of all the commissioners, plus all of the non-executive directors and some, but by no means all, of the executive directors. That would meet modern corporate governance practice. The precise composition will no doubt change over time with the needs of the organisation. The balance of executives and non-executives is a much discussed issue.
So, there is no advantage and much potential disadvantage in specifying the first element of the amendment in the Bill; so too in relation to the other element. Why does the Bill need to specify that one person should be designated the chairman? I am sure that the noble Baroness is right in saying that in all organisations there needs to be someone who takes the lead, but whether that person has the title of chairman, or some other title, will no doubt depend on the circumstances.
There will need to be a Permanent Secretary appointed to head the department, because this will be a central government department. That is not going to change; that was the basis of the appointment of David Varney. His recruitment was on the basis that as Permanent Secretary he would also be chairman. As covered in the Explanatory Notes to Clause 1, the intention is to continue the existing practice of the Permanent Secretary being designated as chairman in the appointments Letters Patent. It is going to happen; there will be someone in that position, but it would not be helpful to insist in the Bill that someone should have that specific title. I hope that that is more reassuring than the previous explanations were found to be relation to previous amendments.
Baroness Noakes: I thank the Minister for that, but he has neatly explained in his answer why I felt it necessary to table the amendment. I completely understand that under the Inland Revenue there is the statutory board, and the management board beneath. That is what happens across much of Whitehall. The

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point of tabling the amendment was in part to bring out the fact that we do not know what kind of organisation will be created by this Bill.
The Minister referred to the likely intention, which would follow practice both in Inland Revenue and Customs and Excise, that the board will comprise commissioners, some executives, and some non-executives. but the Bill does not state that. It is left entirely to the commissioners to work out their own organisation. I put it to the Minister that the Government would not create any body other than a government department in this way. We can look at any statute created recently, such as one that I worked on at the end of the last Session, the Pensions Bill, which created the Pensions Regulator and the new Pension Protection Fund. In each of those cases, the way in which the organisation was to be governed was set out, including executive appointments, non-executive appointments. and the fact that a person was to be called chairman. This is normal in other legislation.
The only point at which we find that the Government do not apply this perfectly sensible approach to specifying what kind of organisation we are creating, is when we get to this organisation, which is a non-ministerial government department. We are allowed to have a complete mystery about how the organisation is to work in practice. It is to be left to people, who are appointed in a way that is not entirely clear, to work out among themselves how they are to organise, and which people to put on their management board, leaving everything else to be worked out away from any form of public scrutiny. It is curious that we have a completely different rule for this important government department than for any other body- that the Government have created in the past seven, going on eight years. I find that very strange.
For today, I am happy to withdraw the amendment, as that is the custom in Grand Committee. Indeed, the amendment is not perfect, as the noble and learned Lord will be aware. However, it has highlighted that we have a Bill that is completely lacking in clarity about how Revenue and Customs will operate in practice. While that has been the case in the past, we are missing an opportunity to lay down a structure that can then be looked at from the outside and explained in a rational way. I beg leave to withdraw the amendment.
Baroness Noakesmoved Amendment No. 4:
Page 1, line 6, at end insert—
"(1A) The Commissioners may appoint one or more persons to be non-executive directors provided that the number of non-executive directors may not exceed the number of Commissioners.
(1B) Non-executive directors appointed under subsection (1A) shall be appointed on terms and conditions to be set by the Commissioners, but shall not be regarded as staff for the purposes of section 2."
The noble Baroness said: Committee Members will be pleased to know that this is the last of the governance amendments for a while, although there will be some a little later. The issues that arise here
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relate to non-executive directors and build on matters that we have just been talking about, and I do not want to repeat those arguments. The amendment deals with how non-executive directors can be appointed and states that they can never be in the majority. The amendment also deals with the status of non-executive directors.
This is another probing amendment. On its own it does not fit within the Bill because it requires a board of a certain type in order to work. But I want to use it to debate the issues that arise in relation to non-executive directors, which are another aspect of the lack of clarity that has not been dealt with by the Bill.
As the noble and learned Lord said a moment ago and as I explained at Second Reading, my noble friend Lady Wilcox and I were appointed as non-executive members of the management board of the Inland Revenue back in 1992. I believe that those were the first such appointments to management boards across Whitehall and it is fair to say that there was a considerable lack of clarity about what we were, what we were supposed to do, what our status was and what our roles and responsibilities were.
For example—this will explain my personal interest in tabling the amendment—I had a vigorous dispute with a Treasury nitpicker, who is now in a yet more elevated post in Whitehall, over my legal status as a non-executive member of the Inland Revenue management board. The dispute eventually cost me a lot of money. The details need not trouble this Committee, but the plain fact is that there was no clarity about my status as a non-executive member of the Inland Revenue and the individual chose to exploit that. That is why I have a personal interest—although not a continuing personal interest—in putting something in this Bill to place non-executives on a proper basis.
That is particularly the rationale for the proposed new subsection (1B) in Amendment No. 4, which sets out that non-executive members are not staff for the purposes of Clause 2, and therefore they are not officers of Revenue and Customs. It also provides that their terms and conditions are to be set out by the commissioners. I do not know what the current experience is in Whitehall, but in the early days there was a considerable lack of clarity about the matter. We should be clear about the status of non-executives who are invited into government departments to assist in some way.
As the noble and learned Lord said and as is clear from the Explanatory Notes, it is the intention at present to use non-executives, which is why Clause 14 allows the commissioners to draft them in. Proposed new subsection (1A) of Amendment No. 4 would legislate for non-executives clearly in the Bill, as opposed to leaving their inclusion to be inferred from the more permissive conditions of Clause 14.
As I said earlier, the amendment allows for the number of non-executives not to exceed the number of commissioners. That is not in accordance with private sector corporate governance. However, for the purposes of debate, it is necessary to identify that non-executives

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must be in a certain proportion and I have assumed that it would always be right for a government department never to have a majority, although I have to say that that is not clear from the Bill either. Clause 14 could be used in quite another way.
I hope that the noble and learned Lord will see that my purpose in tabling Amendment No. 4 is to get him to set out how the Government see non-executives fitting into the Revenue and Customs organisation. I hope that he will explain why it is appropriate for the Bill to be silent on this category of person. I beg to move.
5 p.m.
Lord Campbell of Alloway: There appears to be agreement, but not quite for the same reason. I support my noble friend. We are setting up a new public body within the meaning of Article 8 of the European Convention on Human Rights. We have commissioners, but if they are to have power under some new structure to appoint non-executives, surely that should be stated in the Bill. We do not know whether the new structure will operate as the old structure did. So when you are making a new structure, surely a delegated power of appointment should be on the face of the Bill.
The other point is that the commissioners can set the conditions. That goes without saying. But it does not go without saying that they should not be regarded as staff. If that is the position, it should be stated in the Bill. We have a new structure and we do not know whether it is going to assimilate the old structure. We do not know enough about it. Frankly, the whole thing warrants clarification.
Lord Goldsmith: I seem to have difficulty in getting the point across, so perhaps I may reiterate it. This body will be a government department. Existing codes, guidance and requirements will apply to it. It is not the same as a private sector body; it is not the same as an agency; and it is not the same as some public body which is being established outside government departments.
The legislative approach which has been adopted is the same as that in relation to the predecessor department in Customs; for example, there is no statutory board in relation to Customs. Why is it necessary to say on the face of the Bill—
Lord Campbell of Alloway: I thank the noble and learned Lord for giving way. We are drifting into a misunderstanding. I am saying that it is a public body within the meaning of an article. I am not referring to it as being an ordinary public body outside that meaning. That is all.
Lord Goldsmith: Absolutely. It is not in the same category as other non-governmental public bodies or private sector bodies which are established. The current arrangements for the Inland Revenue and for Customs and Excise are that both engage non-executive directors. In neither case, so far as I am aware, is there any specific legislative provision for
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that to take place. There is no need for there to be specific legislative provision to appoint non-executive directors. I note that the noble Baroness's amendment is not a requirement to appoint them but simply purports to give a power to appoint—a power which it is not necessary to include because it is not necessary to have a specific legislative power for that to be done. It is therefore not necessary to have such a specific legislative power in relation to the precedent of departments and it is not necessary to have a specific legislative power here.
Secondly, it was stated that non-executive directors are not employees. In line with the recommended practice for central government departments, the non-executive directors of the predecessor departments are not employees. The same arrangements will follow forward into Revenue and Customs, and so I see no need for either of the parts of the amendment that the noble Baroness has moved.
I go further than that. She identified that the amendment seeks to put a limit on the numbers of non-executive directors, which does not correspond to modern corporate governance practice in the private sector. Increasingly in modern private sector corporate governance, the proposal is that at least half of a board should be non-executive members. The noble Baroness says that she proposes a limit for the purposes of debate. Why should that limit be right? Even if it is right today—which it might be—should it be enshrined for all time? To my mind, that is a fatal objection to the amendment.
I want to return to the point that I made at the outset—that is, this is a government department. In a private sector body there may be votes on the management board, but one does not see that in a central government department. Equally, in a central government department the head of the department, the Permanent Secretary. is necessarily not a non-executive. He is a civil servant. That does not correspond to modern practice in the private sector.
So, while I have sought to recognise the importance of good corporate governance arrangements throughout the debate on this and other amendments, the simple application of private sector models to a government department does not necessarily work. It is better to accept the requirements set out for government departments, including those that will be set out in the code for corporate governance arrangements for government departments, which the Treasury is working on at the moment.
Lord Brooke of Alverthorpe: I have some sympathy with the views that have been put forward by the noble Baroness. I recall the changes that came in in the old Inland Revenue—I go back to the Revenue. It is a government department. but it decided to introduce non-executive directors. It introduced them because it saw the world around it changing, particularly in the private sector, and it needed to make some amendments. It also had difficulties with its glass ceiling and gender balance. There was a view that that was the opportunity to get

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some women seen around the Board of Inland Revenue, which had hitherto been comprised solely of males. But we have moved on.
Again, we come to the document—I do not have a copy of it, but one has kindly been loaned to me—that sets out the governance. It states that the concept of sound corporate governance practice has developed considerably over recent years. That indicates the flexibility that HMRC requires to be able to adapt to new requirements without the need to amend legislation. It goes on to say that details on HMRC's governance arrangements will be published and available for parliamentary scrutiny. When will they be published and will it be done during the course of the examination of the Bill?
This is an unclear area. This is a government department and will continue to be one, but it appears that it is a government department that will have non-executive directors. I do not believe that this can be left so that when we are dealing with the legislation we have no idea of the terms and conditions that will govern the way in which they will work.
5.15 p.m.
Lord Goldsmith: I hope to make it clear to my noble friend that there are present arrangements in relation to both constituent bodies in which non-executive directors are involved. The terms and conditions on which they work are clear. It is anticipated that those arrangements will continue, but it is important that arrangements should be capable of evolving over time.
I hope that my noble friend will agree that it is not necessary to say on the face of the Bill that there may be non-executive directors, any more that it was necessary previously to say that there may be non-executive directors in relation to the Inland Revenue. Had it been a requirement of law that that should be on the face of the Bill, the Inland Revenue would not have had the benefit of the involvement of the noble Baronesses, Lady Noakes and Lady Wilcox, without specific legislative change.
Lord Brooke of Alverthorpe: I am not necessarily pressing that this should be included in the Bill. I am saying that as we deal with the legislation, we shall need greater clarity in this area. If I gave the impression that I referred to terms and conditions alone, I was not doing so; I referred, too, to roles and responsibilities, which have not been clearly defined hitherto, as far as I could ascertain. They need to be given greater clarity, even though they may not necessarily be included in the Bill. I hope that we can get a fairly early sight of that rather than have to wait a long time for it.
Lord Goldsmith: I want to be as helpful as I can to my noble friend and to other Members of the Committee. On creation, details will be published of top level governance, including on the Internet site. Any changes thereafter will be published the same way and there will be reports to Parliament. In the mean time, I shall see what further detail I can provide by way of satisfying noble Lords' concerns as to whether
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the terms and appointments of non-executive directors and others will be clear to them and therefore to others. The best way in which to do that would be for me to set down in a letter what I can say in that regard. which I shall send to all Members of the Committee who participate in the debate.
I hope that the Committee will feel more reassured that the need for clarity in governance arrangements is absolutely understood, and the real debate has been not about that and the importance of such arrangements but about how much needs to be included in the Bill.
Lord Brooke of Alverthorpe: I am grateful for the assurances that the Minister has given me. I said that I was not pressing hard for the matter to be included in the Bill—and, after what the Minister has said, I feel much more comfortable with the response.
Baroness Noakes: I thank the noble Lord. Lord Brooke of Alverthorpe, for taking part in the debate. To give him a little background, it was not the commissioners of the Inland Revenue who thought that it was about time that they should move forward. I believe the then Paymaster General decided that somebody was needed to crawl over the figures—which was why I was one of the first appointments. Then, opportunistically, it was claimed that there was a gender balance problem, which was why the first two appointments were my noble friend Lady Wilcox and myself. We were constantly referred to as the "two ladies", which we hated.
I shall deal with a couple of points of detail then move on to the overall theme. One point of detail was whether a balance between executives and non-executives should be written into the Bill. I believe that the Minister said that he would regard having a balance written in as a fatal objection: if it is a fatal objection to this amendment, it is a fatal objection to a very large amount of legislation that his Government have passed in the past seven years. Provisions along those lines were included in the Bill creating foundation hospitals; I could refer to the Pensions Regulator and trawl through a whole lot more, if Members of the Committee wanted me to.
Lord Goldsmith: The noble Baroness will recall that I said, "in this Bill".
Baroness Noakes: It does not create an inflexibility over time to define a balance. It is interesting that the Minister resists any form of specificity.
On another point of detail, the Minister said that it is clear that the people referred to are not employees, but it was not clear when I had the altercation with the Treasury civil servant. That was precisely the nature of the altercation—whether I was an employee of the Inland Revenue. It was precisely the lack of clarity at the time that led to a loss of money in circumstances that I do not need to explain to the Committee, and it was that lack of clarity that led me to propose the amendment. I believe that it is on the matter of that lack of clarity that the noble Lord. Lord Brooke of Alverthorpe, has voiced his support.

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At the end of the day, I believe that the Government's position is that this is just another government department, government departments are our playthings and we decide what they do and do not do over time. If the Treasury decides to issue a code, government departments will have to comply with it; until then, it is something of a free for all, unless Parliament catches up with them a couple of years after they have done something.
I do not believe that that is a satisfactory way to go forward. The Bill gives us a good opportunity to lay down some markers for the kind of organisation that Parliament expects to see. I am sure that we shall not be able to pursue this much today, but I will want to reflect very carefully on the Government's approach between now and Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2 [Officers of Revenue and Customs]:
[Amendments Nos. 5 to 11 not moved.]
Clause 2 agreed to.
Clause 3 [Declaration of confidentiality]:
[Amendment No. 12 not moved.]
Lord Sheldonmoved Amendment No. 13:
Page 2, line 18, leave out "make a declaration" and insert "take an oath"
The noble Lord said: There are two main considerations in the merger of the Inland Revenue and Customs and Excise. We are seeing very big changes in procedure, but when you bring these two very large departments together there will obviously be very great changes in the way they operate. We understand that with £400 billion it is a major undertaking. We have seen by the comments by my noble and learned friend and others that this merger is slowing down. When the debate took place in the House of Commons it looked as though it would go much faster than it is. We are seeing that the prosecution service will be the main mover in keeping to the schedule to save the 3,200 staff which was envisaged at the time.
The most important aspect is the standard of honesty that we have to try to maintain. The great advantages that we had in the last century came with the NorthcoteTrevelyan reforms of 150 years ago. We gained enormously from that. The level of corruption throughout the whole of our administration and the Civil Service has been much less than in comparable countries. It is the tradition that has been so valuable—
The Deputy Chairman of Committees (Baroness Hooper): There is a Division in the Chamber. I suggest we stop and resume after 10 minutes.
[The Sitting was suspendeclfor a Division in the House from 5.17 to 5.27 p.m.]
Lord Sheldon: As I was saying before the Division, this important aspect of the Bill needs to maintain the
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standards of honesty that we have had the enormous advantage of retaining over the years. It came from the Northcote-Trevelyan report, which produced the kind of Civil Service that we have come to expect. When we have tradition in such matters, it is easier to retain it so, fortunately, we have not had the disadvantage of having to undergo the dangers of corruption that we see in so many other countries.
The best way to retain standards is to keep things much the same. If you bring about major changes, you change the structure and the opportunities for people to do things that they otherwise not would do. There could be a decline in standards. Because of that, I feel that this is not a time to replace the oath. It has been one of the great standards that we have had, and the dangers of moving away from it are clear—to me, at any rate.
Those dangers are also clear to a very important person who had responsibility for these matters, Jim Callaghan—the noble Lord, Lord Callaghan. He sent me a letter on 10 February that referred to my speech at Second Reading. I now have the privilege of reading that letter out. It states:
"Dear Bob,
Amalgamation of the Revenue in Customs & Excise
I was of course very interested to read the HMRC debate. especially so when you made the point about the need to keep the Revenue as a statutory duty. I highly agree with what you say and hope you will convince the Attorney.
To give you an example, I have never forgotten the importance attached to the occasion when I was required to take the Revenue Oath, even though it is seventy-five years ago when it happened. I was seventeen years old at the time, in 1929. and just out of school, having passed the Civil Service entrance examination and been appointed to Maidstone Tax Office. When I had been there for only a week or two, Norman Sparks, the Senior Clerical Officer, told me what I had to do and then escorted me personally to the office of the Commissioner for Oaths. The Commissioner was a man named William Day, a huge man with a large beard, who sat me in front of his desk whilst he explained the importance of what I was undertaking, and I then took the Oath in the presence of the SCO.
As you will realise from what I am saying, it had a great effect on the young impressionable mind of a seventeen year old. Perhaps the Revenue Oath is even more important nowadays, when many young people seem ready to enter into their obligations without too much thought, so I hope you will continue to insist on its value, and that you are successful.
Trust you are keeping well, and with kind regards, Yours ever, Jim Callaghan.
PS If it is of any help you can quote my experience—and anyway it will show people I'm still aliver!!"
That is a very important recommendation for this amendment, which I have the privilege to move.
5.30 p.m.
As I said, by international standards we have this enormous advantage over other countries, and it is when these major changes are brought about that this kind of thing can occur. If things are left much the same, the same tradition of high standards of honesty is more likely to prevail. When new systems are brought in, and with an amount of £400 billion, it will

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always be possible for a number of things to go wrong. Quite rightly the noble Lord, Lord Callaghan, saw that, as indeed I do. I beg to move.
Lord Campbell of Alloway: I was going to support this amendment in any event but, of course, following what was said by the noble Lord, Lord Sheldon, at col. 599 of the report of Second Reading, I wholly agree that one does not want to downgrade the system.
The Earl of Northesk: I, too, support the amendment. Like my noble friend Lord Brooke of Sutton Mandeville, I should perhaps begin by apologising to the Committee that this is my first intervention on the Bill. I should have preferred to give some indication of the nature of my concerns at Second Reading but, in the event, that was not possible. With that in mind, I hope that in due course the Committee might allow me a modicum of leeway in explaining the context of some of my later amendments.
I should also say that I am only too well aware of the collective experience and expertise of the Committee in Revenue and Customs matters. For me, given my relative lack of experience, the moving of the amendment by someone as distinguished as the noble Lord, Lord Sheldon, argues strongly in its favour.
I also view with approbation the Government's acquiescence to the arguments of my honourable friends and others during scrutiny of the Bill in another place. The result was, in fact, the insertion of this clause on Report. It is wholly appropriate that any individual appointed as a commissioner or an officer of Revenue and Customs should be subject to a duty of confidentiality and that that duty should be subject to an appropriate form of declaration. I am sure that that is common ground among us all. As the Paymaster General put it at Second Reading in another place:
"It is vital for continuing compliance rates that taxpayers provide information to the Revenue departments. The bedrock of that process is the knowledge that their confidentiality is protected".—[Official Report, Commons, 8/12/04; col. 1177.]
That being so, the contribution that the maintenance of a culture of confidentiality within the Revenue can make towards closing the tax gap—after all, that is one of the Government's stated purposes in seeking the integration—should not be underestimated. The proposition for the taking of an oath—it is but a small step further along the road that the Government have already embarked on attaches due gravity and solemnity to the importance of the issue.
That said, my principal motive for supporting the amendment stems from a slightly different perspective. I believe it is just as important that the self-same gravity and solemnity provided for by the amendment be attached to the principle of privacy rights emanating from Article 8 of the ECHR. As I said, I support the amendment.
Lord Barnett: I would normally support my noble friend in whatever he said, but on this occasion I am only too delighted to do so, especially as he referred to the remarkable letter that he received from my noble
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friend Lord Callaghan. I would want to support my noble friend Lord Callaghan anyway because he was kind enough to appoint me to his Cabinet. I am not sure that "kind" is the right word because I was Chief Secretary for five years in that government, but I was very grateful to him then and I am now. I am sure that every Member of this Committee will want to wish him well for many more years in good health.
I am pleased to support my noble friend Lord Sheldon—and my noble friend Lord Callaghan—in the point that he made. I hope that my noble and learned friend the Attorney-General will throw away his brief, say how much he agrees with what my noble friend said and simply support the amendment. It is a simple thing to do and we could all then move on to the next amendment, because I cannot imagine that my noble and learned friend would want to resist the type of support given to this amendment. I briefly and strongly support the amendment and hope that my noble and learned friend will do so too.
Baroness Noakes: We support the amendment and I join in the good wishes sent to the noble Lord, Lord Callaghan. We certainly wish him well for the future and would like him back with us to join in our proceedings.
When the Bill was first published, there was to be no declaration. We were told that it was to be a matter of employment contract between individual members of the staff of Revenue and Customs and that organisation. It was only in response to strong representations by my honourable friends in Standing Committee in another place, coupled with representations made from outside, that the Government wisely took the decision to step back from simply letting it be a matter of a term in an employment contract.
What people hoped would appear was a reinstatement of the oath, but when the government amendment appeared, it came back as a declaration of confidentiality. I know that my honourable friends in another place regretted that the Government had not gone so far as to keep the oath, which was regarded as an important part of the relationship of the individual officer and his duties of confidentiality towards the taxpaying public. In another place, half a loaf is always better than none when there is no chance of overturning a large government majority, so there was no outright opposition at that stage because clearly progress had been made. However, I speak for my honourable friends in saying that they would regard the amendment moved by the noble Lord, Lord Sheldon, as infinitely preferable to what we have in Clause 3.
Lord Goldsmith: The noble Lord, Lord Barnett, as ever, is seductive in his invitations to all Members of the Committee. I hope that I made it clear at Second Reading how much I agree with my noble friend Lord Sheldon about the importance of maintaining standards of honesty, and in particular about the importance of maintaining a strong obligation of confidentiality in relation to taxpayers' affairs. In witness of that, the Bill contains important provisions

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imposing the obligation of confidentiality subject to certain exceptions, which we will no doubt come to explore a little later in Committee, and imposing the strong criminal sanction for unauthorised disclosure. We went further in response to what was said in another place in recognising the symbolic quality of the witness declaration and have provided for that in Clause 3. Up to that point, I agree entirely with the noble Lord and indeed with other noble Lords who have spoken.
I also agree—how could I not?—with the importance attached by my noble friend Lord Callaghan to the impression that making a formal statement has, as he says, on an impressionable young 17 year-old and will have on others. I want to associate myself with the good wishes sent to my noble friend and also to record the fact, as has been recorded in other places, that he recently passed a milestone in becoming the oldest surviving English Prime Minister. In any event, I send many congratulations and all our very best wishes to him.
But here I part company with my noble friend Lord Callaghan for one simple reason: although what happens in the Inland Revenue is referred to as an oath, it is not an oath at all. It may well have been one when my noble friend first joined the Maidstone tax office in 1929, but it has not been an oath since, we think, the 1950s. I shall find out the date and let Members of the Committee know what it is on a subsequent occasion.
The position in relation to the Inland Revenue is that Section 6(4) of the Taxes Management Act 1970 provides that any person appointed an inspector or collector, or appointed by the board to serve in any other capacity, is obliged to make a declaration in a statutory form. The form is set out in the Act. It provides:
"I, A.B., do solemnly declare that I will not disclose any information received by me in the execution of the duties which may from time to time be assigned to me by the Board of Inland Revenue except for the purposes of my duties or to the Board of Inland Revenue or in accordance with their instructions, or for the purposes of any offence relating to inland revenue, or in such cases as may be required by law".
In other words, it is a solemn declaration and not an oath at all.
So far as concerns Customs it is slightly less formal, but only slightly. All those who come to Customs and Excise as civil servants have to sign an employment document which specifically identifies that, as civil servants, they owe a duty of confidentiality to the Crown. There is also specific reference to the need to protect information which is held in confidence and other matters. What was inserted into Clause 3 of this Bill was a requirement for a solemn declaration.
Lord Sheldon: "Solemn" does not appear.
Lord Goldsmith: What else can it be? According to Clause 3, every person appointed under this Act as a commissioner,
"shall make a declaration acknowledging his obligation of confidentiality under section 18".
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Plainly that is a solemn declaration. I have no doubt that those who will be operating the system will want to make sure that they drive home to those joining the service, in the same way as it was impressed on my noble friend Lord Callaghan, what their obligations are by reminding them of that—by making the signing of the declaration an event which is memorable. Keeping the history and the tradition of this is precisely what Clause 3 does.
It is interesting that "oath" has remained when in fact it is not an oath at all. It is the substance of the making of a declaration, acknowledging obligations which are in any event imposed, but recognising the symbolic value of that act. Continuing that obligation to make a declaration is precisely what Clause 3 does.
Therefore, I hope that my noble friend will see that what has been done meets the concern that he has perfectly properly and rightly expressed about the need to emphasise the duty of confidentiality, which we want to continue in the new organisation as it was in the constituent bodies.
5.45 p.m.
Lord Campbell of Alloway: Is this declaration for people who are either agnostics or atheists, who are unable to take an oath and therefore make a declaration?
Lord Goldsmith: I cannot answer that question. All I can say is that that is what appears in part III of Schedule 1 to the Taxes Management Act 1970, which sets out the form in which a declaration is required for those who join the Inland Revenue.
Lord Newby: Is the declaration to be a separate document? I was racking my brains while the discussion was going on earlier about what I signed when I joined Customs and Excise. The reason why I could not remember it with the clarity of the noble Lord, Lord Callaghan, was that it was not the same kind of document at all; it was just an employment contract. I subsequently signed the Official Secrets Act.
Will all officers of the new merged department sign a separate document analogous to the document signed in the past by officials of the Inland Revenue, or is it the Government's intention that it should be part of the broader document that they sign? I believe that it is the general view of this Committee that a separate document brings with it a solemnity which simply signing a broader document covering all kinds of matters does not.
Lord Brooke of Alverthorpe: Much of the revenue and customs work is now outsourced, where confidential information is handled by big international IT companies—previously EDS in the Revenue and now Capgemini. What terms and conditions in regard to that are applied to the employees of those companies? Is a declaration required of them? I should imagine that the

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same terms would apply across the board, whether the people have direct appointments within Customs or the Inland Revenue or are in the outsourced companies.
Lord Goldsmith: I shall deal first with the point made by the noble Lord, Lord Newby. He is right that the position in Customs and Excise is different and has been different. The acceptance and confirmation of the obligation of confidentiality has come by way of signing the terms and conditions of employment which have referred specifically to that obligation. I outlined that a little earlier.
As for the declaration to be required as a result of Clause 3, the clause makes it clear that the form will be a matter for the commissioners to correct. However, I can go this far: it is plain that it needs to be a formal acknowledgement, and something recognised as such. Therefore it seems likely that it will need to be something in a separate document, so as to make that clear. Probably the detail of the text will need to be developed in conjunction with the terms and conditions of employment, so it is probably right not to specify it in the Bill. However, once the terms are decided. I will be happy to ensure that a copy is placed in the Library.
The substantial point is that, for those subject to the obligation, it will be a formal declaration—and I would go further and say that it will necessarily be a solemn declaration of the responsibility that they are undertaking. That is the point of making it a specific obligation under the Bill. I am sure that it will be given the necessary solemnity by those in management positions.
With regard to the question raised by the noble Lord, Lord Brooke of Alverthorpe, the new declaration, as the clause makes clear, applies only to officers, not to contractors or to those not appointed as commissioners or officers of Revenue and Customs. However, there will be other reasons why those people will be bound by the obligations of confidentiality so that statutory duties and criminal sanctions imposed under the Bill will in appropriate cases apply to them too. I am told that all with access to customer data will have confidentiality requirements imposed on them by their contracts.
It is right that those who are officers should be subject to this specific and formal requirement. Others who may have access to information will still be bound strongly by the obligation not to disclose it—which will be enforceable by criminal sanction—but not by having this form of declaration applied to them.
Baroness Noakes: I can say to the noble Lord, Lord Brooke, that we have later amendments designed to explore much the same concerns that he raised in relation to those involved in the Capgemini and Fujitsu projects in Customs and Excise.
The Bill is predicated on grandfathering all the existing employees, which will include the Inland Revenue ones who have made a declaration and the Customs and Excise ones who have signed a contract of employment. How is the Minister sure that there is equivalence between the two organisations in terms of the
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commitment to be made? We have new people making a declaration of confidentiality and Inland Revenue individuals who have made such a declaration, but existing Customs and Excise people who have signed a contract of employment. The grandfathering approach in Clause 3 seems valid only if everyone has signed a declaration already, not simply some people having signed a contract of employment. Perhaps we should revisit the issue.
Lord Goldsmith: I respectfully disagree. I do not think that anyone suggests that the present standards of honesty and integrity, including the maintenance of confidence within Customs and Excise, are any less than in the Inland Revenue. I am not aware of any suggestion that we do not trust the existing officers of Customs and Excise to obey those obligations of confidentiality. They accepted those obligations as a matter of law and contract in a somewhat different way from the formal declaration made by the Inland Revenue, but those same very high standards apply. That is why it seems entirely appropriate to accept the continuation of the declaration practice in relation to new employees, but to accept that those who have previously been within Customs and Excise already obey and understand those standards of confidentiality.
Lord Sheldon: I am very pleased to hear the kind tributes paid to my very good friend the noble Lord, Lord Callaghan. It is valuable that his views have influenced some of the statements made during the debate.
I am a bit uneasy about the terms to be decided. I hope that a solemn declaration will perhaps be witnessed as well. If my noble and learned friend could add "witnessed" to "solemn declaration", it might go some way to meet some of the strong feelings.
The matter is important. There have been obligations on all the Revenue departments for many centuries, but the danger comes when you make such changes. When you do so, some of the standards can be diluted, so it is important that we look at the terms and make sure that they are as strong as we can make them.
Lord Goldsmith: I take the liberty of intervening simply to confirm what my noble friend would like confirmed. The declaration will be witnessed.
Lord Sheldon: I am grateful to my noble and learned friend for that assurance. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Northeskmoved Amendment No. 14:
Page 2, line 22, after "appointment" insert "and, in any event, within one month"
The noble Earl said: My difficulty here is that I discern a slight lacuna in the drafting of the clause. I have no doubt that the phrase,
"as soon as is reasonably practicable",

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is in a standard legislative form. However, it begs the question of what period of time the Government would adjudge to be consistent with it. Did they envisage a fortnight, a month, six months or a year?
With no specific indication in the Bill, and given the importance of taxpayer confidentiality, there is something to be said for requiring any appointee to make the necessary declaration within an appropriate timescale. At the heart of my assumption is that an appointee who is hesitant about committing to the duty of confidentiality renders himself potentially unfit for appointment, the more so if a failure to make such a commitment can be spun out ad infinitum.
To address that, the amendment—I assure the noble and learned Lord the Attorney-General that it is probing—advances the proposition that the requisite declaration should be made within a month. After all, the essential point here is that, in order to sustain taxpayer trust, the regime of confidentiality needs to be—and be seen to be—adequately robust. I beg to move.
Lord Goldsmith: I shall resist the amendment, and shall explain why. I assure the noble Earl that the obligation of confidentiality starts immediately. The statutory obligation of confidentiality in Clause 18, and the criminal sanction which applies to its breach in Clause 19, will apply from the first moment. It is not necessary to worry about whether those obligations are there; they are.
Equally, I assure the noble Earl that the phrase,
"as soon as is reasonably practicable"—
he rightly says that it is used in statutes from time to time—is not an open-ended statement at all. It does not mean "whenever you feel like it", but at the earliest moment that is reasonably practicable. It does not mean the first feasible moment—that might be "as soon as is practicable"—but as soon as is reasonably practicable to take account of the possibility that there may be reasons why the declaration cannot be signed at that moment.
The likelihood is that most staff will make the declaration within the first few days of their appointment. If not, it is extremely likely that the vast majority of them would do so very shortly thereafter. Save in unusual cases, it is unlikely that anyone would fail to do so within a month. It must be done within such time as is reasonably practicable, and there could be circumstances in which it is not reasonably practicable to do it within a month. As a simple example, someone might be appointed and then fall ill. They may be unable to come into work for a number of weeks. It would not be reasonably practicable during that period to make that person sign the declaration. If we had a strict cut-off time, however, that person would then be in breach of the statutory obligation to do it within one month.
I agree with the noble Earl that it is important to make sure that the matter be treated as an obligation to be dealt with at a very early stage. That is the effect of the obligation to do so as soon as reasonably
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practicable. I respectfully counsel against trying to put on a time limit that could be artificial and might, in exceptional cases, cause a problem. I invite him not to press the amendment.
Baroness Noakes: At what point does this run? Is a person appointed when a letter is sent saying, "You will be employed", or is it from the date specified—"You will be employed from 1 March 2005"? There could be a difference about whether it would be reasonable to put a time limit on it, whichever way you went. I mention that because, when a person commences employment, they will sign a contract of employment. There should be no reason why not. There should be every expectation that a statutory declaration is signed at that point.
There should not be any case in which someone who is appointed does not sign the declaration. Leaving a gap where there could be people who have not signed declarations is unhelpful. I am teasing out at what point this first arises and whether leaving this so open-ended as "reasonably practical" creates a practical gap that needs to be dealt with.
6 p.m.
Lord Campbell of Alloway: That clearly arises in relation to the next amendment.
Baroness Noakes: Yes, indeed.
Lord Campbell of Alloway: The point raised by my noble friend is bang on with regard to the next amendment. I had not spotted it until she raised it.
Lord Goldsmith: I am being torn in two different directions. My noble friend Lord Sheldon, for reasons that the Committee found utterly convincing on the last amendment, thought it necessary that the declaration should be witnessed and should have some solemn form attached to it. I am glad to say that he did not go quite as far as to say that we should follow the example of the experience of noble Lord, Lord Callaghan, and insist that each declaration should be witnessed by,
"a huge man with a large beard",
but, none the less, he has in mind some form of solemn event when the declaration is signed. Now that might be a different moment from the moment when a contract of employment is signed—so I am being pulled in two different directions.
It is important to note that the expression "as soon as is reasonably practicable" is an expression that is well recognised in law, and courts regularly have to apply it. It is far from being an open-ended opportunity. Let us take, for example, employment legislation. A claim has to be brought within a certain period of time, unless it is not reasonably practicable to do so. Quite frequently, people find that they have gone beyond the statutory time limit. They say that there was this or that reason for doing so, and tribunals regularly say that "as soon as is reasonably practicable" is a tight obligation. Tribunals consider whether it was reasonably practicable to bring a claim,

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not whether a person has an excuse for not having done so. So I reject the suggestion that this is a loose expression. It is a pretty tight expression as it stands.
As to the moment from which it applies, I am told by the Box that the understanding is that it is from the moment that a person starts work. I do not know what the practice is in relation to contracts of employment. In the private sector, one may well be sent a contract of employment giving a starting date before starting work, and one is expected to sign the contract before that date. If that is so, then the moment for the solemn declaration would necessarily be later. I hope that answers the three points and is of some assistance to the noble Baroness.
The Earl of Northesk: I am grateful to the noble and learned Lord the Attorney-General for that response. I think that a slight issue remains, but this is a probing amendment. I always recognised that the noble and learned Lord would be able to satisfy me on the construction of "reasonably practicable". I am entirely happy with his response, although, as my noble friends have recognised, it leads into the next amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Northeskmoved Amendment No. 15:
Page 2, line 26, at end insert—
"() The appointed person shall not be subject to the provisions of sections 17 to 21 until such time as the declaration mentioned in section 3(1) has been duly signed."
The noble Earl said: I repeat that it is entirely right and proper that any individual appointed as a commissioner or an officer of Revenue and Customs should be required to make a declaration committing himself to the obligations of Clause 18. That is all good and well, but I am uncertain whether there is any provision in the Bill to prevent such an appointee, if he so chooses, from effecting disclosures of information to which he may become privy as a result of this appointment, even though he may not have made the requisite declaration.
While acknowledging that the drafting of the amendment may well be imperfect, its purpose is straightforward. It bars appointees from involvement in the disclosure regime until such time as they have complied with the requirement of Clause 3. Where we are dealing with matters that engage Article 8 rights, it is appropriate to ensure, as far as possible, that any opportunity to circumvent those rights is properly and adequately constrained.
I note that the noble and learned Lord the Attorney-General may have responded this issue in the previous amendment by reference to contracts of employment. None the less, I would welcome the noble and learned Lord's clarification of the matter. I beg to move.
Baroness Noakes: I support my noble friend's amendment but perhaps I may ask the noble and learned Lord to address one question. Do any consequences flow from not signing a declaration of confidentiality, as required by Clause 3?
Lord Goldsmith: I shall deal, first, with the substantial point made by the noble Earl. I understand
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that the purpose behind his amendment is to enforce strongly the obligation of confidentiality. I share that purpose and desire with him, but I think that his amendment, if accepted, would have the opposite effect. I know that he does not intend that but perhaps I may explain why.
The consequence could be that someone who is fully aware of his obligation of confidentiality —because it has been explained to him and because he knows full well that such obligations attach in the organisation— but who, for some reason. has not signed the declaration could with impunity, so it would appear, then disregard the obligation of confidentiality and provide confidential information without fear of sanction under the other provisions of the Act. I am sure that the noble Earl will agree that that is not what he intends to happen.
The important point—I am grateful for what the noble Earl said about the answer that I gave during debate on the previous amendment—is that we get on with the declaration, but that does not prevent the obligations of confidentiality being in place. Even if an employee has not signed the declaration. I have no doubt that before he starts work he will be reminded of the importance of confidentiality. No doubt that will be one of the early things to be impressed upon people when they enter an organisation.
The noble Baroness asked what the consequence would be if someone did not sign the declaration.
Baroness Noakes: A contract of employment could be signed before the statutory declaration.
Lord Goldsmith: We shall have to look into that but there is no doubt that the department will expect its new staff to sign. That is plainly what Parliament and this Committee want. Therefore it is likely that a failure to sign will be a breach of the contract. I do not know, in any sense, the full terms and conditions of employment and therefore do not know whether any adjustment needs to be made to ensure that that is the case. The noble Baroness has made a point which will no doubt need to be considered by those who are concerned with these matters, but I hope that the basic answer is of some assistance.
The Earl of Northesk: Once again, I am grateful to the Attorney-General for his response, although I should stress that during my introductory remarks I explained that I am horribly conscious that my drafting skills may not be as good as they should be in this case. Nevertheless, I am glad that I moved the amendment because we have obviously teased out an issue here which requires a little further attention. But, certainly for the moment, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4 ["Her Majesty's Revenue and Customs"):
[Amendments Nos. 16 to 20 not moved.]
Lord Campbell of Allowaymoved Amendment No. 21:
Page 2, line 35, at end insert—
"() The discretion exercised by the Commission of Inland Revenue as regards arrangements as to composition shall be retained."
The noble Lord said: In every sense, this is a probing amendment. I wish to apologise to the Committee for not having been able to attend Second Reading to put down a marker for the amendment, as was my intention—and my name was on the list. I also apologise for having spoken today and not having apologised before.
The object of the amendment is to include in the Bill a safeguard for retention of the excellent discretion of the commissioners for Her Majesty's Revenue to make arrangements as to composition—which includes, of course, the concessions that they make. The amendment is complementary to Amendment No. 23 in the name of my noble friend, which I wholly support. A further object of the amendment is to seek to achieve compatibility with the convention that I will come to in a moment.
At Second Reading the noble Lord, Lord Thomas of Gresford, kicked this ball into play when he spoke about the need for the independence of the prosecuting authority such as would protect the interests of the individual taxpayer. The noble Lord, Lord Barnett, picked up the ball to ask whether his assumption that the two departments would carry on as before was right. He passed the ball to his noble friend, the noble Lord, Lord Sheldon, who ran with it and touched it down for a try, which could only be converted at a later stage of the Bill.
In a short passage, the noble Lord said:
"Another important difference between the two departments is the kind of expertise they have of necessity acquired in the course of so many years with their very long pasts. The history of Customs and Excise, which comes from intercepting smugglers and dealing with criminals, is something that we know and is well recorded in so much of our history. Although the present day approach has over the years altered the attitude of that department, it is still rigorous; more rigorous than the Inland Revenue. The Inland Revenue's history comes from dealing with mostly honest but certainly unwilling taxpayers. It is not easy to see how these two different kinds of expertise will survive, still less be transferred with success from one part of the new department to another. It is still more difficult, given the present level of work by each of these two departments, which are under considerable strain.".—[Official Report, 7/2/05; col. 597.]
The point was made in a very short passage from the noble Lord, Lord Brooke of Alverthorpe. who said:
"Returning to the different cultures between the two partners, I have a question for the Attorney-General. The Inland Revenue has always been seen as having a somewhat lighter touch than Customs. I wonder whether that will continue or whether there will be a harmonisation of approaches. If so, which culture is likely to prevail?".— [Official Report, 7/2/05; col. 602]
The point was taken up by the noble Lord, Lord Newby, who said that,
"the traditional Customs and Excise officer looked down on those lesser mortals with a very considerable degree of scorn. There was a tremendous esprit de corps in Customs, which may or may not
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have been desirable in every last respect as regards an ebullient way of dealing with taxpayers, but it certainly existed and was certainly a different culture than that which obtained in the Revenue. Putting these two cultures together will not immediately lead to efficiency savings".—[Official Report, 7/2/05; cols. 604–5.]
I suppose I have an interest to declare, in that years ago I was on the prosecuting attorneys list for Customs and Excise. I have never done a tax case in my life, and I know nothing at all about it.
6.15 p.m.
Now I come to a slightly more complex affair. The noble and learned Lord said in this context:
"The use of those powers will be subject to guidance which I shall issue to ensure that they are used only where necessary and proportionate".—[Official Report, 7/2/05; col. 615.]
That was in response to what my noble friend had said about the coercive investigatory powers and the draconian position of Customs and Excise compared to the Revenue at cols. 608 and 610, to which I have already referred.
With great respect to the noble and learned Lord, what he said was not satisfactory. It was at the end of a long speech, which dealt with many other things. However, there are matters here that require serious consideration. Why? Because the Bill provides no procedural safeguards and no relevant criteria to regulate decisions as to enforcement by any identifiable person. The resort to such powers relates to the use, exchange and disclosure of information relating to an individual taxpayer's private life. As being confidential, it without doubt engages Article 8 of the Convention on Human Rights.
The HMRC, as it is called, is a public authority for the purposes of Article 8(2), and it may not interfere with the taxpayer's exercise of this right, except in accordance with the law, and if necessary in a democratic society in the interests of national security. public safety, or the well-being of the country for the prevention of disorder or crime, or for the protection of health or morals, or for the protection of the rights and freedoms of others. None of those exceptions applies, or begins to apply, to the ordinary, run-of-the-mill case of assessing and collecting taxes and making an arrangement by composition or by concession.
There is a problem here that cannot just be ignored. There is a want of clarity. Safeguards ought to be built into the Bill. For the HMRC to exercise certain powers under this Bill if those exceptions do not apply—and none of them will apply in the ordinary, run-of-the-mill case at all—there would be a breach of Article 8(2) and it would be incompatible with the convention, and the courts would so rule. The specific concerns—there is not time to deal with them here and I shall not attempt to do so—on which the onus is on the Government to satisfy that the Article 8(2) exceptions apply, are referred to in the report of the Joint Committee on Human Rights. I declare an interest—I cannot call it a disinterest—as a Member. I shall refer to the specific aspects to save time and repetition when dealing with Amendments Nos. 32, 35, 36 and 37 to Clauses 17 and 18, because theirs is a generic application.

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The question is—and I conclude with it—should not the safeguard as proposed by this amendment be on the face of the Bill in some form? I pretend to no expertise in drafting, and someone could do it very much better than I, but there must be some form of safeguard. It must be drafted by someone who realises that in the ordinary run-of-the-mill tax assessment, collection and composition the exceptions will not clear; they will not apply. There is a risk the whole time of incompatibility and unenforceability. It is suggested that there should be—not necessarily in these words but in some terms probing in every way—a statutory safeguard on the face of the Bill as a break on the Orders in Council that arc in Amendment No. 23 proposed by my noble friend, which I support. I beg to move.
Baroness Noakes: I do not pretend to have the competence of my noble friend on matters of human rights and Article 8, or any other article. At the start of his speech, he was talking about the Inland Revenue's discretion, which was the nature of the amendment. That led me to realise that I did not know what was going to happen to extra-statutory concessions, which are an extraordinarily valuable part of the way in which the Inland Revenue, but not by Customs and Excise, operates at present. Can the noble and learned Lord say something about how that—which by definition would not find its way into statute but is an important part of the way in which tax law is operated by the Inland Revenue but not by Customs and Excise—will find its way into the new body? Or will that be lost in the wash when the two are merged?
Lord Goldsmith: I listened with great interest to what the noble Lord, Lord Campbell of Alloway, has said. Of course, I am well aware of his membership of the Joint Committee on Human Rights. There are some aspects of what that committee has said that we will want to come back to. I accept and entirely agree with him that Article 8 on the right to privacy will apply to the new department as it applies to other government departments. Those protections will apply. I will return to the detail of their application and to why certain disclosures are, in the Government's view, perfectly proper. Those are the subject of particular amendments, to which we will come later.
I will say two things on the general question of the Bill's compatibility with the Human Rights Act. First, as I explained at Second Reading, there is an important ring-fencing of the powers. Secondly, the safeguards contained in the Human Rights Act and the Data Protection Act are not in any way overruled by the Bill. I therefore do not share the noble Lord's view that there are not appropriate safeguards in place. There are strong and appropriate safeguards.
That is not the most important point on this amendment. This amendment touches on the discretion which presently is exercised in relation to compounding or otherwise negotiating settlements of particular liabilities. I share the noble Lord's view that it is important that the new department should continue where appropriate to deal flexibly with the errors, omissions and sometimes frauds which it discovers. I can
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assure him that flexibility will continue under the Bill as currently drafted and it is not necessary to make any specific provision for it.
Both departments have powers to conclude agreements to settle arrears of tax, including interest and penalties, without the need for formal proceedings. Where proceedings have been commenced, there are various powers to conclude them informally. Both departments, for example, can settle civil appeals by agreement. Both departments can offer the prospect of a civil settlement instead of criminal proceedings, provided that full disclosure is made. All of those powers will be vested in the new department under Clauses 5, 6 and 7 as currently drafted. I can therefore say to the noble Lord that he need not be concerned that those powers will cease to exist for the new department because they will continue to have such powers and there is no need to make further provision to that effect.
In answer to the question from the noble Baroness, Lady Noakes, on whether extra-statutory concessions will continue, the answer is yes. The commissioners' powers of collection and management will enable them to continue the policy of extra-statutory concessions. Again, those powers are being transferred through.
With the promise that I will revert to questions of privacy and Article 8 when we come to those clauses, I hope that I have given enough reassurance for the noble Lord to withdraw his amendment.
Baroness Noakes: Perhaps I may clarify the point on extra statutory concessions. As I understand it, they apply only to the Inland Revenue. When we have the merged organisations, will they apply to other taxes currently operated by Customs and Excise? The one which obviously comes to mind is VAT because it is a business tax and when it was first introduced which department it went into was decided almost on the toss of a coin. As I understand it, there is a similar mechanism. Are we going to have old Inland Revenue and old Customs and Excise carrying on in the new organisation?
Lord Goldsmith: That is a detailed question on which it is important to have a clear and precise answer. If the noble Baroness will permit, I will write to her about it rather than attempting to get an answer standing at the Dispatch Box.
Lord Campbell of Alloway: I am grateful to the noble and learned Lord, but the fundamental problem still arises to be faced. I understand his point of view, but to save time, I cannot do justice to my amendment until I have spoken to Amendments Nos. 32 and 35 to 37, which are concerned with Clauses 17 and 18. There I develop the arguments on which I rely and at this time do not wish to repeat. If the noble and learned Lord would understand and forgive me for not replying and acquit me of obduracy, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clauses 5 to 7 agreed to.
6.30 p.m.
Baroness Noakesmoved Amendment No. 22:
After Clause 7, insert the following new clause—
"DISPUTES AS TO FUNCTIONS

(1) The Treasury shall appoint a person to consider applications under this section.

(2) An application may be made under this section by any person who believes that an officer of Revenue and Customs is exercising a function or has exercised a function which is not in accordance with section 6 or 7.

(3) The Treasury may make regulations as to the way in which applications under this section may be made and how they are to be dealt with."

The noble Baroness said: We now come to the issue of the powers of the new Revenue and Customs. The integration is being undertaken at such speed that the Government have not taken the time to work out how Revenue and Customs will work in practice. They will be doing this following some form of consultation. I raised the issue of consultation at Second Reading and the noble and learned Lord told me:
"Treasury Ministers are still considering what form the consultation will take".—[Official Report, 7/2/05; cols. 612–13.]
Is the noble and learned Lord yet able to say when the consultation will emerge? I appreciate that only two weeks have elapsed since Second Reading. However, it is an important issue and, if he cannot say when it will happen, perhaps he will say a little more about what kind of consultation is being considered.
I hope that the Government are committed to a wide-ranging consultation allowing all potentially interested parties to debate the issues fully and in a reasonable timescale. I say that because I know that in another place the Paymaster General indicated that matters would be brought forward in the 2006 Finance Bill. While that sounds rather a long way away, given the potential complexity of drafting and some of the quite serious issues that arise in relation to whether the powers should be levelled up or levelled down, it is not that far away. Therefore, it is important to know what kind of consultation and what kind of timescale will be involved.
I am sure that the noble and learned Lord will agree that in a perfect world the powers of the new organisation would have been worked out before commencing the merger process. That is especially important as the powers themselves have a particularly powerful influence on the culture of the new organisation.
But, of course, we do not live in a perfect world and so the Government have introduced Clauses 6 and 7, which are intended to ensure that the existing powers are ring-fenced and capable of use only in the context in which they were originally created. We do not oppose that approach, but the issue remains of what happens if, say, an officer seeks to use his Customs and Excise powers for an Inland Revenue purpose.
This issue has been raised with us by the Institute of Chartered Accountants of Scotland, which has said that there are concerns about a transfer of powers by stealth. It refers in particular to the different access provisions currently enjoyed by the Inland Revenue and Customs and Excise.
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The examples that the Institute of Chartered Accountants of Scotland give are the powers under the PAYE regulations and for corporation tax under the Taxes Management Act, neither of which give rights of access to premises or powers to interview taxpayers. On the other hand, VAT inspectors can do those things. What happens if an enthusiastic VAT inspector decides to go on a fishing expedition for PAYE or corporation tax purposes using his access and interview powers? Does the taxpayer have any realistic method of ensuring that Revenue and Customs officers do not exceed the powers so painstakingly ring-fenced in Clauses 6 and 7?
I anticipate that the noble and learned Lord will say that the taxpayer retains the right to seek judicial review. If he does, I shall be watching very carefully to see whether he says it with a straight face. I am sure that, as a law officer, he will know that the remedy of judicial review is a very large sledgehammer to crack an often very small nut. It is an expensive process and it does not give accessible justice in normal circumstances—the circumstances of an ordinary taxpayer.
Similarly, an application to the Parliamentary Ombudsman may well be available but that is an extremely slow procedure for delivering a just solution, as anyone involved in the Equitable Life affair will be aware. The taxpayer needs a simple, purpose-built process to deal with the issue of powers that are being transferred and purportedly ring-fenced by Clauses 6 and 7 until the whole issue of the powers of the new body are put on to a proper statutory footing and it becomes much clearer.
I have drafted Amendment No. 22, which may not be a perfect amendment, to create a simple and effective appeals procedure to allow a taxpayer access to some simple form of justice if he feels that his rights are being infringed. The amendment states that the Treasury must appoint a person to consider applications about Clauses 6 and 7 powers. It is deliberately light touch, leaving the details to be provided by the Treasury in the way it thinks appropriate. We have drafted a regulation-making power to cover this so that arrangements can be changed as circumstances change.
The amendment says nothing about what happens if there is a finding against the Revenue and Customs. I am assuming that the Revenue and Customs would then put the matter right in whatever way was appropriate. Failing that, the taxpayer might then have to fall back on judicial review, but he would by then have a finding which would fortify his own position and case.
As I mentioned, this is not a perfect amendment in drafting terms. I hope that the noble and learned Lord will not attack it on that basis and will treat it as a probing amendment. But I do hope that the noble and learned Lord will recognise that it is a serious issue which has been raised and that it does need a serious response. I beg to move.
Lord Campbell of Alloway: I support the amendment in principle, really because every profession now has some means of challenge by

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anybody who wishes to challenge the conduct that he receives at the hands of those in the department and so on. I can see in this context every reason to support the amendment; not necessarily in the terms in which it is drafted. It is the spirit of the thing, and I think that the access should be there.
Lord Newby: The interest in the amendment is not so much the short-term problem in the way that the text of the amendment seeks to deal with the matter—that is, the period between now and the next stage of legislation—but that it foreshadows a really big issue which is coming down the track relating to powers.
One of the virtues of the merger, as set out by the Government, is that it will enable officers of the new merged department to deal with a company's entire tax problems. In theory, a single person will look at the income tax, PAYE, corporation tax, VAT and other matters dealt with by a company.
As long as there are differing powers relating to different taxes, there will be considerable scope for muddle, confusion and potential abuse. If I were to go into a company in this all-seeing tax officer mode and I wished to investigate a revenue problem that that company might have, but would like greater powers in which to do that than those I have wearing a Revenue hat, I might decide that it would be extremely helpful to wear a Customs and Excise hat— a VAT hat, if you like—to gain access or whatever. I think that this is potentially a big problem that we shall need to look at in greater detail, probably not with this Bill, but in the next Bill. It is worth pointing the issue out before consultation gets very much further. How will a multi-hatted tax officer segregate in his mind how he deals with one tax or another, in the context possibly of a single visit, when he has sole responsibility for a company?
I am not sure that this particular amendment is required in the short term, because I do not think that current officers of the Revenue or of Customs and Excise are likely to be exercising that broader responsibility in the short term. Given what the Minister said at Second Reading, I think that the noble Baroness has flagged up a potentially major long-term issue.
Lord Goldsmith: I have listened carefully to the concerns expressed by the noble Baroness. In large measure, the answer to the concerns expressed in her amendment is that that has just been given by the noble Lord, Lord Newby. In the Bill as it is, with the ring-fencing of powers in Clauses 6 and 7, there is no need to be concerned about the misuse of powers. I shall explain why in a moment. I shall also point to the existing adequate procedures for dealing with cases where there is a problem and I shall identify what they are.
At Second Reading, I explained the position with relation to ring-fencing of powers. The idea of ring-fencing powers is not new in this field. A number of existing powers are already ring-fenced so that they already cannot be used by officers, even for functions of the same department. Officers are well aware that
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there are certain powers that are particular to certain functions. The idea of ring-fencing as the two departments are put together will not come as a surprise to any officer involved, or cause any difficulties of understanding. Officers are accustomed to distinguishing between powers that are proper to their purpose and other powers.
I also indicated at Second Reading that it was not the intention that officers would overnight become people who would be dealing with every single aspect of tax or duty. So they will not have occasion to seek to deal with powers that are outside their normal day-to-day work. Integration will take place gradually and initially the same people, for the most part, will continue to perform the same functions as now, exercising the powers with which they are already familiar.
There are safeguards to minimise any risks and to ensure that the public know their rights. My right honourable friend the Paymaster General announced at Second Reading in the other place that an advice note would be produced to aid clarity and public understanding of what HMRC's powers for different taxes and tax credits are in different situations. A draft advice note is already in the Library and Inland Revenue and Customs have been consulting on its content. It is intended to provide guidance to claimants and taxpayers. It will cover the main areas of interaction between them and the two departments. The advice note will be made available to customers during inspections and visits by HMRC officers, as well as being available on the HMRC website. There will be good information about this.
Pending the outcome of the review—to which reference has been made by the noble Lord, Lord Newby, and by the noble Baroness—most HMRC officers will continue to work as before, using the same powers, and taxpayers will have their rights explained to them.
What are the procedures for dealing with an error, whether made inadvertently or otherwise? First. there are existing internal complaints procedures that will be followed through into the new department. If a taxpayer believes that an officer has simply ignored the departmental instruction not to use powers inherited from the wrong department, he could make a complaint, which would usually be the quickest means of resolving that problem. The two current departments have similar complaint procedures that will be adopted by HMRC.
I have little doubt that the misuse of powers by an officer is regarded as a very serious matter in both departments and that that will continue to be the case. So there is the internal complaint mechanism. The noble Baroness wondered whether what she had in mind—or perhaps it was the noble Lord, Lord Campbell of Alloway—was not far from an internal complaints procedure. But there is one already, and there will plainly continue to be such a complaint procedure. There are possibilities to involve a legal tribunal. I say that with a straight face because there is more than one procedure and also because I do not accept and agree with what the noble Baroness said about judicial review.

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6.45 p.m.
A genuine dispute between a department and a taxpayer on what the law permits in a particular case could reach a legal tribunal in a number of ways. First, it may be open to the individual to decline to comply with the request, which request is believed to be unlawful. In those circumstances it may be open to the department to seek to impose a penalty. If that penalty is resisted, the matter must be determined by a legal tribunal. Equally, there are bespoke appeal rights which apply to particular powers and which will go to legal tribunals.
There is also the possibility of applying for judicial review. It is a procedure which is used much more regularly these days than it was 10 or 20 years ago. A large number of judicial review applications are made. As a Law Officer, I know very well how much litigation the Government face on that front. But I do not rely solely on judicial reviews being the answer. It may be that that would be a last resort for many people. But the other procedures that I have identified—internal complaints and the other legal procedures which would be available where there are bespoke appeal rights, or the ability simply to contest a particular sanction that is imposed—should provide adequate opportunity for this to be tested.
So, I hope that it has been useful to explore what the procedures are and that the noble Baroness will see that they should meet the concerns that this new clause was meant to deal with.
I cannot sit down without saying that I am afraid I cannot say anything further about the timing of the consultation. For the next occasion that the noble Baroness raises the matter I shall do my best to be in a position to say something more positive.
Baroness Noakes: I thank the noble Lord, Lord Newby, for his support of these important new powers. We shall have an opportunity to debate that in the context of any new Bill in your Lordships' House. Of course if the matter is contained in a Finance Bill we will lose that opportunity. But we will let that pass for the time being.
I believe that there is still a concern about how the powers will be used. People think that the new organisation, with which we understand the Government wish to press ahead from the beginning of April, will start to act across taxes to try and deliver some kind of seamless operation to taxpayers. If that happens, the concern arises that powers might perhaps inadvertently, or over-enthusiastically, be used.
The Institute of Chartered Accountants of Scotland, which I cited as the source of the concerns that led to my tabling the amendment, has seen the draft advice note. I believe that it is available on the website. The advice note failed to resolve any concerns and possibly made the institute more worried.
I am very grateful to the noble and learned Lord for setting out all the ways in which a taxpayer might seek to ascertain how powers could be correctly used if a dispute arose. I shall certainly go back to the Institute of Chartered Accountants of Scotland and ask it to
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consider again whether it believes that that provides an adequate answer. I think that that is the right way to go forward. I thank the noble and learned Lord for his answer and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule I agreed to.
Clause 8 [Power to transfer Functions]:
Baroness Noakesmoved Amendment No. 23:
Page 4, line 29, at end insert—
"() After section 5(1) of that Act insert—
"(1A) No Order in Council which—

(a) provides for the transfer to any Minister of the Crown of any functions previously exercisable by the Commissioners for Her Majesty's Revenue and Customs or by the officers of Revenue and Customs, or

(b) directs that functions of the Commissioners for Her Majesty's Revenue and Customs or of the officers of Revenue and Customs shall be exercisable concurrently with another Minister of the Crown, or shall cease to be so exercisable,

shall be made under this Act unless, after copies of the draft thereof have been laid before Parliament, each House presents an Address to Her Majesty praying that the Order be made.""
The noble Baroness said: Clause 8 deals with the possible transfer of functions both in and out of Revenue and Customs once it is created. This area has caused much concern. The Treasury Select Committee in another place and a number of lobby groups have raised concerns about the clause. I acknowledge that the Delegated Powers Committee, which published overnight, did not raise concerns about the way in which Clause 8 is constructed, but I am not prepared to accept that as a conclusive reason for not debating the issues, which is why I wish to raise the concerns in your Lordships' Committee.
We have read the debates in another place and feel unconvinced by what appears to be the Government's basic argument about the necessity for Clause 8 as currently drafted: it is that the provisions from transfers in and out of non-ministerial government departments already exist in other legislation, so why not this one, and that any transfers would be no less rigorous than those that already exist. I hope that the noble and learned Lord will be able to give examples of legislation that covers non-ministerial government departments in this way.
Non-ministerial departments are different from ordinary government departments. They are created deliberately without a Minister at their head because of the nature of their activities. It is the nature of Revenue and Customs, and its activities and relationship to individual taxpayers in this case, that causes concerns at heart. A member of the Treasury Select Committee in another place described this clause as having the effect of a licence allowing Ministers to transfer powers willy-nilly under the Ministers of the Crown Act 1975. The 1975 Act transfers functions subject to the negative procedure only, thus restricting Parliament's ability to scrutinise fully any changes that are proposed. The Treasury

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Select Committee in another place recommended that transfers should be subject to the affirmative procedure and that is what this amendment is about.
While dealing with this amendment, there are some issues that I would like to clarify in relation to Clause 8. First, in Clause 8(1), subsection (4) of new Section 5A to the 1975 Act appears to treat commissioners and officials as if they were Ministers of the Crown, which is presumably a comparison that is not the current status quo. We were mystified why this provision should be created under subsection (4). If it is necessary now, why was it not necessary in 1978 when the Government of Wales Act was originally mooted?
The power in Clause 8 allows pretty well anything to be transferred. There are some exceptions, but they are narrowly drafted. and it is difficult to tell what is and is not within the power to transfer. One is looking for the Minister to be absolutely clear about the powers that could be transferred under the Ministers of the Crown Act 1975. Can we be absolutely clear about what can and cannot be transferred?
Our amendment steers a middle way between what the lobby groups want, which is the clause removed completely and transfers to be subject to primary legislation; and the current draft, which has minimal parliamentary scrutiny, which is the negative procedure. We have steered a middle way, because we think that it is proper to have some parliamentary oversight of functions and powers being transferred in and out of Revenue and Customs, without going so far as to restrict completely how things should work.
As a technical point, we recognise that the amendment does not cover Scotland and Wales; but as a probing amendment, it allows the issues to be debated. I beg to move.
Lord Goldsmith: It may be helpful for me to start by explaining the structure of the clause, because I hope that it will answer some of the questions raised by the noble Baroness, Lady Noakes.
The Bill establishes HMRC as a non-ministerial department. That is driven by the important principle that the administration of revenues should be conducted at arm's length from Ministers. Those Revenue functions are the driver for HMRC's establishment as a non-ministerial department. The effect of making it a non-ministerial department is that the sensible machinery of government change arrangements that exist in the Ministers of the Crown Act 1975 would not apply. It is my understanding that the way of bringing in the powers in the Ministers of the Crown Act is precisely to make the deeming provision, which new Section 5A(2) would have, namely to treat for purposes of the Act the commissioners as Ministers of the Crown. It is not for any other purpose; it is simply the way of bringing in the benefit of those other powers.
However, while that would bring in the ability to use the powers in the Ministers of the Crown Act for machinery of government changes, that is subject to an important restriction. I respectfully take issue with the noble Baroness in saying that it is a narrow restriction; it
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is not narrow, because the Bill prevents the transfer out from HMRC under this provision of any of the Revenue and tax credit functions that HMRC will inherit from the Inland Revenue and Customs and Excise. That is the effect of new Section 5A(3), that an Order in Council may not provide for the transfer of functions specified in Section 5(1) of the Commissioners for Revenue and Customs Bill. Section 5(1) is the collection and management of revenue for which the commissioners of Inland Revenue were responsible, the collection and management of revenue for which the commissioners of Customs and Excise were responsible, and the payment and management of tax credits for which the commissioners of the Inland Revenue were responsible before the creation of this new section.
That carves out of this power altogether the important collection and management of revenue and payment and management of tax credits that would be the responsibility of the two predecessor departments. That is an important restriction, which means that what drove this to be a non-ministerial department will remain, in the sense that those functions cannot be transferred in and out using this provision.
There will be other powers, and things have moved on a lot since 1975, when the Ministers of the Crown Act was passed. The role of HMRC will be more varied than the role that either the Inland Revenue or Customs and Excise had in 1975; with child benefits, statutory payments in the new department, and other functions. In relation to those, which do not fall within this properly protected area, there is no reason, in the Government's view, why responsibility for those powers and areas of government activity should not, like any other government activity, be subject to the possibility of moving them from one department to another under the machinery of government changes that exist in the 1975 Act.
So I am saying that we should keep out of these provisions the important revenue tax credit business. Other provisions should be subject to the same possibility of change as for other government departments. The 1975 Act works well: it has been used on many occasions. There is no intention at the moment to transfer any particular business. That is not at all what is in mind. I am reminded that my right honourable friend the Paymaster General in the other place wrote to the Committee setting out the Inland Revenue business that could be transferred out. The noble Baroness may have seen the letter, but I am happy to provide a copy for her to see the sort of things involved. However, I hope that she will be reassured by what I have to say. I will put it in short form.
7 p.m.
If the department had been established as an ordinary ministerial department, these provisions would simply have applied automatically. We accept that it is sensible and right to make the department non-ministerial to maintain the distance from Ministers, which means that the provisions cannot apply. We do not allow them to apply to the core tax credit and revenue issues, but there is no reason why they should not apply to the rest.

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The disadvantage of the noble Baroness's proposal is that, if there were a requirement for a positive affirmative resolution, there would have to be parliamentary time for any change in relation to one of these other areas, whatever the significance and however little the controversy might be. It would not be a good use of parliamentary time and there is no reason why the provision should not be subject to the same sort of rules as other government business. I hope that that is sufficient to reassure the noble Baroness on this point.
Baroness Noakes: I thank the noble and learned Lord for that explanation and I would be grateful if he would provide a copy of the Paymaster General's letter because that was not passed on when I inherited some papers from my colleagues in the other place. The concerns still arise about what could potentially still be transferred out. Issues do not arise about what could be transferred in: the issue is what might be transferred out.
Although the reference to the functions in Clause 5(1) appears comprehensive, others could be contentious. I would not like to predict what might be contentious, and it would repay looking at the list provided to the Committee, but an example might be child trust funds, which concern the individual circumstances of individual taxpayers and children who are entitled to child trust fund entitlements of various layers. Could those functions be transferred in and out? Should they be capable of being transferred willy-nilly, to use the words of the Member of the Treasury Select Committee in another place, or should they be subject to some form of parliamentary procedure, other than the negative procedure? What is at issue is not the wish to ossify Revenue and Customs as an organisation but to ensure that there is a parliamentary procedure that examines something being taken away from its functions.
Lord Goldsmith: It might help if I intervene for a moment. Of course, I understand that even under the Ministers of the Crown Act there is a parliamentary procedure, but it is a negative rather than a positive resolution. That means that if there is controversy about an issue, it is open for that to be raised and a Motion put forward so that it can be debated.
Baroness Noakes: I completely understand that, but this is not a power that is exercisable without any parliamentary procedure. I am sure that the noble and learned Lord will recognise that on Opposition Benches, that procedure—the requirement to pray against a negative resolution—is one that gives even less opportunity for parliamentary scrutiny in practical terms than an order, which must pass through both Houses of Parliament. That is a fact of life. Given the volume of secondary legislation that gushes out of government departments day after day, those that require a positive parliamentary procedure ensure that Parliament pays attention, which is why, in Opposition, we always seek those powers.
I will consider what the noble and learned Lord said and I would be grateful to receive a copy of the letter. I am sure that the noble Lord, Lord Newby, would be
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as well. We can consider this matter again. My instinct remains that an additional parliamentary procedure would be safer in terms of safeguarding the kinds of functions that ought to remain for a body such as Revenue and Customs. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
Clause 9 [Ancillary powers]:
On Question, Whether Clause 9 shall stand part of the Bill.
The Earl of Northesk: By way of reassurance to the noble and learned Lord the Attorney-General, my purpose is merely to seek clarification. At first blush, the remit of the clause seems extremely broad—so broad as to potentially undermine, if not neuter, many of the welcome safeguards elsewhere in the Bill. While relatively content with the use of "necessary" in the clause, I am rather less comfortable with the use in that context of "expedient … incidental or conducive".
I acknowledge that the Explanatory Notes give some useful examples of what is envisaged here: nevertheless, taken to its logical conclusion, it is not impossible to envisage a situation arising whereby, for example, commissioners might conclude that it might be "expedient … incidental or conducive" to the exercise of their functions to disclose just about any item of taxpayer information much more widely than the Bill on the surface permits. Certainly, I cannot discern any constraint on the exercise of the clause's powers.
On the related issue, what I like to call the "transposition note"—the table of provisions relating to the predecessor departments—makes it clear that,
"no express provision for exercise of these powers by the Customs and Excise currently exists".
The Government have maintained throughout that the process of integration should not result in any extension of powers not already held to either the Inland Revenue or Customs and Excise. As the Minister explained at Second Reading and fleshed out in the context of earlier amendments, the Bill deliberately makes only those changes necessary to establish HMRC. It therefore transfers the powers of the two existing departments to HMRC but ring-fences to prevent their inadvertent extension within HMRC. There are therefore no changes in how the powers can be used as a result of the Bill.
That aspect is reinforced at paragraph 298 of the Explanatory Notes, which states:
"In order to prevent the accidental spread of the wider powers to the whole of the new department's business, it is necessary to ring fence these powers by reference to the matters inherited from each predecessor department".
And yet to my interpretation no such ring-fencing exists in respect of this clause. Instead, apparently extensive additional powers are conferred on Customs and Excise. Why? In the circumstances, I would be grateful if the Minister would elaborate on the nature of any legacy powers insofar as they may exist for Customs and Excise in this area.

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I willingly acknowledge that I may have misconstrued the construction of the Bill. Perhaps the key lies in the clause's heading—"Ancillary powers". Come what may, I very much hope that the Minister will be able to reassure me that my misgivings are misplaced.
Lord Goldsmith: I hope that I can. This clause does not provide the commissioners with any new coercive powers over taxpayers; that would be a matter of concern, plainly. To take the example of confidentiality that the noble Earl gave, it does not allow them to override the express obligations in that regard that one finds in other parts of the Bill.
It is not unusual to provide that people can do things that are ancillary to their substantive powers, which are transferred. As the noble Earl said, examples are given in the Explanatory Notes, which refer to,
"gathering of information relating to the exercise of its functions… establishing advisory bodies… entering into agreements… acquiring and disposing of property; and … promoting, or assisting in the promotion of, publicity about the tax system".
I could add, indeed, the giving of advice to Ministers about the operation of the system for collection or management of taxes.
It is sensible to make such provision in the Bill. The noble Earl is right to say that that is treated as implied; indeed, it is implied with regard to Customs. But there exists a clear precedent in Section 1(2) of the Inland Revenue Regulation Act 1890, which gives the commissioners all of the,
"necessary powers for carrying into execution every Act of Parliament relating to Inland Revenue".
That does not allow them to override the express constraints in relation to the exercise of powers otherwise imposed—or, as I said, to override the obligations with relation to confidentiality.
Customs and Excise has always had the implied powers to enter into contracts and do all the things that the clause would permit. It is recognised in the commissioners' Letters Patent. even though it does not appear in the Bill. I have helpfully been provided with a copy of one, which states that the relevant person is appointed,
"for the collection of Our Revenue of CUSTOMS AND EXCISE … and the management of all matters belonging and incidental to such collection".
It goes on. The matter is recognised already in relation to Customs and Excise and explicitly in relation to Inland Revenue. The clause does not take those powers further than that, and certainly does not provide for any new coercive powers or undermine the protections about which we have talked in relation to other provisions.
Baroness Noakes: Where does the limitation arise? The clause mentions,
"anything … necessary or expedient…incidental or conducive".
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How does the Minister interpret the clause so that it covers only benign things such as contracts and data, rather than slightly less benign things such as coercive powers? What leads to that interpretation?
Lord Goldsmith: I shall take the two examples put to me. One is that the commissioners might say, "Actually, we think it expedient to disclose this taxpayer's information much more widely than the Bill provides". That would not be permissible under the clause, if only for the reason that it would contravene an express provision in the Bill, which sets out expressly the obligations. A general power of this sort could not override those.
Equally, where coercive powers would be set out clearly in a Bill—"in this and that circumstance, you can search premises if you have a judicial warrant" or whatever it may be—you could not use a power of this sort to circumvent those clear express permissions, subject to express conditions. You could not therefore use an ancillary power of this sort, well recognised in statute in the private sector, to give yourself a coercive power over a taxpayer when it is clear that the scheme of all the legislation is that those coercive powers are explicitly set out. That is how I would explain the matter.
Baroness Noakes: My point is that you could use the power to fill a gap. I understand that you could not use the ancillary power to override an explicit set of provisions. However, the power is very widely drawn and something may not be explicitly provided for. it seems capable of interpretations in ways less innocuous than the noble and learned Lord suggested earlier about contracts and information. That is the heart of our concerns on the matter.
The Earl of Northesk: My major concern arose purely because the clause states:
"The Commissioners may do anything".
The provision then sits there completely unconstrained.
Lord Goldsmith: One has to read on. The commissioners may not do anything. That would be a wonderful power to have; I hope that such an Act is passed and that Ministers of the Crown are included as its beneficiaries. The commissioners,
"may do anything which they think … necessary or expedient in connection with the exercise of their functions, or incidental or conducive to the exercise of their functions".
One starts with a clear limitation. What are their functions?
To take that a stage further, commissioners could not say, for example, "We think that it would be expedient to go out and apply the thumbscrews to a taxpayer who is not answering our questions as we would like", if only on the grounds that it is clear that the structure of the tax Acts and Customs and Excise Acts is that, where there are powers to compel a taxpayer or someone else to do something, they are spelt out explicitly. I am confident that the courts would not regard such a power, however widely expressed, as giving power to do something coercive of

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that sort when it is plain that the whole scheme of the legislation spells those things out explicitly, subject to all sorts of safeguards such as those referred to. I am not sure that in relation to each and every tax one would not find a code stating what one can and cannot do in terms of coercive powers, and there simply is not room to say, "Well, we think we'll add something else", when Parliament has not explicitly given us the power to do that.
The Earl of Northesk: Once again, I am grateful to the noble and learned Lord, at least for offering me a modicum of reassurance. I remain rather concerned about the clause and I suspect that I may well have to return to it at a later stage, if only to try to satisfy myself that some form of constraint is placed on it. I can see, as my noble friend Lady Noakes has pointed out, that potentially the clause could generate a degree of leakage on the margins. But, in the mean time, I am happy to withdraw my opposition to the clause standing part.
Clause 9 agreed to.
Clause 10 [The valuation office]:
Baroness Noakesmoved Amendment No. 24:
Page 5, line 14, at end insert—
"(Al) The Commissioners of Revenue and Customs may arrange for valuations of property to be provided in accordance with subsection (1) and the officers of Revenue and Customs who provide such valuations shall be known as the valuation office.
(B1) Where subsection (A1) applies, the Commissioners shall nominate one of their number to be responsible for the valuation office."
The noble Baroness said: I was surprised to find that Clause 10 had no counterpart in existing legislation and that, indeed, there was no statutory basis for the valuation office, which has operated as a semiautonomous part of the Inland Revenue for many years. It was formed in 1910 and, to use the Whitehall jargon. in 1991 became a Next Steps agency. It is a significant body. It employs around 5,000 staff and operates from 85 offices.
While no harm is done by the valuation office having only an informal existence, it is clearly proper for it to be placed on a statutory footing. However, Clause 10 is curious because it is headed "The Valuation Office" but the term appears nowhere in the clause itself. So the existence of the valuation office will remain in the shadows, existing only in the heading to a clause after the Bill becomes law.
Amendment No. 24 would do two things. First, it unambiguously provides for the existence of the valuation office, and I am sure that, in particular, the staff who work for the office will be pleased that their organisation will, for the first time, have a proper statutory basis. The name of the office is clearly an important part of that. Earlier today, we spent a lot of time talking about names, and clearly a name is important for the parent body. I believe it is also important for the significant body that exists within it.
Secondly, the amendment would ensure that valuation office matters were represented at the highest level in the commissioners of Revenue and Customs. I believe that in
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the past one of the commissioners has sometimes taken specific responsibility for the valuation office, although I do not believe that that is current practice. As I understand it, the chief executive of the valuation office reports to the chairman of the Board of Inland Revenue. I believe that the former practice, involving another commissioner with less onerous responsibilities, was a sensible approach with one commissioner dedicated to valuation office issues, although my amendment would allow either approach to be taken.
The noble and learned Lord will note that I have not included in the amendment a requirement for a commissioner to be engaged full-time on valuation office matters because that would clearly be too inflexible. But the amendment requires that when the commissioners come together, the valuation office will effectively be at the table— in particular when issues affecting the valuation office are raised. Again, I believe that the staff of the valuation office would be reassured by that. I beg to move.
7.15 p.m.
Lord Goldsmith: If I understand correctly—I have listened carefully to what the noble Baroness said—her concern centres around what will happen to the Valuation Office Agency which operates at present. It is currently an executive agency within the Inland Revenue. The functions are currently carried out on the basis of the Royal Prerogative, as expressed in the Treasury Minute of 1920. The Bill provides an opportunity to embody the agency's non-statutory remit within primary legislation. I think that is the explanation for why it appears in the Bill. That explicit legislative backing to its work will regularise its position.
Apart from that, there will be no change in the Valuation Office Agency's status or functions. So far as governance is concerned, because members of the agency are by virtue of Clause 10 officers of HMRC, it is already the case that they are required by Clause 2(3) to comply with the directions of the commissioners. Under Clause 5, the commissioners are responsible for all the functions that previously were vested in the commissioners of Inland Revenue and of Customs and Excise. The clause does not, as she said, specify that those offices carrying out property valuations will be known as the valuation office.
Let me explain that. The Valuation Office Agency will be an agency of HMRC, as it is an agency of the Inland Revenue now—it is not a separate legal entity. The commissioners are entitled to organise officers providing valuation services into an executive agency, but the legal form is it is still officers of Revenue and Customs who are providing those services. That is in line with what some other agencies do; for example the Highways Agency is an agency of the Department for Transport that administers the trunk road network and motorways. The powers that the agency uses are the Secretary of State's powers, and although its staff are organised in an agency for good administrative reasons, they remain without any legislative underpinning for the existence of the agency itself.

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I have little doubt that there will continue to be good reasons to organise this function in the form of an agency, but it will be for the commissioners to organise the collective responsibilities of HMRC, and there is no need to require that in the Bill. I hope that the explanation is sufficient for the noble Baroness to feel able to withdraw her amendment.
Baroness Noakes: I thank the Minister for that explanation. I hope that he noted that my amendment did not try to create a separate legal entity in the valuation office. I merely tried to draft that the persons engaged in that activity were to be referred to as the valuation office. This is a significant organisation in its own right. We talked a lot about culture when we dealt with the first group of amendments. The Valuation Office Agency has a distinct culture; it is a distinct organisation within the Inland Revenue.
My amendment did two things: first to try to get the valuation office recognised; secondly to ensure that there was a commissioner who was positively responsible for the valuation office. The Minister did not answer that point—
Lord Goldsmith: The noble Baroness is quite right. The current position is that the chief executive reports to the chairman. That position might well change—not in the sense that I know that there is a change in mind, but it is something that is capable of changing. It would not be sensible to set it out in statute. There may be another way of doing it. The commissioners will be responsible for the proper administration of all the functions and responsibilities of staff under their responsibility. There is no more sense in requiring there to be a specific nominated commissioner responsible for the Valuation Office Agency than there is to say that a specific commissioner should be responsible for some other activity of Revenue or Customs. The basic responsibility will be there. It is not necessary to say that a particular person should be nominated to look after it. We should rely on his proper judgment, subject to parliamentary scrutiny and accountability, to run the whole department properly.
Baroness Noakes: I thank the Minister for that reply. He may or may not be aware that the immediately preceding arrangement was that there was a commissioner who was specifically responsible for the Valuation Office Agency, which meant that it was represented at a higher level.
Lord Goldsmith: I am simply saying—not on the face of any statute. It may well be a sensible thing to do, but we should not require it in statute.
Baroness Noakes: I take what the Minister says. I will not labour the point. I wanted to air the issue that the Valuation Office Agency, ignored by statute entirely until today, now has only a half-life created by Clause 10. I thought that was a bit of a pity. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Baroness Noakesmoved Amendment No. 25:
Page 5, line 26, at end insert—
"() Any fee charged for the provision of a valuation under subsection (2) shall not exceed the costs incurred in connection with providing that valuation."
The noble Baroness said: We are staying with the valuation office and now descending into more prosaic matters and I am slightly more on home territory. Clause 10(2) allows the valuation office to charge fees where valuations are done for those outside the Revenue and Customs.
The valuations carried out by the valuation office are wide reaching. The valuation office carries out valuations for council tax and business rate purposes as well as many other purposes, for example the valuation of NHS property. I believe that the valuation office started life as an adjunct to the core Inland Revenue functions—providing valuations of property to assist with the assessment or collection of tax—but its current scope goes way beyond that. The issue of the charging of fees, which is provided for in Clause 10 (2) is not necessarily a small matter.
The amendment is simple. It provides that where a fee is charged outside Revenue and Customs, that fee should not exceed cost. That is, Revenue and Customs should not make a profit from its valuation activities. The valuation office will be a monopoly supplier of valuations in nearly all instances; it is important that it does not have any opportunity to abuse its ability to price.
Again, the Institute of Chartered Accountants of Scotland drew this matter to our attention. It proposed a slightly different amendment to create a right of appeal against a fee. We may need to revisit that issue at a later stage, but my own amendment is more modest for the purposes of today's debate. I hope that it is uncontroversial in its approach by seeking to put beyond doubt that the valuation office should not seek to profiteer from its monopoly functions. I beg to move.
Lord Goldsmith: I do not at all disagree with the noble Baroness that the valuation office should not be able to "profiteer" from its position. The way to achieve that it does not charge excessive fees is this: the Valuation Office Agency operates in accordance with the published Treasury fees and charges guide. It is subject to internal and external audit to ensure that it operates fully in line with Treasury guidance. There is no intention that the agency should change its practices and start to charge excessively in any sense for its services. In that way, the assurance that the noble Baroness seeks about the operation of the Valuation Office Agency can be provided. Therefore, it is not necessary to put this on the face of the Bill. There are adequate other safeguards that will keep the position as the noble Baroness has described it and as I agree it ought to be—namely, not charging excessive fees for the work that it does.
Baroness Noakes: I thank the noble and learned Lord for placing on the record that the valuation office will be subject to the normal fees and charges

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memorandum prepared by the Treasury, which is what I expected him to say. I will ensure that the Institute of Chartered Accountants of Scotland sees what he has said in Hansard and I hope that it will be satisfactory. For today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 agreed to.
Lord Goldsmith: This may be a convenient moment for the Committee to adjourn until Thursday at 3.15 p.m.
The Deputy Chairman of Committees (Baroness Ramsay of Cartvale): The Committee stands adjourned until Thursday at 3.15 p.m.
The Committee adjourned at twenty-nine minutes past seven o'clock.

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  National Savings and Investments: Changes to DEL and Administration Costs Limits
  National Savings and Investments: Changes to DEL and Administration Costs Limits
  Office for National Statistics: Changes to DEL and Administration Costs Limits
  Office for National Statistics: Changes to DEL and Administration Costs Limits
  Pensions: Financial Assistance Scheme
  Pensions: Financial Assistance Scheme
  UK Trade and Investment: Spring Supplementary Estimate 2004–05
  UK Trade and Investment: Spring Supplementary Estimate 2004–05
  Department of Trade and Industry: Spring Supplementary Estimates 2004–05
  Department of Trade and Industry: Spring Supplementary Estimates 2004–05
  Department of Health and Food Standards Agency: Departmental Expenditure Limits and Administration Cost Limits for 2004–05
  Department of Health and Food Standards Agency: Departmental Expenditure Limits and Administration Cost Limits for 2004–05
  Doctors' and Dentists' Review Body
  Doctors' and Dentists' Review Body
  Cabinet Office: Spring Supplementary Estimate 2004–05
  Cabinet Office: Spring Supplementary Estimate 2004–05