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Orders Of The Day

Volume 115: debated on Thursday 7 May 1987

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Banking Bill

Lords amendments considered.

Clause 1

Functions And Duties Of The Bank Of England

Lords amendment: No. 1, in page 2, line 2, after first "or" insert

"who is, or is acting as."

4.4 pm

I beg to move, That this House doth agree with the Lords in the said amendment.

This is a technical amendment to put it beyond doubt that the immunity in clause 1(4) extends to those members of the Bank's staff who are seconded to the Bank rather than being its permanent employees. Although not directly employed by the Bank, they act essentially as employees, and it is important that they are able to act firmly and confidentially in their supervisory duties.

As this is the first of the Lords amendments, I shall say a general word about the coming into force of the Bill's provisions. We intend that the bulk of the Bill's main provisions will come into force on 1 October this year. However, there will be an exception in the case of the large exposures reporting regime, for which a target of 1 January 1988 has been set to give the banks time to prepare their systems for compliance with the requirements. We propose, too, that the provisions on the disclosure of information should be implemented two months after the Bill receives Royal Assent to enable the Bank of England to co-operate more fully with other supervisory authorities as soon as practicable.

Question put and agreed to.

Clause 21

Notification Of New Or Increased Control

Lords amendment: No. 2, in page 16, line 6, leave out

"which is a body corporate".

I beg to move, That this House doth agree with the Lords in the said amendment.

This is a drafting amendment which simply removes some unnecessary words to make for consistency with similar references elsewhere in the Bill.

Question put and agreed to.

Clause 22

Objection To New Or Increased Control

Lords amendment:: No. 3, in page 17, line 25, leave out subsection (4).

I beg to move, That this House doth agree with the Lords in the said amendment.

With this, it will be convenient to take Lords amendment No. 4.

The amendments correct the procedural provisions for the giving of notices of objection by the Bank of England. As drafted, the clause did not take account of the period allowed for representations to be made by a person who has acquired a controlling shareholding without clearance and is subsequently served with a preliminary notice of objection by the Bank of England. The Bank might therefore run short of time to consider the case, given that the final notice must be served with an overall time limit of three months. The purpose of the amendments is to take account of that passage of time and also to clarify the Bank's authority to require information and documents in such cases.

Question put and agreed to.

Lords amendment No. 4 agreed to.

Clause 26

Restrictions On And Sale Of Shares

Lords amendment: No. 5, in page 20, leave out lines 10 and 11.

I beg to move, That this House doth agree with the Lords in the said amendment.

The amendments are designed to ensure that copies of notices of restriction made under clause 26 are sent to all those affected by the notice, which may include a number of people acting as associates. Earlier drafts of the Bill did riot adequately deal with such cases and the amendments are designed to meet that question.

Question put and agreed to.

Lords amendment: No. 6, in page 20, line 16, at end insert

"in a case where the notice of objection was served under section 22 or 24 above".

I beg to move, That this House doth agree with the Lords in the said amendment.

This is a technical and drafting amendment and represents a correction consequential on the introduction in this House of clause 23. The decision to object on grounds of reciprocity is a matter for the Government and is not subject to appeal to the tribunal constituted under the Bill. The existing reference to allowing time for an appeal in clause 26(4) does not, therefore, apply to action under clause 23.

Question put and agreed to.

Lords amendment No. 7 agreed to.

Clause 37

Notification Of Acquisition Of Significant Shareholding

Lords amendment: No. 8, in page 28, line 21, after "institution" insert

"incorporated in the United Kingdom".

I beg to move, That this House doth agree with the Lords in the said amendment.

The amendment relates to clause 37 which deals with notification of significant shareholdings which was a measure introduced during the Bill's passage on which we had extensive debate. The clause requires shareholdings of between 5 and 15 per cent. in an authorised institution to be notified to the supervisors. Such "significant shareholders", as they are defined, are then subject to the powers to require information and to mount investigations, which appear later in the Bill. However, in the same way as the Bill's requirements for shareholder controllers apply only to United Kingdom incorporated banks, which is clearly the matter of concern, the provisions of the clause were also intended to apply only to significant shareholders in United Kingdom incorporated banks. The amendment is designed to achieve that effect.

I do not wish to disagree with the amendment, but it provides a useful hook on which to hang some points of public interest. One concerns the link of the Bank of England to the £26 million Morgan Grenfell sale. According to press reports, the bankers refused to comply with a request to name a major shareholder. Given that the bank is now committed to more open disclosure of nominee shareholders to prevent abuses of the takeover code, I should like the Minister to comment on these interesting mystery shareholder stakes wherein someone has used a nominee company owned by the Bank of England to build up a stake, apparently of nearly 5 per cent., in Morgan Grenfell during the past few months. One should know exactly how and why this is happening.

To strengthen the Minister's hand and his resolve—of course, I am relying on press reports and do not necessarily have the latest information— I remind him that the Government no longer owe anything to Morgan Grenfell. More recent press reports make it clear that Morgan Grenfell will no longer countenance political payments without the prior agreement of shareholders. Last year, it funded the Tories to the tune of £25,000. No doubt, Central Office will be particularly interested in that report. Even when the former Chancellor, the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), sat on Morgan Grenfell's board, the annual payment to Conservative funds was "stolidly maintained", to quote from a press report. That only confirms the deepest suspicions of Labour Members that the right hon. Gentleman and his party are much more closely aligned with Conservative Members than with anyone else. I think that the Minister is now in a position to come clean about Morgan Grenfell and the Bank of England and exactly what is going on. I am sure that the House—it is not exactly full—will be delighted to hear what the Minister has to say.

4.15 pm

As we are rattling along fairly well, I should like to make a few comments because I was a member of the Standing Committee and important questions have arisen in relation to significant shareholdings. Recently, I heard from the acceptance houses committee, a most distinguished body, which would like to make certain comments. I should be grateful if my hon. Friend the Minister will give me a reply, if not immediately, then shortly after, and in writing, if necessary.

Discussion in the other place drew attention to a number of defects that were thought to exist in the Bill and could have great significance in certain circumstances. The Bill has received a great deal of support from the banking industry and there has been a great deal of helpful consultation throughout its passage.

One concern is the action that the Bank of England may take when an unwelcome shareholder announces that he has 5 per cent. of the voting capital in an authorised institution. When such a shareholder increases his holding to 15 per cent., he has to seek the approval of the Bank of England before going further. If the Bank does not consider him fit and proper, it can take quite drastic action under the Bill to prevent him from doing damage to the bank in which he holds shares.

Unfortunately, the Bill does not make it clear that the Bank of England can do anything before the 15 per cent. point is reached, even if it has already formed the view that the shareholder is not fit and proper. It seems somewhat illogical that an undesirable shareholder should be allowed to play around between 5 and 15 per cent. without interference by the central bank charged with the maintenance of the stability of the banking system. However, a number of assurances have been given in another place by Ministers that the Bank of England would not be powerless in such circumstances and would be able to warn an undesirable off the course. The important point is that there should be a proper warning system to ensure that the results that I am sure we all want —including the Government—are produced.

There is another difficulty in that the Bill does little to resolve the interaction between itself and the Financial Services Act 1986. I served on the Standing Committee on the Financial Services Bill and have viewed this matter with some interest over the past 18 months or so. The main point is that, since the passage of that legislation, it has become clear that two sets of regulations will apply in certain circumstances, which I have described, coming from two different regulatory authorities. That will cause considerable burdens for the banking system. It is hoped that the securities regulators are able to accept the Bank of England as——

Order. I am sorry to interrupt the hon. Member. I allowed the hon. Member for Thurrock (Dr. McDonald) to go fairly wide, but the hon. Member for Stafford (Mr. Cash) is going very much wider than the Lords amendment. We are dealing with Lords amendments and remarks must be addressed to them. I am sure that the hon. Member will bring his remarks into order.

The point that I wish to make—I think that I can make it briefly—is that the Bill could have contained a provision to enable the banking supervision used by the Bank of England to be equivalent to the system used by the securities regulators. It would be helpful to know how the current talks are progressing. We want to be sure that the banking system as envisaged by the amendment tabled in the Lords ensures that banking supervision operates in a way that would not be needlessly undermined by different securities regulators. I think that my hon. Friend the Minister knows the point that I am making. It has been made a number of times, so there is no need to dwell on the subject.

The hon. Member for Thurrock (Dr. McDonald), drew attention to some comments that had appeared in the press about a shareholding in Morgan Grenfell and asked about the implications of that and of nominee shareholdings. My hon. Friend the Member for Stafford (Mr. Cash), also on significant shareholdings in banks, pointed to the situation which applies where an individual or company owns between 5 and 15 per cent. of the share capital of the bank.

I will begin by dealing with the point that was made by the hon. Member for Thurrock about a report in the press. I suspect that that report is the same one as I saw on 29 April, which was not entirely accurate, so it may help, therefore, if I explain the provisions with regard to holdings in companies and banks in particular.

As to nominee shareholdings, under the Companies Act a company has a right to know the identity of its shareholders who are registered through nominee companies. There is an exception to that in section 216(5) which applies to certain categories of shareholders, notably Governments and Heads of State. It provides that a person is not obliged to comply with a notice to reveal identity if he is exempted under that section. That only applies up to the figure of 5 per cent., which is the same figure as applies for the purposes of the Banking Bill in relation to significant shareholders.

Until recently 5 per cent. was the figure required for disclosure in the case of a hid for a company under the rules of the Takeover Panel. That figure has been reduced to 1 per cent., but it applies under those circumstances only once a bid has been announced. For this purpose it is not relevant to the case that the hon. Member for Thurrock has raised.

The nominee position runs out when a shareholding reaches 5 per cent., so at that point there is no further protection on anonymity and, at the same time, any holding of 5 per cent. or more would trigger the provisions that we have included in the Banking Bill. The Bank of England, as supervisor, would have to be notified of a holding to be able to keep a check on significant shareholdings in authorised institutions.

My hon. Friend the Member for Stafford repeated some comments that he had made in the earlier stages of the progress of the Bill. He said that there was little of effect that could be done if a shareholding lay between 5 and 15 per cent. In practice. that is not a fair description of the position. because any undesirable shareholders, to be able to own and take advantage of a shareholding of 15 per cent. or more, would have to satisfy, at that stage, the Bank of England as supervisor that they were fit and proper to be controlling shareholders of an authorised banking institution. That would mean that their conduct as a shareholder of an amount of the capital of that bank that is lower than 15 per cent. but above 5 per cent. would be directly relevant. We have included provisions in the Bill for the Bank of England to be able to obtain relevant information from such a significant shareholder.

To use a phrase that I used earlier in the proceedings of the Bill, the strengthening of the 15 per cent. hurdle, which we accomplished by making it apply not just at the time of acquisition of the 15 per cent. but continuously thereafter, casts its shadow back to the time before the shareholder reaches the figure of 15 per cent. That gives an effective preliminary opportunity for the Bank of England to monitor the conduct and behaviour of a shareholder who may aspire to become a controlling shareholder.

It would be wrong to set a figure lower than 15 per cent. for the strong measures that are in the Bill. After all, they enable voting rights, or even ownership, to be divested, which are very powerful measures. If one had a figure significantly lower than 15 per cent. one could only accompany it by rather weaker measures, and I would not be in favour of that.

Will my hon. Friend look into the question that has been raised that the securities regulators do not seem to be able to accept the Bank of England's method of consolidated supervision under which the capital of the banking conglomerate stands behind its engagements. It appears that it is insisting on a surfeit allocation of capital to each separate business that is undertaken. Talks are occuring on this question. but perhaps my hon. Friend will drop me a note about it.

I will certainly look into that. It is a separate point from the one that we have been discussing, but since it has been raised I will comment on it.

I know that there is the question of capital adequacy calculations under the different supervisory regimes, but I am anxious that a sensible solution should be found to this. Any institutions which are affected or potentially affected by the different regimes and are concerned about it should not hesitate to make their views known and put their comments to the supervisors concerned. I hope that by so doing they will enable a reasonable and workable basis to be found between the two.

Question put and agreed to.

Clause 39

Power To Obtain Information And Require Production Of Documents

Lords amendment: No. 9, in page 31, line 39, leave out "or subsidiary" and insert ". subsidiary or related company".

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendments Nos. 10, 12 to 17 and 55.

These amendments slightly widen the power under clause 39 for obtaining information by including "a related company" among the connected companies from which information and documents can be obtained. A "related company" is defined in the Companies Act as a company in which the authorised institutions hold 20 per cent. or more of the nominal value of the shares in the company.

The amendments widen the reach of the powers of investigators appointed under clause 41 to include companies in which the authorised institution or its shareholder controllers have a 20 per cent. or more stake, rather than just 50 per cent. as is the case in the Bill as it stands. These amendments were originally put forward by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) on Third Reading.

The amendments reflect suggestions that have been made by the Institute of Chartered Accountants in England and Wales. The Government undertook to consider them and subsequently concluded that a widening along the lines of these amendments would be desirable. Therefore, such amendments were able to be included in the proceedings of the Bill in another place.

The Minister will know that we welcomed these amendments when they were moved in the other place, but we note that they go pretty wide. It is proper that an investigation should be thoroughly carried out and should include related companies as well. The Minister will know that companies may, for one reason or another, find themselves over 20 per cent. owned by an authorised institution, perhaps as a result of underwriting.

The amendment is a wide one, but nevertheless the Opposition accepted these amendments in the other place and realised that investigations must be able to be carried out as thoroughly as possible.

Question put and agreed to.

Lords amendment No. 10 agreed to.

Lords amendment: No. 11, in page 32, line 19, after "information" insert "or documents"

I beg to move, That this House doth agree with the Lords in the said amendment.

It alters subsection (9) of the clause by empowering the Bank of England to require the provision of documents as well as information from a director, controller of manager to assist it to determine whether that person is fit and proper. This brings the subsection in the clause into line with the other provisions in the Bill relating to the obtaining of information and to investigations, all of which include powers to require the furnishing of documents.

Question put and agreed to.

Lords amendments Nos. 12 to 17 agreed to.

Clause 4

Investigations On Behalf Of The Bank

Lords amendment: No. 18, in page 34, line 4, after "every" insert

"person who is or was a".

I beg to move, That this House doth agree with the Lords in the said amendment.

4.30 pm

The amendments correct omissions from the Bill as originally drafted. They relate to clause 41, which deals with investigations into the affairs of authorised institutions by inspectors appointed for the task by the Bank of England when it believes that an investigation is necessary in the interests of depositors. Subsection (5) imposes a duty on the directors, managers and controllers of an institution under investigation and on others closely connected with its business to co-operate with the inspectors. The analogous provision, section 17 of the 1979 Act, applied that duty also to people who were in such positions as well as to those who continued to be in such positions but were no longer at the time that the investigation took place. The drafting of the replacement provision in clause 41 did not include that, and we have taken this opportunity of correcting it.

Question put and agreed to.

Lords amendment No. 19 agreed to.

Clause 43

Powers Of Entry In Cases Of Suspected Contraventions

Lords amendment: No. 20, in page 36, line 44, after "to" insert "laying an".

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendments Nos. 21, 37 and 52.

The amendments are technical drafting ones that improve the Bill in its application to Northern Ireland. I am advised that in clause 43, to which the amendments relate, the correct usage is to refer to laying information and making a complaint. Amendments Nos. 20 and 21 reflect that usage. In clause 79, the reference to Article 296 of the Companies (Northern Ireland) Order 1986 should, to be more exact, be Article 296(2). In clause 89, the reference to that order should have included the word "arrangement". Amendments Nos. 37 and 52 respectively correct those points of drafting.

Question put and agreed to.

Lords amendment No. 21 agreed to.

Clause 45

Audited Accounts To Be Open To Inspection

Lords amendment: No. 22, in page 37, line 24, at end insert—

"( ) In the case of an institution incorporated in the United Kingdom the accounts referred to in subsection (1) above include the auditors' report on the accounts and, in the case of any other institution whose accounts are audited, the report of the auditors."

I beg to move, That this House doth agree with the Lords in the said amendment.

Amendment No. 22 relates to clause 45 and requires an authorised institution to keep at each of its offices in the United Kingdom at which it holds itself out as accepting deposits not only its audited accounts but the auditors' report on the accounts. The amendment was suggested by the Opposition in Committee in another place, and I am glad to confirm that it is an acceptable improvement to the Bill.

Question put and agreed to.

Clause 47

Communication By Auditor Etc With The Bank

Lords amendment: No. 23, in page 38, line 41, leave out

"shall be subject to annulment in pursuance of a resolution of either"

and insert

"no such regulations shall be made unless a draft of them has been laid before and approved by a resolution of each"

I beg to move, That this House doth agree with the Lords in the said amendment.

Amendment No.23 fulfills an undertaking that I gave on Report. At the time, I agreed that, if the Government wished to introduce rules specifying the circumstances in which the auditors of authorised institutions should communicate information to supervisors, as the hon. Member for Thurrock (Dr. McDonald) suggested, it would be more appropriately dealt with by affirmative resolution of both Houses of Parliament. Again, I am happy to agree to that. I am glad that the provision has been able to be included in the Bill.

My remarks will be even briefer on amendment No. 23. I thank the Economic Secretary for ensuring that the amendment that I proposed in Committee has been put forward in the other place and is now part of the Bill.

Question put and agreed to.

Clause 58

Compensation Payments To Depositors

Lords amendment: No. 24, in page 44, line 7, leave out

"end of the deposit's original term to maturity"

and insert

"deposit is or becomes due and payable under the terms on which it was made".

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendments Nos. 25, 26, and 28 to 34.

The amendments relate to clauses 58 and 60, dealing with technical aspects of the administrator procedure. That procedure was introduced by the Insolvency Act 1985. It has recently come into force for the generality of companies, but as yet does not apply to banks. It will do so in due course when secondary legislation under the Insolvency Act is laid.

The Bill, with a view to that order being made in due course, provides for the deposit protection arrangements to apply in respect of deposits with an institution, subject to an administration order. The amendments relate to the way in which calculations are made with regard to deposits and the amount of compensation payable in an administered institution. The amendments were accepted unopposed in another place. They are a useful piece of forward planning in relation to the application of the Insolvency Act provisions and the administration procedure in the case of banks.

Question put and agreed to.

Lords amendments Nos. 25 and 26 agreed to.

Clause 59

Meaning Of Insolvency

Lords amendment: No. 27, in page 46, line 5, at end insert

"or on the making of a winding-up order against it by virtue of section 90 below".

I beg to move, That this House doth agree with the Lords in the said amendment.

It is designed to remedy a gap in the circumstances in which the deposit protection fund is brought into play when a Scottish partnership is wound up. It ensures that the deposit protection fund is triggered when an institution that is a Scottish partnership is wound up by the court on the petition of the Bank of England under clause 90. At present, the drafting is defective in that respect. The position of partnerships in the rest of the United Kingdom is already covered, but for the sake of completeness it is wise to make provision for what I hope will be an exceedingly rare occasion, if it ever arises at all.

Question put and agreed to.

Lords amendments Nos. 28 to 34 agreed to.

Clause 66

Tax Treatment Of Contributions And Repayments

Lords amendment:: No. 35, in page 52, line 47, after "an" insert "allowable".

I beg to move, That this House doth agree with the Lords in the said amendment.

I should inform the House that the amendment involves privilege.

After that ominous warning I must tell the House that the amendment was proposed, for the sake of clarification, by the Opposition in another place. It is designed to make clear that contributions to the deposit protection fund could be deducted from taxable profits. Although I was advised that clause 66 did not need amendment, there is no harm in the amendment. If it could conceivably assist in the avoidance of doubt, I am happy for it to be included in the Bill.

Question put and agreed to.[Special Entry.]

Clause 74

Meaning Of "Overseas Institution" And "Representative Office"

Lords amendment: No. 36, in page 59, line 13, at end insert

"; and 'establishment', in relation to such an office, includes the making of any arrangements by virtue of which such activities are promoted or assisted from it."

I beg to move, That this House doth agree with the Lords in the said amendment.

Under the Bill, an overseas bank proposing to establish a representative office in the United Kingdom is required to give not less than two months' notice to the Bank of England. As the Bill stood, an overseas bank would not clearly be required to give such notice if it entered into an arrangement with an agent that had already established premises here for the purpose of conducting representative activities through that agent. Therefore, the amendment closes a potential loophole in the requirement to report establishment of a representative office. It is not a loophole which, under current circumstances, is likely to be exploited, but it is wise to close it now because it may well be that, in future, further arrangements will need to be made with regard to representative offices, and it would be unfortunate if the Act, as it would then be, did not cover that point.

Question put and agreed to.

Lords amendment No. 37 agreed to.

Clause 84

Disclosure For Facilitating Discharge Of Functions By Other Supervisory Authorities

Lords amendment: No. 38, in page 63, line 4, column 2, leave out "section 431, 432, 442, 446, 447 or 448" arid insert "Part XIV".

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take amendments Nos. 39, 40, 41, 42 and 43.

Amendments Nos. 38, 39, 42 and 43 extend the purposes for which the Bank of England can disclose supervisory information to the Secretary of State for the purpose of investigations under the Companies Act 1985. As presently drafted, clause 84(1) allows disclosure by the Bank to the Secretary of State only to assist him with some of his powers under part XIV of the Companies Act, which deals with investigation of companies and their affairs. While it is unlikely that disclosure will be necessary in many of the remaining cases, it is not impossible. The amendments therefore replace the references to specific sections of part XIV of the Companies Act and the equivalent Northern Ireland order, with reference to the whole of part XIV and its Northern Ireland equivalent.

Amendment No. 40 adds to the list of supervisory persons to whom the information may be disclosed a person appointed by the Secretary of State to obtain a company's books or papers under section 44 of the Insurance Companies Act 1982.

Amendment No. 41 arises as a consequence of the approach adopted by the draftsmen in the Building Societies Act 1986.

As a whole, these are a rather miscellaneous list of technical tidyings-up of clause 84 on disclosure to other supervisors, and while I would not try to exaggerate their importance, they tidy up an important clause in the Bill.

Question put and agreed to.

Lords amendments Nos. 39 to 43 agreed to.

Clause 87

Disclosure Of Information Obtained Under Other Acts

Lords amendment: No. 44, in page 67, line 1, leave out subsection (2).

4.45 pm

I beg to move, That this House doth agree with the Lords in the said amendment.

With this it will be convenient to take Lords amendments Nos. 45 to 50.

These are minor, technical, drafting amendments that deal with cross-references to the Companies Act and the Financial Services Act 1986.

Question put and agreed to.

Lords amendments Nos. 45 to 50 agreed to.

New Clause

Electronic Transfer Of Funds

Lords amendment: No. 51, after clause 88, insert the following new clause—

— After section 187(3) of the Consumer Credit Act 1974 (arrangements to be disregarded in determining whether a consumer credit agreement is to be treated as entered into in accordance with prior or in contemplation of future arrangements between creditor and supplier) there shall be inserted—
`(3A) Arrangements shall also be disregarded for the purposes of subsections (1) and (2) if they are arrangements for the electronic transfer of funds from a current account at a bank within the meaning of the Bankers' Books Evidence Act 1879.'"

I beg to move, That this House doth agree with the Lords in the said amendment.

The amendment involves a new clause that is designed to clarify the existing law as it affects banking transactions carried out with the latest technology. Without the amendment, there would have been some uncertainty about the position under the Consumer Credit Act of electronic transactions on a current account by means of a plastic card. It can be difficult for the law to keep pace with such changes, and the amendment, which is designed to remove a possible constraint on the development of an important project in electronic banking — electronic funds transfer at point of sale— was and is welcome, and I am glad that it has been incorporated in the Bill. It is one item to which the banks attach considerable importance in planning their developments in the area, and for that reason it has been taken ahead of other matters that have been referred to the review of banking services law in general.

I do not wish to oppose the amendment. Nevertheless, it is somewhat surprising to find legal obstacles to the introduction of EFTPOS being dealt with at this stage of the Bill, and, as the hon. Gentleman has just said, in advance of a full review of banking services. He will no doubt be aware that consumer associations and consumers in general may have certain anxieties about the way in which such systems may operate, and may be concerned about whether their interests are properly protected. I want to put on record the fact that the Opposition, while not opposing the amendment, express doubts about the wisdom of removing legal obstacles without ensuring that sufficient consumer protection has been built into the legislation. I should be interested to know what thought has been given to that matter.

I understand that the banks wish to move ahead with EFTPOS, and that this is an opportunity to remove any possible legal obstacles, doubts or misgivings, but the Government have not paid sufficent regard to consumer protection in this case.

I note what the hon. Lady has said. I am glad that she did not oppose the provision, which was discussed in the Government's original White Paper and has therefore had a wider currency than other matters relating to the law as it affects the relationship between banks and their customers.

As far as I am aware, there is no decisive reason on grounds of consumer protection why we should not go ahead with the provision now, particularly because if we do not plans for the arrangements would be put back, possibly for an indefinite period. The review of the banking services law will examine the whole area and now that the provision has been incorporated in the Bill the banks will be able to take that into account in considering other related matters concerning the transfer of funds and the interests of consumers. However, I take the hon. Lady's point.

Question put and agreed to.

Lords amendment No. 52 agreed to.

New Clause

Powers For Securing Reciprocal Facilities For Banking And Other Financial Business

Lords amendment: No. 53, after clause 89, insert—

"For the avoidance of doubt it is hereby declared that a notice under section 183 of the Financial Services Act 1986 (disqualification or restriction of persons connected with overseas countries which do not afford reciprocal facilities for financial business) may be served on any person connected with the country in question who is carrying on or appears to the Secretary of State or the Treasury to intend to carry on in, or in relation to, the United Kingdom business of any of the descriptions specified in subsection (1) of that section whether or not it is of the same description as that affected by the less favourable terms which are the occasion for the service of the notice."

I beg to move, That this House doth agree with the Lords in the said amendment.

The amendments relate to a point raised by my noble Friend Lord Elton during debate on Report in another place. The question which then arose was whether the drafting of section 183 of the Financial Services Act 1986 was sufficiently clear. That section deals with reciprocity and provides the Government with reserve powers, the purpose being to secure reciprocal access for British firms in overseas markets. It allows for the refusal, the restriction or the removal of authorisation to carry on banking, investment or insurance business in the United Kingdom if the country of origin of the institution concerned does not allow reciprocal access in those areas to British institutions.

The intention has always been that these powers should operate in such a way that action could be taken against, for example, a banking institution on the grounds of lack of access to investment or insurance markets, or vice versa. This is known as a cross-functional approach, and it gives the necessary degree of flexibility for the powers to achieve their objective.

It was considered that the present wording of the provision is ambiguous and that it is insufficiently clear whether cross functionality would apply if challenged, and the new clause was introduced to put the matter beyond doubt. The related amendment to clause 108, No. 56, ensures that as the new clause is a clarification of existing legislation it will come into effect immediately following the Bill's enactment.

I am glad to note that the new clause begins

"For the avoidance of doubt".
This is a matter upon which there should be no doubt, and the provision goes to the centre of gravity of the "playing field". I refer to the way in which reciprocity between nations—I have in mind specially Japan and the United States — operates in the international securities and banking markets. It is essential that we have such a provision, and I greatly welcome it. I think that my hon. Friend the Economic Secretary to the Treasury will recall that I tabled a series of amendments in Committee, which provoked a certain amount of comment in the press and elsewhere at the time which argued strongly for adequate reciprocity. I am delighted that the Government have taken the steps that they have and that my hon. and learned Friend the Under-Secretary of State for Trade and Industry went recently to Japan to discuss these very matters with those responsible in that country.

There is also the general question of the GATT round and the manner in which bilateral arrangements and agreements are entered into. We cannot work on the basis that the Japanese, or other countries that have enormous capitalisation at their disposal, are in a position to do a Monty Python on our banking system. It is essential that the amendment should be agreed to. I welcome the fact that my right hon. Friend has adopted it.

I welcome the remarks of my hon. Friend the Member for Stafford (Mr. Cash). It is important that we have in place provisions that will be seen to be able to work if they need to be brought into play. If there were any legal doubt that they could be implemented, they would fail in much of their purpose, which is to encourage the countries in which British financial institutions may want to operate to offer the same access to our banks and insurance companies, for example, as we offer them by way of a welcome to the City. Doubt had been cast upon that and we want to make it clear that we have relevant provisions in the Bill and in the Financial Services Act, and that such provisions, if they had to be brought into force, would be effective and would enable us to take appropriate action.

As I have said during earlier stages in our consideration of the Bill, we hope that we shall not have to implement these provisions. Our purpose is to open up foreign financial markets rather than to close the City, or British financial markets, to foreign institutions. It is clearly right that the relevant provisions in our legislation by way of reserve powers should be effective if ever they have to be used. Although the new clause is designed for the avoidance of doubt, it adds strength to our commitment and will make it clear to all outside that we want to have provisions of this sort and that we want them to be right, so that if they have to be used they will be effective in practice.

Question put and agreed to.

Clause 103

Meaning Of "Director", "Controller" "Manager", And "Associate"

Lords amendment: No. 54, in page 76, line 45, leave out from "has" to "that" in line 48 and insert

"with any other person an agreement or arrangement with respect to the acquisition, holding or disposal of shares or other interests in that body corporate or under which they undertake to act together in exercising their voting power in relation to it".

I beg to move, That this House doth agree with the Lords in the said amendment.

The amendment is designed to tidy up the definition of an associate for the purposes of identifying controllers and significant shareholders. It follows on changes made on Report in this place, especially the introduction of a requirement for notification to the Bank of England by persons who become significant shareholders—that is to say, shareholders with 5 per cent. but less than 15 per cent. of the voting power of an institution in the United Kingdom or of another institution of which it is a subsidiary.

This addition to the Bill has resulted in the Bank of England being required to pay more attention to persons who may be acting in concert for the purpose of acquiring shares, even though they may not be seeking to control the institution through the joint exercise of voting power. The effect of the amendment is to include within the definition of associate for the purpose of grouping persons who are, in effect, concert parties, those who agree or arrange to buy shares together or to dispose of them together. The subsection had already provided that associates included those who exercised their voting power together, and that provision is retained.

Question put and agreed to.

Lords amendments Nos. 55 and 56 agreed to.

Schedule 1

The Board Of Banking Supervision

Lords amendment: No. 57, in page 79, line 29, at end insert

"provided always that there shall be a majority of independent members on the Board."

I beg to move, That this House doth agree with the Lords in the said amendment.

It has always been the Government's intention that the independent members of the Board of Banking Supervision should be in a majority, and that is accepted by the Bank of England. The provision that is set out in paragraph 3 of the schedule gives a degree of flexibility to change the total number of board members if it proved desirable to do so in future. That is subject to the baseline of six independents and three ex-officio members, which is set out in clause 2. That flexibility was never intended to undermine the policy of retaining a majority of independent members. In the other place an Opposition amendment was tabled, which was accepted by the Government, to make clear on the face of the Bill that there would always be a majority of independent members of the Board of Banking Supervision, notwithstanding any future changes in the number of board members.

I am happy to report back to the House that the provision has been included in the amendments to the Bill. As I have said, it was our intention, on the ground of policy, that that should be so. Having it spelt out in the Bill will make that doubly clear.

I welcome the opportunity to support this amendment. Modest though it is, it is regarded by most people who have followed this Bill as implicit in the previous provisions. I ask my hon. Friend whether, during the passage of this Bill or when it left the House after the Third Reading, there have been any further discussions to which he has been privy within the Bank of England or with the Governor about the role, composition and activities of the Board of Banking Supervision. My hon. Friend will recall that the composition of the independent ex officio board, the way in which the members' activities will evolve and the influence they could bring to bear on the Governor were matters of deep concern to the Members who took an interest in the passage of this Bill. One would like to feel that the tenor of what we said about the opportunity that has arisen to evolve their practices has had some impact since the matter was debated previously. Can my hon. Friend add anything to that?

I am happy to acknowledge that there were valuable debates in Committee, on Report and on Second Reading about the role of the independent members of the Board of Banking Supervision. My hon. Friend has asked me whether further thought has been given to this. Certainly it has. As he will know, we have introduced amendments to provide that my right hon. Friend the Chancellor and the Governor of the Bank of England will have joint responsibility, which each of them recognises, to ensure that people appointed to the Board of Banking Supervision are effectively able to carry out the job which the Bill entrusts to them. Further thought has been given and will continue to be given to this as the supervisory framework of financial institutions emerges and becomes clearer.

The passage of time—every month that goes past brings more experience — shows that, although the process of supervision of financial institutions is complex, it will have to be very closely co-ordinated between supervisers in banking and other parts of the financial sector.

The Board of Banking Supervision will not come into force as a legal entity until the provisions of the Bill are enacted and become operative later this year. In the meantime, it has been found useful that the Board of Banking Supervision, in escrow as it were, is operating, bringing experience and making a critical assessment of what is needed in the changing circumstances of the financial sector for the benefit of the supervisors in the Bank of England.

I assure my hon. Friend that the debates on the Bill have been noted, both by the Bank of England as the supervisory authority and by my right hon. Friend the Chancellor who is responsible for the legislation under which it is established and who will, under the amended provisions of the Bill, have joint responsibility with the Governor for making such appointments.

Question put and agreed to.

Schedule 6

Minor And Consequential Amendments

5 pm

Lords amendment: No. 58, in page 91, line 2, at end insert—

"The Finance Act 1986

In Schedule 7 to the Finance Act 1986—

  • (a) in paragraphs 8(1) and 11(1)(c) for the words 'a recognised bank or licensed institution (within the meaning of the Banking Act 1979)' there shall be substituted the words 'an institution authorised under the Banking Act 1987';
  • (b) in paragraph 8(2) for the words 'recognised bank or licensed institution' there shall be substituted the words 'authorised institution'."
  • I beg to move, That this House doth agree with the Lords in the said amendment.

    It remedies an omission dealing with consequential amendments to other legislation. It substitutes references to institutions authorised under the Bill for references to recognise banks or licensed institutions. That was the terminology used in the Banking Act 1979, which this Bill will supersede. The latter definitions will no longer be relevant once this Bill becomes operative.

    Question put and agreed to.

    Lords amendment No. 58 agreed to.

    Lords amendment: No. 59, in page 91, line 27, after "54(4)" insert "and (5)".

    I beg to move, That this House doth agree with the Lords in the said amendment.

    Amendments 59 and 60 relate to schedules 6 and 7. They have the effect of deleting clause 54(5) of the Building Societies Act 1986 which, together with subsection (4), made provision for disclosure of banking supervisory information to the Building Societies Commission by the Bank of England pending the coming into force of the relevant provisions of this Bill. As soon as this Bill is enacted and comes into Force, those provisions of the Building Societies Act 1986 will be superseded, and amendments 59 and 60 deal with that.

    Question put and agreed to.

    Lords amendment No. 60 agreed to.


    Lords amendment: No. 61, in line 4, after "descriptions" insert

    "to amend section 187 of the Consumer Credit Act 1974 in relation to arrangements for the electronic transfer of funds; to clarify the powers conferred by section 183 of the Financial Services Act 1986;"

    I beg to move, That this House doth agree with the Lords in the said amendment.

    The amendment is to the long title of the Bill and is consequential upon amendments 51, 53 and 56, which have been dealt with.

    The proceedings on the Bill at all stages in this House and in another place have been carried through constructively. I thank all my hon, Friends who were members of the Standing Committee and the hon. Lady the Member for Thurrock (Dr. McDonald) and her hon. Friends who took part in the Committee for the way in which they have approached this important legislation. It is far from being the most contentious of Bills which has been before the House this Session, but it is neccessary, along with the Building Societies Act 1986 and the Financial Services Act, to provide the basis for modernising and updating the supervisory arrangements for the financial sector. It is an important advance on the Banking Act 1979.

    I hope that, having had the opportunity of observing and operating the Banking Act for the past seven or eight years, we have been able to take account of lessons learned and have made provision for a rapidly changing financial sector. It is of great importance to the economy, but it must be properly regulated and supervised. This Bill is designed to do that. I thank all those in this House and in another place who have contributed constructively to its passage.

    I rise, not to comment on the amendment, but to thank the Minister for his remarks and to say that Opposition Members, both here and in another place, have been glad of the opportunity to improve the legislation. Members of all parties have an interest in seeing that banks are properly supervised, and the legislation which will shortly be on the statute book provides much of the necessary framework for that.

    The main point now, as the Minister well knows, will be how the Bank of England uses the powers conferred on it by this legislation. We trust that the Bank will keep a close watch on banking institutions. It has already looked into the conduct of some banks, notably the investigation currently under way into the Standard Chartered Bank, which we hope the Bank of England will be able to bring to a conclusion successfully once this legislation is fully operative.

    Question put and agreed to.

    Fire Safety And Safety Of Places Of Sport Bill Lords

    As amended (in the Standing Committee), considered.

    [SIR PAUL DEAN in the Chair.]

    New Clause 1

    Entertainment Licences: Removal Of Certain Exemptions

    'The following premises, namely—

  • (a) the Theatre Royal Haymarket, and
  • (b) the Royal Albert Hall,
  • shall cease to be exempt from the requirement for a public entertainment licence under paragraph I of Schedule 12 to the London Government Act 1963.'— [Mr. Douglas Hogg.]

    Brought up, and read the First time.

    5.8 pm

    The Parliamentary Under-Secretary of State for the Home Department
    (Mr. Douglas Hogg)

    I beg to move, That the clause be read a Second time.

    With this it will be convenient to take Government amendment No. 3.

    The new clause, incomprehensible as it sounds on the face of it, is an important and interesting piece of legislation which owes its appearance largely to the enterprise and enthusiasm of my hon. Friend the Member for Lewisham, East (Mr. Moynihan). I am, therefore, particularly pleased to see him in his place and I hope that he will speak to the new clause which, as I say, owes much to his work.

    It might be helpful if I were to tell the House something about the purpose, effect and background of the legislation, because it must be admitted that it is rather bizarre.

    The new clause and the amendment relate to the exemptions from the licensing requirements of paragraph I of schedule 12 to the London Government Act 1963, which, as the House will know, is the public entertainments licensing code for London. Paragraph 1(1) of schedule 12 requires the licensing by London borough councils — formerly the GLC — of premises used for public dancing or music and any other public entertainment of the like kind. Paragraph 1(6) provides exemptions from the licensing requirements for the Theatre Royal Drury Lane, Covent Garden Opera House, the Theatre Royal Haymarket and the Royal Albert Hall and for any entertainment lawfully held by virtue of letters patent or licence of the Crown. The new clause provides for the removal of the exemption for, first, the Royal Albert Hall, and to require it, for the first time, to be licensed for public music and dancing; and, secondly, the Theatre Royal Haymarket, which, despite the specific exemption, holds a music and dancing licence.

    Amendment No. 3 is a consequential amendment of schedule 4, the repeals schedule, to repeal the references to the Theatre Royal Haymarket and the Royal Albert Hall in paragraph 1(6) of schedule 12 to the 1963 Act.

    I agreed in Committee to consider an amendment which would have the effect of requiring the Royal Albert Hall, for the first time, to conform to the music and dancing requirements contained in schedule 12 to the London Government Act 1963. That is why we have brought the new clause and the amendment forward.

    The Bill as it stands, as my hon. Friend the Member for Lewisham, East so rightly pointed out, creates an anomaly. Clause 42 introduces new licensing requirements for indoor sports premises in London. The Royal Albert Hall is not to be exempted from licensing under clause 42 and it will be subject to licensing controls for all indoor sports entertainments to which the public are invited as spectators. Because of the exemption for the Albert Hall in the 1963 Act licensing code for music and dancing entertainments, the result is that a tennis tournament or boxing match at the hall will be subject to licensing requirements whereas the last night of the Proms, or any other concert, will not. That is bizarre, paradoxical and unjustifiable, and my hon. Friend and, to be fair, the hon. Member for Battersea (Mr. Dubs), objected. I agreed with them and said that I would explore the legal position with a view to bringing forward an amendment.

    The public are right to expect such premises to satisfy standards on a musical occasion as much as on a sporting occasion. The purpose, and, I hope, the effect, of the new clause and the amendment is to correct the anomaly.

    5.15 pm

    As I have already said, the Royal Albert Hall is not the only premises exempt from the music and dancing licensing controls. Others are the Theatre Royal Drury Lane, the Royal Covent Garden Opera House, the Theatre Royal Haymarket and any entertainment lawfully held by virtue of letters patent or licence of the Crown. The exemption for the Theatre Royal Haymarket appears to be derived from an 18th century exemption in respect of the Old King's Theatre in the Haymarket, but the present Theatre Royal does, in fact, hold an entertainments licence. So the opportunity is taken here to amend the licensing exemption in order to bring the law into line with the facts.

    As I said I would in Committee, we have also looked at the possibility of removing the other exemptions in respect of any entertainment lawfully held by virtue of letters patent or licence of the Crown. In the course of our inquiries we discovered at least one bizarre fact—that nobody knows what meaning is to be given to the phrase "licence of the Crown". Despite the most assiduous research by my officials, for which I am extremely grateful, the phrase "licence of the Crown" appears to have no very certain meaning. Indeed, it is just possible that it has no meaning at all, in which case it will not be unique if that piece of legislation is meaningless in any statutory sense. However, there it is. We have explored it and we do not know what it means, for which we are all sorry. There is also the question of letters patent.

    We have had to come to the conclusion that, for a variety of reasons, it is not possible for us to remove the general exemptions in the legislation. It may be possible to bring the premises, which are within the general exemptions, under statutory control when used for public music and dancing entertainment, hut it has not proved possible to do so in this statute, although it is not for lack of wanting to do so. Therefore, we shall be exploring whether more suitable opportunity can be found.

    However, there is good news. The House should note that as theatres both the Theatre Royal, Drury Lane and Covent Garden are subject to conditions imposed by Westminster city council which are designed to ensure the safety of the public. The formal requirements of a theatre licence do not apply, as they are treated as special cases under the Theatres Act 1968 by virtue of their letters patent. That may be a curious situation, but the fact is that if and when those theatres are used for public music and dancing entertainments, as opposed to theatrical performances, no conditions apply. In the unlikely event that either the Theatre Royal Drury Lane or the Royal Opera House Covent Garden staged a public indoor sport event—the mind boggles at the prospect—the premises would be subject to the licensing controls that have hitherto applied under the 1963 Act licensing code.

    There is an anomaly, and we must confess that it cannot be justified. However, there is no reason to believe that any of the premises now exempt from entertainment licensing pose any hazard to the public. My officials—to whom, again, I am grateful—have carried out inquiries of the London Fire and Civil Defence Authority, and have been assured that the standard of fire precautions at the exempted premises is satisfactory.

    While it is extremely difficult to justify this absurd anomaly, I believe that the House and the general public are extremely grateful to my hon. Friend the Member for Lewisham. East, who first pointed out the problem during the Committee stage of the Bill. We should undoubtedly try to correct it. If the House approves the new clause and the amendment, we shall he able to correct the anomaly in relation to the Theatre Royal Haymarket and the Royal Albert Hall, and I hope that the House will decide to accept them. On the other hand, I fear that it will not be possible, at least on this occasion, to correct it in respect of the Theatre Royal Drury Lane or the Royal Opera House Covent Garden. I hope that we shall revert to the matter on a subsequent occasion.

    I know that this subject has created a good deal of interest. Indeed, after the outstanding presentation by my hon. Friend the Minister, there are now twice as many hon. Members in the Chamber. That is because of the importance of the new clause, the concern that is felt about this remarkable anomaly and the need to address in some detail—as I hope we shall do — the revelation that no one knows what "licence of the Crown" means. The matter is extremely serious. I realise that it will need further examination, and I hope that my hon. Friend the Minister will re-examine it outside the ambit and remit of the Bill. In view of the considerable expertise available to him both here and in his Department, I am certain that he will be able to consider the matter in detail and come up with some historic assessment and analysis carried out with penetrating wisdom, and that he will write to me in due course with his findings about those three aspects of it. I hope that that will be possible in the not too distant future, so that during the next Parliament we shall have the opportunity to address the question further, look again at those two important historical venues and possibly amend current legislation there and then to rectify the remarkable misunderstanding over the phrase "licence of the Crown".

    Having said that, and having reinforced my gratitude for the lucid explanation of the new clause by my hon. Friend the Minister, I feel that it would be timely to assess in detail the background reasons for my having drawn this important issue to the attention of the Front Bench and the House in general, both in Committee and here. Many hon. Members are very concerned about the implication of the new clause, not least because of the importance that it has for sporting promotions in the Royal Albert Hall.

    It is well known that my hon. Friend the Member for Crawley (Mr. Soames) is a lover of sport: indeed, he has spent many an enjoyable evening at the Albert Hall watching first-rate promotions. Like other hon. Members, he will be very surprised to hear that the law perceives boxing to be more in need of tougher fire controls than a completely full house for, say, the last night of the Proms — although that involves far more serious problems associated with access and exit routes and the possible reaction of large numbers of people to a fire breaking out.

    Until my hon. Friend so wisely re-examined the matter, completely different criteria were placed on the same venues in regard to events when far fewer persons were present. A clear anomaly would have been created about the fire risk in a specific venue, which is intrinsic to the venue, not to the sporting performance or entertainment taking place there. That is why, during the Committee stage, I moved an amendment to paragraph 2 of schedule 3, which relates to music and dancing licences. I suggested that after the words "paragraph 1" the following words should be inserted:
    "in subparagraph (6) the words 'or the Royal Albert Hall' shall be omitted".—[Official Report, Standing Committee D, 23 April 1987; c. 41.]
    I intended in the first instance to welcome the removal of the exemption for boxing and wrestling licences for the Royal Albert Hall. I am sure that all hon. Members welcome that, because we all know that it will improve the safety requirements and provision affecting members of the public attending any promotion. Any measure that puts public safety first must surely be supported by hon. Members on both sides of the House.

    However, in welcoming the removal of the exemption, the Committee recognised that an anomaly would be created, in that the premises would still not require a licence for music and dancing. Indeed, if the Bill had been enacted in its original form, it would have meant premises requiring a licence for a tennis match, when the hall might be half empty, but not for the last night of the Proms, when it might be packed to capacity. It seemed to me, and to other hon. Members on both sides of the House, that the drafting of the Bill as it stood, and the fact that we had not faced up to the requirement for the amendment and the new clause, would make nonsense of the legislation.

    It was suggested that the Royal Albert Hall should also lose its exemption for the need for a music and dancing licence, and that important issue formed the second part of the amendments that I tabled in Committee. Theatre and entertainment licences ensure that safety regulations are brought up to scratch. It is therefore important for us to address the reason for four major cultural venues in London being exempt from such licences, and thus, implicitly, from the options of ensuring, through the local authorities, that the regulations for fire and safety were not up to scratch. I am glad to say that the point has now been addressed in respect of two of those four venues.

    The new clause covers the Theatre Royal Haymarket and the Royal Albert Hall, but I am very worried that the new clause does not cover the Theatre Royal Drury Lane and the Royal Opera House Covent Garden. It is important to consider why they have not been included in the Bill. No major sporting occasions have been held in the Theatre Royal Drury Lane or in the Royal Opera House Covent Garden. Indeed, pitch and putt competitions at the Royal Opera House Covent Garden are unlikely in the foreseeable future.

    5.30 pm

    The hon. Gentleman says, "Shame". Other hon. Members will probably support him, because they believe that there should be sporting functions at the Theatre Royal Drury Lane and at the Royal Opera House Covent Garden. Those two venues have been excluded because the Bill is first and foremost about safety at sporting venues, and we have yet to see sporting events at the Theatre Royal Drury Lane and at the Royal Opera House Covent Garden.

    Nevertheless, the House must consider why those four venues do not, for historical reasons and because of letters patent, come within the law. The safety of these venues is of paramount importance, and an accurate interpretation of the phrase "licence of the Crown" should recognise that safety must come first at any venue. Nobody would argue that because of historical precedent or letters patent safety should not come first, yet for historical reasons four very important buildings in London do not have to adhere to the rigorous licensing requirements for all other venues.

    The Government were wise to introduce the new clause and to consider the point in depth. I said earlier that I should have been hard pushed to vote for that part of the Bill that allowed this exemption to continue if the Government had not recognised the need for substantial changes and if they had not taken the wise advice that they have sought since the proceedings in Standing Committee to rectify this anomaly.

    The Westminster city council devoted a great deal of time and energy to considering the implications of the new clause. The council has been outstanding in its promotion of the safety interests of everyone who goes to sporting, musical and entertainment venues in the Westminster area. I am delighted that it has had the wisdom and the perception to support the initiative that I introduced in the Standing Committee, and that my hon. Friend the Minister has so generously and appreciatively considered.

    My hon. Friend raised various points when he introduced the new clause. Coupled with the new clause is amendment No. 3. My hon. Friend seeks to include the words
    "The Theatre Royal, Haymarket or the Royal Albert Hall"
    in schedule 4 to the Bill. The Local Government Act 1963 will have to be amended. That led hon. Members to pay close attention to the need for a new clause to sort out the problems concerning the wording of the Local Government Act and the anomalies caused by the historical precedents at these four venues.

    I hope that the exemptions will go further and that we shall not ignore the implications for theatregoers at the Theatre Royal Drury Lane and the Royal Opera House Covent Garden. If a theatre is exempted, for historical reasons, from the need to have a theatre licence or an entertainments licence, nobody suggests that the management of the Royal Opera House Covent Garden or the Theatre Royal Drury Lane do not impose the required safety standards. It would be quite wrong for anybody to interpret our remarks as being critical of the safety standards that are imposed by the management of those outstanding places of entertainment. Nevertheless, that anomaly must be sorted out in law to ensure that the standards that are required to obtain a theatre licence or an entertainments licence are adhered to both in the spirit —as they are at the Royal Opera House Covent Garden and at the Theatre Royal Drury Lane—and in the letter of the law. That was the reason for my original amendment.

    My hon. Friend's answer covered some aspects of this point. It is difficult to tackle the problems associated with letters patent and then to legislate to cover the phrase "licence of the Crown". Despite those difficulties, suitable legislation must be drafted to ensure that both the spirit and the letter of the law are followed in all four venues that are exempted by the 1963 Act.

    I was interested to hear of the historical reasons why one of these venues was exempt and why, according to the Minister, it appears no longer to be exempt. I am delighted that detailed historical research has led my hon. Friend to come before the House to remedy the problem regarding the Theatre Royal Haymarket. However, I am not convinced that that goes far enough.

    I am completely satisfied that the new clause is acceptable, according to the terms and objectives of the Fire Safety and Safety of Places of Sport Bill. That is precisely what my hon. Friend was trying to achieve. If so, he has achieved it in a masterly fashion. However, I would have hoped that my hon. Friend, with his genius, intellectual tenacity and capacity for seeing through a mass of historical data, literary footnotes and references, and with his way of going straight to the heart of an argument, would have gone further and tackled the problems that he recognises as being exceptionally difficult, the problems of letters patent, historical status and, above all, the interpretation of "licence of the Crown." Only that held him back from going further in moving new clause 1. Nevertheless, that can be remedied, and I hope that it will be.

    The hon. Member for Orkney and Shetland (Mr. Wallace) intervened on the issue of sporting events in the two other important and significant cultural and artistic centres. I understand the hon. Gentleman's strength of feeling and I am pleased that there was all-party recognition in this House that we need to consider going one step further.

    The whole essence and character of the handling of this clause and the way the House is addressing it shows how we can get together and tackle problems that might otherwise separate us in Committee for party political reasons. In this new clause we put the interests of the public and of public safety first, both in Committee and in this House, thus enabling it to pass so successfully and without problems or divisions that might otherwise harry our proceedings in the Palace of Westminster.

    I thank my hon. Friend for responding to the removal of certain exemptions and the implications of the removal. The new clause goes a long way towards tackling the overall problem and completely deals with the immediate problem in the Fire Safety and Safety of Places of Sport Bill. For that reason I welcome it. I hope that other hon. Members will speak on this new clause. I can see the hon. Member for Battersea (Mr. Dubs) on the edge of his seat, willing to make a contribution for the Labour party so that we can have complete unanimity on this issue. I hope that he will lend his support. I would not want to push him because there are other important amendments that the House will be considering later this evening. I am even more delighted to see the hon. Member for Orkney and Shetland seeking to catch your eye, Mr. Deputy Speaker, in order to support me in supporting the Minister in moving the new clause.

    I wish to ensure that this new clause has all-party support and I add my welcome to it.

    I have seldom heard supporting remarks from the Opposition Benches that have been so lucid or so much to the point. We are grateful for their support, but at the end of the day the credit for what has been achieved goes to my hon. Friend the Member for Lewisham, East (Mr. Moynihan). Had he not raised this matter in Committee, the amendment and the new clause would not be before the House now. My hon. Friend said some kind things about me and I propose to study Hansard because my opening remarks in my election address will be based very much on what he said.

    The hon. Member for Battersea (Mr. Dubs) laughs, but I note that he was nodding agreement when my hon. Friend was making those kind remarks. I heard what my hon. Friend said, that we have not gone far enough. I regret that it has not been possible to remove the exemptions for entertainment lawfully held by virtue of letters patent or licence of the Crown. We have had about two weeks to look into this issue. The concept of "licence of the Crown" is not readily comprehensible. Letters patent involve issues of constitutional importance, notably the status of letters patent and the prerogative of the Crown.

    It would not be right to legislate after an interval of two weeks without full consultation, and that is why we have not addressed those two exemptions in the course of this Bill, but should a suitable statutory vehicle emerge it will be our intention to look again at them.

    5.45 pm

    My hon. Friend said that in premises which are used for important purposes of entertainment it is essential that proper provision should be made for fire safety. He emphasised, as I do, that despite the exemptions, to which he drew our attention, the London Fire and Civil Defence Authority is wholly satisfied as to the adequacy of the arrangements at Drury Lane and Covent Garden. I hope that you, Mr. Deputy Speaker, whatever I or my hon. Friend may have said in the course of this debate, will not go away with the impression that there is any anxiety about safety at those premises, because there is not. I hope that this new clause, together with the amendment, will attract the support of this House and will thus become law.

    Question put and agreed to.

    Clause read a Second time, and added to the Bill.

    Clause 1

    Power To Exempt From Requirement To Have Fire Certificate

    I beg to move amendment No. 1, in page 2, leave out lines 39 to 41 and insert—

    '( ) The fire authority shall not grant exemption under this section for any premises without causing an inspection to be carried out under subsection (4) above unless they have caused the premises to be inspected (under that or any other power) within the preceding twelve months.'.
    This is quite an important amendment which was introduced in response to what the hon. Member for Battersea (Mr. Dubs) said in Committee. It is a credit to him that this issue was raised. To understand this amendment one must have an understanding of the statutory background to clause 1. The main statute with which we are concerned is the Fire Precautions Act 1971, which is aimed at protecting life from the risk of fire. The central feature of that Act is the requirement that occupiers of premises which are put to a use which is designated by order made by the Secretary of State should obtain a fire certificate from the local fire authority.

    Before the local fire authority issues the relevant certificate, it is required to satisfy itself as to the adequacy of fire safety on the premises, including the means of escape, the means for fighting fire and the means for giving warning to people on the premises. When the measures are not found to be satisfactory, the fire authority has the statutory power to acquire appropriate improvements. In addition, the fire certificate can impose any requirements that the fire authority considers necessary, including maintenance conditions and the requirement for training staff and keeping records.

    That is the statute on which the subsequent delegated legislation was founded and to which this Act refers. In 1972 the Secretary of State designated hotels and boarding houses providing sleeping accommodation for six or more persons or for any number of persons above the first floor or below the ground floor as being premises which required a fire certificate.

    In 1976 the certification process was taken yet further in that under the fire certification requirements under the 1971 Act provision was made to extend the process to factories, offices, shops and railway premises which were previously subject to certification under the Factories Act 1961 and the Offices, Shops and Railway Premises Act 1963. Under the designation order such premises in which more than 20 persons are employed to work, or more than 10 persons are employed to work other than on the ground floor, are required to be certificated.

    Further changes were made in that factories in which explosives or highly flammable substances are stored or used also need a certificate, regardless of the number of employees. Thus, in general terms, fire certificates are needed for all but the smallest hotels and boarding houses and for many places of work.

    Naturally, since the certification provision of the 1971 Act came into force fire authorities have carried out extensive programmes to certificate premises in the categories which I have described. The 1971 Act, together with the delegated legislation which followed, has led to a substantial improvement in fire safety.

    However, as you will be the first to appreciate, Mr. Deputy Speaker, such legislation requires constant scrutiny and updating. That is precisely what has been happening. A process of review was undertaken which culminated in proposals produced within the framework of the Central Fire Brigades Advisory Council which includes representatives of fire authorities and the fire service. A consultative document based on these proposals was published in 1985. As a result of the comments received, a further consultative document was issued last year. The consultative process led to the substantial provisions that are to be found in part I of the Bill.

    In substance, it has been thought right under the clause to enable the Secretary of Stale to specify in an order made under section 1 of the Fire Precautions Act 1971 descriptions of premises which a fire authority may exempt from the requirement to have a fire certificate, even though they are being put to a designated use under section 1 of the 1971 Act and are not otherwise exempted. In other words, clause 1 says that the Secretary of State may by provision exempt certain classes of premises which are, on the face of it, designated premises, but he can do so only by giving to the local authority a discretion to make that exemption, the local authority being the fire authority for these purposes.

    The point that exercised the minds of hon. Members in Committee was that it was right and proper that before an exemption order was made by the fire authority it should have carried out an inspection. That is precisely what the amendment is seeking to achieve. It provides:
    "The fire authority shall not grant exemption under this section for any premises without causing an inspection to be carried out under subsection (4) above unless they have caused the premises to be inspected (under that or any other power) within the preceding twelve months."
    It thus follows that an inspection within the relevant period is a condition precedent to the power of exemption arising.

    The amendment has been introduced because of an undertaking that I gave in Committee to the hon. Member for Battersea. Because of that undertaking, he withdrew the amendment which he had moved in Committee. I hope that my amendment meets completely the undertaking that I gave and that it will satisfy the hon. Gentleman.

    The amendment will allow fire authorities to avoid needless duplication of inspections so that they can exempt premises on the basis of knowledge gained on a recent inspection, but it sets a reasonable limit to that discretion and ensures that an inspection has taken place within the previous 12 months. Of course, even if the fire authority had inspected within the previous 12 months, it can, if it wishes, require a further inspection, if that is thought necessary, before issuing the certificate of exemption. We have given the fire authority a wide discretion but we have also fettered it in the way set out in the amendment.

    I very much hope that this approach will commend itself to the hon. Member for Battersea and to my hon. Friend the Member for Lewisham, East (Mr. Moynihan), who played such a prominent part in the discussion in Committee.

    I welcome the amendment. As the Minister said, it reflects precisely the amendment that I moved in Committee which the Minister said he would like to consider and get drafted to Home Office standards. I understand that the amendment will achieve what I intended: that if more than 12 months have gone by there will be an inspection by the fire authority. As the Bill was drafted originally, such an inspection was not necessary. This small improvement will add to the fire safety standards, and I welcome it.

    Amendment agreed to.

    Clause 8

    Duties As Regards Safety Pending Determination Of Applications For Fire Certificates

    I beg to move amendment No. 2, in page 10, line 3, leave out 'and' and insert—

    '(aa) the means for fighting fire with which the premises are provided are maintained in efficient working order; and'.
    This is another important amendment. Its main purpose is again to meet an undertaking that I gave in Committee on an amendment moved by the hon. Member for Battersea (Mr. Dubs). Because of that undertaking, the hon. Gentleman felt able to withdraw his amendment. I hope that he will support the amendment I am moving. It might be helpful if I were to give the House an indication of what the amendment is designed to achieve because I know that my right hon. and learned Friend the Minister of State, Home Office has a particular interest in it.

    Clause 8 imposes a duty on the applicant for a fire certificate to secure that, pending the disposal of the application, the means of escape with which the premises are provided can be safely and effectively used, and that employees receive instruction or training on what to do in the case of fire. The amendment adds the further requirement that any means for fighting fire with which the premises are provided shall be maintained in good and efficient working order.

    I should like to describe the amendment which the hon. Member for Battersea moved in Committee. It was intended to extend to means for fighting fire the interim duty which applied under clause 8 to premises subject to certification in order to cover the period between the date of the application and the date of certification, or, for that matter, the granting of exemption. What he had in mind was to include means for fighting fire amongst the measures that the occupier was required to secure.

    There were problems about his amendment. First, there is no fire-fighting appliance that can properly be prescribed for all ills. We might find ourselves providing a statutory requirement which involved an occupier in obtaining fire-fighting appliances which were either wholly inappropriate or positively dangerous. The Committee found that a compelling argument and the hon. Member for Battersea was good enough not to proceed with his amendment.

    However, a point which required consideration was whether we should impose on the occupier a statutory obligation to maintain the means for fighting fire which exist at the time of the making of the application. That seems to be a sensible thing to do and is consistent with the approach that we have more generally adopted in the Bill. That is reflected in the amendment now before the House and I very much hope that it will command hon. Members' approval.

    6 pm

    I wish to welcome this amendment, too, which reflects very closely my intention in Standing Committee. There are already two conditions which have to be met when an application for a fire certificate has been made. One is that a means of escape in case of fire is provided, and the second is that persons employed to work on the premises are trained in what to do in case of fire. This amendment adds a third condition—that the means for fighting fire with which the premises are provided shall be maintained in efficient working order.

    This may seem, on the face of it, to be a small amendment, but we know that there are premises which could suffer from fire and which present hazards should a fire break out. By having adequate means for fighting fires, both the premises and lives could be saved. Therefore, I believe that this amendment will be an important addition to fire safety.

    We are referring, of course, to a variety of premises, as the Minister made clear. I have in mind, for example, small workshops in the clothing trade. Unfortunately, there have been some rather tragic fires in such premises, particularly in the east end of London. I believe that this amendment will lessen the risks of a dangerous fire occurring in premises of that kind and in other premises covered by this provision.

    The words of the amendment are to me very important:

    "the means for fighting fire with which the premises are provided are maintained in efficient working order; and".
    I am concerned indeed when we use words of this nature. What do we mean when we say "the means for fighting fire"? How far should it extend? Does it mean that one must be able to indicate that there is a fire? Does it mean that one's alarm and communications systems must be correct? Does it mean that the warning system must be efficient? Does it mean that the provision for sustaining the responsibility for communication and dealing with a fire must be adequate?

    "The means for fighting fire" implies that the communication services are totally alerted. It means that when someone presses the privatised British Telecom 999 button it will operate. Are we sure of that? Are we assured that when one presses the 999 button to call the police, the fire service or the hospital service there will be a response without a question being asked by British Telecom about who will pay for it and who will accept the responsibility for it?

    I wish to be assured that when the 999 button is pressed the full communications system will come into play for fighting the fire. Ratepayers and taxpayers should he totally covered by the system. When one presses the 999 button, one should be fully protected.

    The word "and" at the end of the amendment worries me. I want to know, and I hope that the Minister will spell it out to me, that when someone presses the 999 button British Telecom will not ask the ambulance service or the fire service if he can pay for the call. Will the 999 service be maintained and will the full fire service be called upon irrespective of who presses the button and asks for full fire service coverage?

    I am very pleased that our fire communications service in the Palace of Westminster has recently been brought up to date. The fire service has been enlarged, it is able to cope and there is no 999 problem. I hope that when this clause is established with this amendment the 999 system will be totally applied and there will be no restriction whatsoever, so that it is possible to maintain the fire services in efficient working order.

    As one would expect, the right hon. Member for Wakefield (Mr. Harrison) has raised an important point which deserves a careful answer. I am sure that he appreciates that clause 8, in particular, is meant to deal with the interim position between the time when the certificate is applied for and the time when the fire authority either grants a safety certificate or decides to grant an exemption. Therefore, it is intended to cover a fairly narrow period. In effect, clause 8 provides that the systems which are within the premises for fire escape and for fighting fire shall be maintained in good and efficient working order.

    The right hon. Member asked, very fairly, what was meant by the phrase "means for fighting fire." The phrase has a narrow meaning and is intended to extend only to fire-fighting appliances rather than to the more general considerations which he mentioned. But of course some of the wider points that he has brought to the attention of the House would feature in the safety certificate, which could be issued once the fire authority had determined the application.

    I hope that the right hon. Member will bear in mind that this amendment is intended to cover a fairly narrow period, but I am very grateful to him for raising what is clearly an important point.

    Amendment agreed to.

    Clause 8, as amended, ordered to stand part of the Bill.

    Schedule 4


    Amendment made: No. 3, in page 41, line 15, column 3, after '12', insert

    ', in paragraph 1(6), the words "the Theatre Royal Haymarket or the Royal Albert Hall",'.—[Mr. Douglas. Hogg.]

    Schedule 4, as amended, ordered to stand part of the Bill.

    Motion made, and Question proposed, That the Bill be now read the Third time.— [Queen's Consent and Prince of Wales's Consent signified.]

    6.8 pm

    I appreciate that it is the desire of the House to move to other business. Therefore, I will make my comments very brief.

    I should like to thank the members of the Committee, notably my hon. Friend the Member for Lewisham, East (Mr. Moyniham) and, if I may, the hon. Member for Battersea (Mr. Dubs), for the very constructive way in which the Committee proceedings were conducted. Their co-operation made it possible to improve the Bill, and I am grateful for that.

    We have today extended and altered the Bill. We have restricted the discretion of the fire authority to exempt without an inspection for the purpose. We have extended the interim duty to include means for fighting fire and we have made various other important changes, such as the removal of the exemption of the Royal Albert Hall and the Theatre Royal. The Bill overall improves the safety afforded to the public both in respect of hazards posed by fire and hazards posed at sports grounds, mainly with regard to regulated stands. The Bill represents a valuable addition to public safety, and I commend it to the House.

    Were this not local government election day, I am quite certain that many hon. Members would be here to take part in the debate. I refer in particular to my hon. Friend the Member for Stalybridge and Hyde (Mr. Pendry), who has a long-standing commitment to the cause of sport and who has expressed regret to me that he is not able to be here to take part in the final stages of the legislation.

    I have expressed one regret about the Bill. The Minister will be aware of what I am referring to because I tried to move an amendment in Committee. For the first time there will be charges imposed in connection with fire safety. That is a retrograde step. I have made my position and that of my colleagues clear in Committee and I continue to say that it is a bad step. I appreciate that the charges will be relatively small, as the Minister pointed out. Nevertheless, we are establishing a precedent. My fear is that, having established such a precedent, future Governments may decide to increase the charges for fire safety. That is a bad decision because it may mean that, because some owners of premises cannot afford those charges or wish to avoid them, standards of fire safety will be that much less.

    One other difficulty is in the part of the Bill concerning sport and safety at sports grounds. In Committee we discussed the difficulties facing small clubs. At the risk of breaching the harmony of today's occasion, I quote from a letter sent to my hon. Friend the Member for Stalybridge and Hyde from the secretary of the Vauxhall-Opel league, a worthy league but one that does not have the benefit of large attendances. In Committee the Minister said that clubs had been slow in coming forward with protests or evidence about the possible hardship for them of some of the provisions in the Bill. The Minister went on to suggest, in an uncharacteristic manner, that that showed acquiescence on their part. The letter said:
    "I believe it merely shows ignorance of the proposals."
    In other words, the smaller clubs were not fully aware of the provision. However, I am sure that the larger clubs were. There is concern that some of the financial burdens imposed upon small clubs may be unduly onerous. I moved an amendment in Committee that was accepted that will make it possible for a Minister to extend the provisions regarding the size of stands below the present level of 500. I am aware that that may add to the burden on small clubs, which point is referred to in the letter, but because of the way that amendment was couched, it will be future Ministers who decide how to bring that into being. It is perfectly clear that any Minister ought to have in mind the financial burdens on small clubs. In a sense that point has been taken in hand and I am sure that future Ministers of any party will be aware of what the Committee discussed and considered. Nevertheless, I think it is important to place on the record the concerns of small clubs because, although we wish to protect the safety of spectators at sports grounds, we do not wish to do anything that may drive those clubs into more serious financial difficulties. I will not go through the other details in the letter except to say that some of those clubs have small attendances and may well find themselves unable to meet some of the obligations in the legislation.

    With the two reservations I have expressed, this is an extremely welcome measure. It has been warmly supported on all sides. I know that the Fire Brigades Union welcomes it, that the National Union of Tailors and Garment Workers believes that it will protect its members better than before and that all fire services believe that the Bill contains important provisions, which they welcome.

    Throughout our approach we have been anxious that the Bill should get on to the statute book as soon as possible. We are all aware that there is a remote possibility that there will be a general election before too long. As we have done our best to get the Bill through the House as quickly as possible I hope that, if a general election should by some chance be announced before too long, the Bill will get on to the statute book before Parliament is dissolved. The Minister is nodding his head, I presume in agreement. The Bill represents an advance in fire safety and, therefore, is to be welcomed.

    Question put and agreed to.

    Bill accordingly read the Third time, and passed, with amendments.

    Financial Services

    6.15 pm

    The Parliamentary Under-Secretary of State for Trade and Industry
    (Mr. Michael Howard)

    I believe that it is.

    I beg to move,
    That the draft Financial Services Act 1986 (Delegation) Order 1987, which was laid before this House on 22nd April 1987, be approved.
    As the House has agreed, we are also discussing motions 4 and 5.
    That the draft Financial Services (Transfer of Functions Relating to Friendly Societies) Order (Northern Ireland) 1987, which was laid before this House on 22nd April. be approved.
    That the draft Financial Services (Transfer of Functions Relating to Friendly Societies) Order 1987, which was laid before this House on 22nd April, be approved.
    It is almost exactly two years since the House debated the financial services White Paper. The Financial Services Bill, which was based on that White Paper, was subsequently introduced in the House in December 1985 and received long and careful consideration before receiving Royal Assent in November last year. In parallel with this parliamentary consideration, the Securities and Investments Board and the prospective self-regulation organisations were working to develop the rules and institutions which will regulate investment business under the Act. The orders we are now debating represent the single most significant parliamentary step in setting up the new regulatory system envisaged in the Act.

    The Financial Services Act embodies our belief that, to achieve effective regulation of the financial services sector, it is necessary to combine two elements. The first element is strong statutory backing for the regulatory system. The Act will make it a criminal offence to carry on investment business without authorisation. It will provide for rules to he made governing the way in which authorised businesses carry on investment business and it will provide legal sanctions, including civil suits, injunctions, restitution orders and withdrawal of authorisation, if the rules are broken.

    The second element is practitioner-based administration of those statutory powers. The Government believe that, if they are given the right powers, practitioner-based bodies have the best prospects of effectively regulating investment businesses and protecting the interests of investors. Accordingly, the Act has, from its introduction, provided for the majority of powers it confers on the Secretary of State to be transferred to a designated agency whose governing body would include both practitioners in the financial services sector and non-practitioners who have the knowledge and expertise to ensure that investors' interests are properly looked after.

    The Act lays down a number of criteria which must, in the opinion of the Secretary of State, be satisfied before powers can be transferred to a designated agency. The agency must be able and willing to exercise the powers that are to be transferred. It must have a balanced governing body whose members are appointed by the Secretary of State and the Governor of the Bank of England. In this respect I should mention that, while the SIB has always had a strong independent element on its board, we have been mindful of the comments expressed during the passage of the Bill, and the recently announced appointments will further reinforce that non-practitioner element. The agency must have satisfactory monitoring, enforcement and decision-making arrangements. It must have effective arrangements for the investigation of complaints, which must provide, in appropriate cases, for investigations to be carried out independently. It must be able and willing to provide high standards in the conduct of investment business and to co-operate with other financial regulators. The Act also provides that, provided it meets those criteria, the body to which the initial transfer of functions shall be made must be the Securities and Investments Board Limited—the SIB.

    I should add that the Act also provides for the transfer to a transferee body of certain powers relating to friendly societies. The conditions that have to be satisfied before these powers can be transferred are broadly the same as those to which I have just referred.

    The purpose of these draft orders is, therefore, to transfer to the SIB the bulk of the transferable powers under the Act. The package represents a considerable range of powers which will establish the SIB as the keystone in the new regulatory framework. It is intended that the SIB should have the ultimate responsibility for establishing the standards which firms will have to meet in order to be regarded as fit and proper to carry on investment business. This will result both from the SIB's power to grant direct authorisation to businesses and from its function of recognising self-regulating organisations and professional bodies, membership of which will confer authorisation.

    The SIB will also draw up the rules and regulations which will set the standards for behaviour by investment businesses. In some cases this will be because the SIB's own rules are directly applicable. In other cases, the rules of recognised self-regulating organisations and professional bodies will apply: but those rules will have to afford protection to investors at least equivalent to that afforded by the SIB's rule book. Finally, the SIB will be responsible for enforcement, having at its disposal a wide range of investigation powers and sanctions, including the power to initiate prosecutions for some offences.

    The principal order is the Financial Services (Delegation) Order, which concerns functions other than those relating exclusively to friendly societies. The other two orders transfer functions relating to friendly societies in Great Britain and in Northern Ireland.

    There are a certain number of transferable powers not covered by the orders. The most significant are the powers in chapter VIII of the Act relating to collective investment schemes. These represent a largely self-contained area which can be dealt with independently of the recognition of SROs and RPBs and the authorisation of businesses which must begin as soon as possible if the basic framework of the Act is to be introduced at an early date. Other powers which are retained concern various international matters; the powers to make indemnity rules, where the SIB has decided not to make proposals, opting instead for a widely drawn compensation scheme; certain powers relating to persons who are not authorised persons; and the function of revoking recognition of art SRO on certain grounds related to insurance since my Department remains primarily responsible for the regulation of insurance companies.

    Before laying the draft delegation orders my right hon. Friend the Secretary of State and the two registrars for friendly societies are required by the Act to satisfy themselves that the SIB meets the criteria to which I have already referred. They must also be satisfied that the rules and regulations which it proposes to make afford an adequate level of protection for investors and, where appropriate, comply with the principles set out in schedule 8 to the Act.

    Schedule 8 provides that the rules must promote high standards of integrity and fair dealing in the conduct of investment business. They must require an authorised person to exercise due diligence in providing investment services. They must require an authorised person to subordinate his own interests to those of his clients and to act fairly between his clients. They must require an authorised person to have regard to his clients' circumstances and to disclose his interest in any transaction, including commissions and other inducements. They must require an authorised person to disclose the capacity in which he acts and to give sufficient information for a potential investor to make an informed decision. They must provide for adequate warnings to be given to investors when the price of an investment is stabilised and they must provide for the protection of property held by an authorised person.

    The rules on compensation must make the best provision that can reasonably be made. The rules must require the keeping of proper records and make provision for their inspection when appropriate. Finally, the rules must take account of the fact that different classes of investors warrant different levels of protection.

    My right hon. Friend the Secretary of State is also required to satisfy himself as to the acceptability of the rules in competition terms. On 10 February we received the SIB's formal request for transfer of powers, together with its proposed rules and regulations entitled "Regulation of Investment Business" and a document entitled "SIB's Approach to its Regulator Responsibilities", copies of both of which have been made available in the Table Office. We subsequently received reports on these documents from the Director General of Fair Trading and further amendments proposed by the SIB, on which the director general has also reported. Copies of all these documents have been placed in the Library. We have also received a large number of comments both from representative bodies and individual practitioners.

    Having considered all the material submitted, it has been decided that the SIB and the rules it proposes to make fulfil the conditions and requirements laid down in the Act for a transfer of the powers referred to in the draft orders. The House will recognise that the SIB's rule book covers a large range of topics. I propose to refer specifically to the two issues which provoked considerably more comments than any other, both in the Director General's report and in the comments made by interested parties. These were the costs to small independent insurance intermediaries of complying with the new requirements and the issue which has come to be known as polarisation.

    It would be pointless to pretend—and we have never done so—that improvements in investor protection can be achieved without cost and without placing some new requirements on firms. To mention just two of the characteristics of the new system, regular monitoring arrangements and an adequate compensation scheme are bound to cost money. Having said that, I should say also that I think some of the estimates of compliance costs which I have heard have been considerable overestimates. Some of the estimates, for example, have assumed elaborate new compliance procedures whereas in fact many of the SIB requirements reflect current best practice and will require little if any change in practice in reputable businesses. Furthermore, the SIB has made considerable efforts to keep costs at an acceptable level. Indeed, in March amendments to the rule book were proposed which were designed to reduce the costs of compliance for small investment businesses which do not handle clients' money. Having considered all the evidence, my right hon. Friend is satisfied, as required by the terms of the Financial Services Act 1986, that the SIB's proposals will not significantly restrict, distort or prevent competition on this account.

    The polarisation debate has in some ways been the other side of the coin, in the sense that very many of those most worried about the costs which they believed the SIB's rules implied were equally strong in their support of the polarisation rules. These rules have evoked very strong support on both sides of the House. Indeed, more than 60 members supported early-day motion 814 backing polarisation. Most hon. Members will be aware that polarisation is the requirement that all those who sell life assurance and unit trusts should act either as fully independent intermediaries or as company representatives selling only the product of a single company or group. The SIB has argued, and we accept, that this is an important safeguard for investors. Some have argued that it will have an anti-competitive effect. We take the contrary view. Polarisation will clarify the status of investment advisers and will therefore promote transparency in the market. It will therefore enhance rather than restrict competition.

    The Director General of Fair Trading did not find the polarisation rules on their own anti-competitive. Indeed, he, like us, considered them in isolation to be conducive to competition. But he was concerned about the implications of polarisation when combined with the costs of compliance for small intermediaries. This concern arose from the director general's assessment that the number of of independent intermediaries would be significantly reduced; that the rules would lead to a reduction in independent advice from banks and building societies; and that the overall result was therefore likely to be an increase in the influence of company representatives.

    We have considered the director general's arguments carefully but we canot accept his conclusions. First, as I have said, I do not believe that the costs of compliance will be as high as some have suggested. Moreover, polarisation will ensure that the independence of genuinely independent advisers is perceived as a real advantage. So I believe that there will continue to be a substantial body of independent intermediaries. Indeed, I expect the rules to be of positive benefit to the genuinely independent intermediary, with the result that the availability of independent advice will be safeguarded. This reinforces the view that polarisation is in itself conducive to competition. Secondly, I believe that the banks and building societies will be able to adjust to the new regime without radical change, and that the availability of independent advice from banks and building societies will not be significantly reduced since these will he able to continue to operate, if they wish, broadly as they do now. For those reasons we have come to the conclusion that the rules will not have a significantly anti-competitive effect.

    In seeking approval for the draft orders, we are recommending transfer powers to the SIB on the basis of the rules it has submitted.

    My hon. and learned Friend said that in his view there would be a substantial number of independent intermediaries. I think that those were his words. As Sir Gordon Borrie raised the important point as to what the number would be and was not too sure about that, will my hon. and learned Friend say what he means and what number he has in mind?

    I cannot give any really sensible numerical estimate, but I would not expect any substantial decrease in the number of independent intermediaries or in the availability of independent advice on these matters.

    Further to the point made by my hon. Friend the Member for Beaconsfield (Mr. Smith), am I not right in thinking that Sir Gordon Borrie's expression of concern was delivered before the initiative taken by the SIB materially to reduce the costs to small intermediaries, provided that they did not handle clients' money? Is it not now much less likely, therefore, that Sir Gordon Borrie's fears will materialise?

    My hon. Friend is right to the extent that the original reservations that the director general expressed came before the modification of the SIB's rules on costs. The director general was required to comment on the modification, and I fear that it was not sufficient to alter his original view, so it would be rash to claim that that view was wholly invalidated—at least for him—by the modification.

    In seeking approval for these draft orders, we are therefore recommending transfer of powers to the SIB on the basis of the rules that it has submitted, as modified by amendments that it proposed during our consideration. This is an appropriate point to pay tribute to the work that the SIB and its staff have put into the draft rules and the setting up of the framework described in its document. No one should underestimate the difficulties of producing a new body of regulation essentially from scratch. The SIB has worked hard to enable, this next step in improving investor protection to be taken, and I am sure that, once the powers are transferred. it will apply itself with equal vigour to the tasks that Parliament has given it. I ask the House to approve the draft orders.

    6.31 pm

    Having expected this debate for a couple of months, as a major set piece debate on the City and its regulations, I find it odd that such a central proposal is being smuggled through when the rest of the country, and much of the rest of the House, have their minds elsewhere. [HON. MEMBERS: "Where are Labour Members?"] My people have decided on a sensible division of labour, whereby I shall put our case at the Dispatch Box tonight and they will pave the way for the election outside. We shall meet tomorrow and find out which of us has been more successful. Therefore, I am happy to say that Labour Members do not intend to divide the House on this order, and I shall not be requesting an adjournment to consult my supporters on their attitude to the order.

    Having made that statement, for obvious reasons, it does not mean that our doubts about the SIB have been removed by the rule book, the events of the past two months or the Minister's speech. We remain opposed to the measure, not because we do not believe that the City requires supervision—it patently does—or because we do not believe that the SIB could be made into an appropriate vehicle for that supervision, but because we would he opposed to designating the SIB in its present form. First, the SIB is not a public body, and remains in a curious constitutional position, being a private company limited by guarantee. Secondly, it is not a publicly funded body. I have been entertained by some of the letters that I have received in recent weeks from modest financial intermediaries complaining about the cost of the structure. I hope that they will take the advantage of voting Labour at the forthcoming general election, thus relieving themselves of that burden.

    Thirdly, we oppose the designation of the SIB in its present form because, as the Minister is well aware from our previous criticisms, it contains a clear majority of practitioners in the City. That means that there is a danger of the SIB confusing its two roles—as the body that supervises the City, and as the body that speaks for the City. It could thus become a sort of Law Society of the financial institutions. The Minister came near to recognising that point when he emphasised that the costs of meeting the SIB's rules has been exaggerated by some of the companies that have complained. He pointed out that the SIB had gone to great trouble to minimise the cost of meeting its rules. That is perfectly true, but the other side of the coin is that some of the rules have been criticised because, rather than changing existing practice, they seek to codify it. That applies in particular to the requirements for disclosure, which are no more onerous than the requirements met at present by most companies.

    Of the 18 members of the SIB, only one could be described as representing the interest of the wider consuming public — the many private investors — attracted into the market by the present Government. There are, to be sure, half a dozen other representatives of consumers of financial services, but they are representatives of the major institutions, which are well placed to make their voices heard by those who operate on their behalf.

    Finally, we are opposed to the designation of the SIB in its present form because it does not include coverage of Lloyd's insurance market or of the work of the Takeover Panel. Those two omissions are curious as it is in those areas that the worst financial scandals have occurred over the past three years. The omission of the Takeover Panel is particularly odd. Over the past year, it has become clear that if there has been a weakness of self-regulation it has rested with the Takeover Panel and that, if there is a case for providing greater powers of investigation and subsequently of sanctions, it rests in the area that the panel supervises. For those reasons, we believe that the SIB is inadequate to the task.

    To be fair to the Government, I think that, if they had their time again and were introducing a Financial Services Bill now in the light of the events of the past 12 months, they would not be proposing the measure that the House passed 18 months ago and that they are obliged to defend tonight. Nevertheless, the Minister is obliged to lay the order designating the SIB, and I am obliged to note the order in its present form.

    I have three comments on the rule book as laid by the SIB. First, I have enormous sympathy with the point made by Sir Gordon Borrie about the impenetrability of the rules. It is regrettable that we are confronted with a set of semi-statutes of such length, language and complexity. I take the point made eloquently — and by comparison with the rule book with great lucidity — by the stock exchange in its circular to members. The SROs are placed in greater difficulty when they are at a tertiary level of the process — following the Financial Services Act and the SIB rule book — and are then obliged to devise their own rules to meet the registration requirements of the SIB on the basis of SIB draft rules which are impenetrable, complex and lengthy.

    Secondly, it is regrettable that there is not a greater thrust in the SIB rules to tackle some of the cartels that still exist. I draw the Minister's attention to recent comment in the financial press concerning the commissions charged by the unit trusts. It is noticeable that since big bang there has been a sharp reduction in the cost of trading by the unit trusts. Their fees have gone down by about 50 per cent. and stamp duty has been halved, yet the spread being charged by the unit trusts has remained constant and, in one or two celebrated cases, has actually expanded.

    A body that supervises the City — not only by preventing fraud but by ensuring that the City provides a fair return for and decent access to the small investor—should turn its mind to that development which is enabling the unit trust to take advantage and to pocket the gains of big bang rather than turning them over to the many small investors who put their money into unit trusts.

    Thirdly, I must confess that I have mixed views on polarisation, partly, no doubt, because of the impenetrability of the problem. On the whole, I incline to the view taken by the Under-Secretary of State and by the SIB. But, regardless of which view one takes on the merits of polarisation, it was vital that the SIB won that debate and obtained the backing of the Minister and the House. If, at this early stage of the SIB's existence, it had lost this, its first battle with the major forces in the City, thereafter its standing, prestige and status would have suffered a major blow from which it might never have recovered. Therefore, whether or not the SIB were right in the first instance—I believe that, on balance, it was—it is vital that the House backs it in this matter and makes it clear that the SIB has our confidence.

    The designation of the SIB in the order will be judged by history in the light of results. That, effectively, brings us to the resources available to the SIB compared with those available to other regulatory bodies, most notably the Securities and Exchange Commission. Those resources appear dangerously thin on the ground. The SEC has an annual budget of $40 million for surveillance alone. There are no comparable resources available to the SIB, which is faced with a major task.

    The extent to which there is a churning of shares in the market at present is alarming. I looked at the figures only the other week when I received the stock exchange's latest fact sheet. Trading in December last year was on a turnover of £57 billion, which was double the figure for December 1985. Total turnover for March was £165 billion — three times the turnover figure in December and six times the figure for December 1985. That level of churning in turnover, especially in the gilts market, cannot be healthy. Inevitably, it will pose major questions of supervision, of regulation and of the prevention of fraud.

    Other evidence has been made available to us by the latest issue of Acquisitions Monthly, which has updated its survey of share price movements in the context of takeover bids and which points out that the increase in the price of the share of the target company in the period preceding the announcement of a bid continues to rise inexplicably and disturbingly. Acquisitions Monthly found that, of the 100 such bids that it monitored in the last six months of 1986, on average, the share price of the target company rose by 11 per cent. before the bid went public, in a quarter of the cases it rose by more than 20 per cent. and in one tenth of the cases it rose by more than 30 per cent. No doubt, in most of those cases there is an innocent explanation. But it is difficult to avoid the conclusion that in some there is a less innocent explanation which reflects people taking an opportunity in the market on information which they had obtained in a professional or perhaps rather unprofessional manner. That poses a major task for the SIB. I wish it well. I hope that it proves adequate to the task.

    I am confident on one point—current events in the City will force themselves upon the consciousness of the House in the near future and we shall have another opportunity to debate this matter, perhaps when the attention of the House is focused in the Chamber rather than on the ballot box outside. On that occasion. I promise the Minister a more testing time in the debate.

    6.43 pm

    I have not taken part in these debates before but, because I have been in touch with people in the City who have registered some concern to me, I want to ask my hon. and learned Friend the Under-Secretary of State some questions about the orders. I should like to declare an interest in that I am a non-executive director of a small financial institution, although it is largely unaffected by the orders.

    No one would disagree with the principle of regulation, which has been warmly welcomed. I know that my hon. and learned Friend the Under-Secretary of State has had an extremely difficult job, which he has discharged with great vigour and skill. He will be aware that there are those — as there always are — in such cases who do not necessarily agree with his conclusions, but that is inevitable. These arguments are at the margin because the Government have decided the road down which they wish to go. Despite the fact that I think that it is a pity that some of these matters have not been more fully debated, as the hon. Member for Livingston (Mr. Cook) said, we are now at a stage when the order for the delegation of authority has been laid before the House and we can comment only in the most general terms.

    Will my hon. and learned Friend the Minister agree not to stick or to urge the SIB to stick too firmly to any particular timetable? Some quarters feel that it will take time from delegation to get the systems up and running effectively and efficiently. These are important and weighty matters, and the most detailed and careful consideration will need to be given before any conclusions are reached. I understand that the clearing banks have received legal advice that the decision by my right hon. Friend the Secretary of State on polarisation is in breach of the treaty of Rome.

    It is vital that, when the new framework is operative, it should be as good and as effective as possible. There is a danger that, by trying to stick to some kind of arbitrary timetable, or by laying down a timetable in a way that would be difficult or politically embarrassing to turn from, the system could come into effect when the proposed rules and requirements of financial organisations have not been thought through properly and current doubts and disagreements resolved. There are, therefore, strong grounds, although, of course, I welcome the new era of regulation in principle and in fact, for urging my hon. and learned Friend the Minister not to seek to have the machine up and running by a certain date if, by then, the vehicle is not ready or has been constructed in such a way that it will either seize up or cause potential users to go elsewhere for their financial advice and activities.

    At the moment, as the House knows, there are significant disagreements and discussions, some or all involving the Department of Trade and Industry, the Bank of England, the SIB, SROs and potential members of SROs—on such matters as segregation of capital, the scope and rules of SROs and proposals for complaints and compensation, to mention but a few. The SIB has not yet produced all its draft rules—for example, those relating only to collective investment schemes have not yet appeared. There are important and weighty decisions which have not yet been taken which will need time to be examined carefully and thoughtfully and which I hope my hon. and learned Friend the Minister agrees are worthy of being given further time and consideration.

    It has been suggested that for the operation of the system to be fully in place by 1 January 1988 firms seeking authorisation will have to have applied for membership to the relevant SRO by 1 November 1987. It seems highly unlikely that the matters to which reference has been made will have been resolved in time for the necessary decisions and preparations to be taken by the end of October. There is no particular magic, it has been suggested to me, in either date. Even if there were, it is surely right to suggest that the great importance of regulating the scheme correctly and workably is greater than the desirability of announcing that a series of decisions and acts will have been carried out by a certain fixed date, especially when so many of these decisions depend on unresolved issues.

    The House will very much appreciate the great care taken by my hon. and learned Friend the Minister on this legislation. I ask him to agree that it is vital that we do not rush the last fence. I hope that he will further consider the matters that I have mentioned.

    6.48 pm

    If any hon. Member present at the beginning of the debate had thought that the absence of Opposition Members showed that they were largely in agreement with the orders, the hon. Member for Livingston (Mr. Cook) disabused him of it. As the hon. Gentleman said, his troops will reappear, perhaps on another occasion — no doubt, on the Opposition Benches.

    We have got this legislation right. The premise that the hon. Member for Livingston put forward that we should have a full statutory, bureaucratic system such as the American one is a mistake. The Government are right to put the emphasis on the regulatory authority being practitioner based so that it is more likely to be able to regulate the City in an effective way. It is a false premise to try to suggest that there is an argument as between a practitioner-based regulation and a full statutory system. With this legislation, we have managed to get the best of all worlds. We have full statutory backing and the country outside, the City and people who deal in financial services outside the City will have seen that the Government are taking regulation and industrial protection very seriously. If there is any wrong-doing it will be brought to book very quickly.

    Enforcement is the key. If there were hon. Members on the Opposition Benches, I am sure that they would agree that this legislation must be toughly enforced. The three-tier approach that we have with the SROs, the SIB and the Government standing behind them is a system that will bring wrong-doers to book very quickly.

    Does my hon. Friend agree, that, in addition to the structure that he has described, the heart of the matter is whether there will be independent watchdogs on these organisations that will ensure that the system works effectively? It is not sufficient to have the structure; we must also have within it people who will be independent and who will exercise those powers with courage and integrity.

    I agree with my hon. Friend, and we must see how that develops.

    If people say, "What is the evidence that it is being treated seriously?", one can point out that some of the rules of giving evidence and such matters have been changed and that they are tougher in this legislation than in any other part of the criminal law. We have got that right and people should understand that. One example of that is compelling people to appear before the SIB or SROs as well as their auditors and bankers. That shows that the Government are taking this matter seriously. My hon. Friend the Member for Crawley (Mr. Soames) was right on that point.

    I want to move on to some of the aspects that affect some of the small practitioners. My hon. and learned Friend the Minister knows that many hon. Members were deeply concerned about the impact of the bureaucratic compliance and how its cost was to impinge on some of the small practitioners in the financial, insurance and other sectors. The chairman of the SIB has responded reasonably to that concern and has done something that many of us in respect of other parts of policy have been pressing on the Government. He has instigated a two-tier regulatory system. What is reasonable for a giant firm such as Prudential Assurance or Pearl Assurance to comply with is not reasonable for a two, three or 10-man firm. I am glad that Sir Kenneth Berrill has agreed to that and that there will be two-tier regulations, especially for those firms that are not handling clients' money.

    My hon. Friend knows a great deal about these matters, but does he agree that, because of the fundamental nature and importance of the next stage of this legislation, it is vital that it is not rushed, since if it is not right there could be a lack of confidence in the market and regulations which may lead to business going elsewhere, which would be a very unhappy state of affairs?

    I agree with that. If we had made this regulatory system too burdensome it would be a very strange thing if the Government, who have done so much over the last eight years to encourage the growth of small firms, were to find that they had passed legislation that was forcing small firms to join together and become larger firms.

    I welcome the flexibility that Sir Kenneth Berrill has shown and the reduction in the charges. For example, a three-man firm that previously had to pay an application fee of £1,150 would now be required to pay £900. The periodic fee for the same size of firm would fall by 33 per cent. from £2,250 to £1,500. There would be a similar reduction for a 10-man firm. That shows that Sir Kenneth Berrill has applied his mind to this matter and that what I feared at one time would happen—that it would force firms to join together—will not happen, because these charges are not unreasonable.

    The overriding responsibilities of Sir Kenneth Berrill and the members of the SIB are to protect the investor. It is a tricky task to carry out the onerous duty that the Act has laid on the SIB and to balance it without putting too much of a cost or bureaucratic burden on the smaller firms, which at the end of the day costs money.

    Does my hon. Friend agree that by removing the insistence for carrying professional indemnity the SIB has further reduced costs that would have been quite a burden on the small firm and are a burden on all firms? Therefore, the firms that feel that they should take professional indemnity will be able to apply for it, but it will not be an obligation for trading in this market.

    I agree with my hon. Friend.

    I am glad that the need for two-tier regulation and two-tier cost structures has been recognised by Sir Kenneth Berrill. I hope that my hon. and learned Friend the Minister will continue to keep this aspect of regulatory framework in mind, and that he will agree that we are not in the business of forcing firms to join together; we are in the business of effective and tough investor regulation. As I believe that Sir Kenneth Berrill has shown by his changes that were announced some weeks ago, it is possible to combine the best of both worlds—a degree of flexibility and two-tier regulation — with the need to have that essential and effective industrial protection.

    6.57 pm

    This is a somewhat invidious point at which to launch on to a debate as I suspect that the affairs of the City of London may shortly be punctuated by the affairs of the City of Westminster.

    Perhaps I can start what I trust will be a brief, although punctuated, intervention by saying how much I welcome the orders that have been made by my hon. and learned Friend the Minister. I look forward to the SIB taking up its new responsibilities for regulation of the investment markets.

    My hon. and learned Friend the Minister, who has played such a conspicuous and able part in the passage of the Bill through the House, will admit that during the lengthy Committee stage a contribution of some note was made about enhancing the status and powers of the SIB, a move which, in retrospect, has been increasingly welcomed in the City and by commentators. It was vindicated by subsequent events. By the sensitive way in which he has consulted about the rules and evolved not only the personnel but the activities of the board, Sir Kenneth Berrill has displayed a competence and an ability that have already gained the respect of investment markets and, indeed, investors not only in this country but beyond.

    The order is important. For the first time, it transfers significant powers from the hands of the Secretary of State to an independent, powerful body that is recognised and identified by law and that, for the first time, will have a significant ability to take to task the fraudsters—

    It being Seven o'clock, and there being private business set down by THE CHAIRMAN OF WAYS AND MEANS under Standing Order No. 16 (Time for taking private business), further proceeding stood postponed.

    City Of Westminster Bill (By Order)

    Order for Second Reading read.

    7 pm

    I beg to move, That the Bill he now read a Second time.

    The city that I have the honour to represent is not only the centre of London but the heart of Britain's capital and the seat of national government. It is, or should be, the nation's showpiece to British citizens and the world. Ninety-nine per cent. of all tourists to Britain visit Westminster. It now sees 10 million foreign tourists yearly, plus a further 13 million from within the United Kingdom. But the city—it is not unique in this respect—has the problem of litter, up to 90 tonnes daily during the tourist season. That is enough to fill the Chamber every month.

    Few people could say that they were not at fault at some time in dropping litter. Some people are anti-social and take pleasure in defiling other people's environment. But the central fact facing the city is that occasional human lapses, multiplied by the number of people living in and passing through the city — 180,000 residents, 750,000 commuters, and many visitors — mean that Westminster's fate is to experience a growing volume of litter dropped by the tides of humanity to which the city is witness every day of the week, both in the day and during the night. The volume grows year by year because of the increasing amount of packaging and the expansion of fast food shops.

    Westminster city council is not complacent. Indeed, it has been foremost among British councils in endeavouring to tackle the problem. It initiated the cleaner city pilot scheme in 1979. It was specifically adopted throughout the council's 220 miles of roads and 390 miles of footways. The council has installed 6,000 litter bins, together with 500 sponsored litter bins. Educational leaflets are provided for schools. There is close co-operation and frequent liaison between Westminster's cleansing services department and local community groups, residents' associations and businesses. Agreements are being reached with fast food outlets for their staff to conduct litter patrols of nearby areas. Westminster has launched a quality of life campaign to increase public awareness of the value of a cleaner city and to obtain further improvements in conditions on the streets. But the city council faces a high cost in achieving that aim. Despite major improvements in the efficiency of the council's cleansing services department in recent years, major street cleansing in central London costs up to £600,000—the yearly cost for Oxford street alone. The average figure for Westminster streets was £26,700 per mile in 1986–87. The net cost of the street cleansing service in Westminster, excluding refuse collection, will be £6,450,000 in 1987–88. Most of that is the cost of sweeping up litter.

    Against that background, the city council has considered it to be quite realistic to budget for major increases in cleansing department manpower. Even then, it would not be possible to guarantee wholly clean streets, for such a policy fails to tackle the causes of litter. They have to do with human forgetfulness, human lapses and, sometimes, a failure to care for others' environment. The council has also given careful consideration to use of the existing litter laws, notably the Litter Act 1983. The chief failing of the Act is its requirement for criminal proceedings to be undertaken, with all that that implies in administrative procedures and the undue involvement of police, Crown prosecution and court time for an offence that is essentially anti-social rather than criminal.

    The need for improved legislation pre-dates the Litter Act 1983 that basically consolidated pre-existing Acts of Parliament. For example, the March 1981 official report of Westminster city council's cleaner city pilot scheme stated that current legislation was
    "particularly unsatisfactory. In theory, individuals can be prosecuted for dropping litter."

    What the hon. Gentleman said is correct; the legislation is unsatisfactory. But Westminster is a wealthy and powerful local authority. Would it not have been a salutary lesson to all potential litter louts to have seen Westminster pursuing through the courts a number of well-publicised cases? That would undoubtedly have been a major deterrent.

    Westminster is indeed the heart of London and gives the appearance of being wealthy, but among its 180,000 residents are many people who draw housing benefit. Business, too, expects to pay a fair rate, not an excessive rate. Wealth is subject to qualification. As to prosecution, I shall refer in a moment or two to the developing role of the city and its plans for its enforcement service. If the hon. Member for Newham, North-West (Mr. Banks) will allow me to proceed, I may reach that interesting point.

    The council report went on to state:
    "In practice, prosecutions are very difficult to bring about and the low level of fines often imposed makes it unviable to do so."
    The city council has proposed the Bill that is intended, as the preamble states,
    "To make further provision for the enforcement of the Litter Act 1983 in the City of Westminster."
    The core of the Bill is the proposal for a fixed penalty ticket to be issued when an authorised officer of the city council has reason to believe that a person is dropping litter or has just committed that offence. The Bill does not create a new offence of littering; it already exists in the Litter Act 1983. It merely adds to the Act by making it possible for a fixed penalty ticket to be issued for offences within the city of Westminster. Fixed penalty tickets have been established for more than 20 years as a recognised and practical method of improving enforcement of laws relating to a variety of offences, particularly minor motoring transgressions that are regarded by the public as less serious than major criminal acts. Their uses, along with their public acceptability, have grown.

    The Bill does not adopt an on-the-spot fine system. That was considered and rejected by the council following early discussions with the Metropolitan police. Instead, any person handed a fixed penalty ticket will have the opportunity to pay a fine within 14 days, in which case no criminal proceedings will be taken against him. If the fine is not paid, the normal provisions of the Litter Act for criminal proceedings will be enforced.

    I am sure that my hon. Friend will come to this point later, but how will one be able to identify the individual to whom a fixed penalty ticket is given, as we do not carry identity cards, which are common in many European states?

    My hon. Friend touches on an interesting point. He is quite right to say that, in the United Kingdom, we do not as yet have identity cards; and in the enforcement of minor law, the constable or other enforcement agent has the delicate and somewhat difficult task of identifying the individual. We seem to overcome that difficulty by a mixture of bluff, common sense and good humour.

    I said that a fixed penalty ticket could be issued, but the city council does not envisage tickets being issued on every occasion. That might lead to more littering of the streets. The council's policy is that its officers will ask the litterer to retrieve his presumed litter before any thought is given to issuing a fixed penalty ticket. The council sees no reason why responsible people will not do that, provided that they are asked courteously. The council is to give extensive training to its officers. No doubt it will take into account the thoughts of my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) on how to go about that.

    There will be about 60 officers, comprising some members of the cleansing department staff, plus 41 members of the multi-purpose inspectorate, many of whom are already in post and employed by the city council for the enforcement of various laws, including street trading and planning regulations.

    I apologise for intervening again, but the hon. Gentleman will understand that as he is the hon. Member responsible for steering the measure through the House he must be prepared to answer whatever questions we ask him. Does what he has said mean that there has been an increase in the number of staff employed to carry out these duties? Secondly, what consultation has there been with the recognised trade unions? Did they agree to the proposals?

    I cannot answer the hon. Gentleman's questions precisely because, as he knows, I am not a member of the city council and thus not privy to its every activity. However, I can tell him that the city council prides itself on close discussions with its employees, provides them with news letters, is in constant contact with its staff and will have discussed its objectives with its employees at all levels, as that is its normal practice.

    As to the number of staff, I have said that the existing cleansing department staff will be employed, in addition to the 41 members of a new multi-purpose inspectorate. I have no doubt that, with the passage of time, others will be employed as appropriate to enforce the legislation—if the House approves it—and many other matters that concern the city council.

    The hon. Gentleman has referred to 60 staff, who will enforce the provisions. Will he explain how any member of the public will know that he is dealing with a city council official who is trying to enforce the provisions and not someone else? How will they be recognised?

    I shall come to the hon. Gentleman's point in a moment.

    The council will be guided by experience on the best way in which to deploy its staff. The multi-purpose inspectorate will undertake litter enforcement duties as part of its various roving tasks, and wardens from the cleansing department may be employed in specific locations, such as Oxford street and Trafalgar square. That is the point about which the hon. Member for Battersea (Mr. Dubs) was concerned. All of those employees will have clear means of identification.

    The hon. Gentleman refers to "clear means of identification". It is important to know the nature of an individual who tries to enforce the law. What is the hon. Gentleman talking about?

    The hon. Gentleman is right to say that anyone seeking to enforce the law must be able to show the citizen in the street that he is authorised to do so and that he is a proper and accountable person. As I have already said, the employees of the council will receive appropriate training for their duties. They will also be equipped with a proper means of identification. What will that be? It might, as my hon. Friend the Member for Richmond and Barnes suggested, be a form of identity card—it almost certainly will be. The employees might even wear an appropriate form of clothing that identifies them as being from the Westminster city council, bearing in mind that that clothing should not allow them to be mistaken for members of the police force. I am sure that the city council will be pursuing those matters.

    The city council has had detailed discussions with the Home Office, the Department of the Environment and the Metropolitan police about the provisions of the Bill, at council officer level and Civil Service level. It has also held discussions at political levels, including some with the Home Secretary, the Metropolitan police Commissioner, the Commissioner-designate and the leader of Westminster city council. With their agreement, the council proposes to make three substantive amendments to the Bill at Committee stage, together with consequential drafting stages.

    First, the Metropolitan police and the Home Office's police department have said that they believe that the provisions of the Litter Act are adequate for the few occasions — generally serious events — on which their officers are likely to be involved in enforcement of litter laws, although they fully understand the council's desire for fixed penalty tickets to be available for routine enforcement. So fixed penalty powers will not now be made available to the police. Secondly, the council has agreed to withdraw the provision making it an offence not to give a name and address to the authorised officer issuing the fixed penalty notice. That is to minimise potential calls on police time and criminal justice proceedings. The deletion of that provision brings the Bill into line with most of the enforcement carried out by local councils, in which there is no obligation to give a name and address.

    Opposition Members will, I am sure, agree that the proposed offence would have steered too close to the former sus law, which I and other hon. Members had a hand in removing. The Westminster city council is satisfied that careful staff training will help to ensure that most people will comply on a voluntary basis with the request for a name and address. Many members of the council's inspectorate are former police officers who understand how to handle these situations. The experience of other organisations that also require names and addresses—for example, London Underground and bus ticket inspectors — is that the great majority of the public provide their identity and address voluntarily.

    The third change is one that the council—I shall he frank—is reluctant to concede. It is proposed in the Bill that the fines levied by way of fixed penalty tickets should he paid ultimately to the city treasurer and directed to a specific fund to offset enforcement costs, and that the surplus should be used to improve further the city's environment. The Home Office has stated that that would be contrary to the national policy on the direction of all fines, which, as the House knows, are due to the Crown. The city council believes that this national policy handicaps many local authorities in effectively implementing enforcement legislation for a range of lesser offences because there is little chance of enforcement being self-financing or of the polluter paying directly for the alleviation of his wrongdoing.

    The result of an independent opinion poll conducted for the city council by the Oxford Research Agency was that 77 per cent. of all those interviewed agreed with the council's proposal that the fines be directed to the city treasurer and then to the environmental fund. The council considers that in due course the national policy will have to be changed as part of improvements to local enforcement procedures throughout the country.

    In the interim, the council accepts the Home Office request and will propose in Committee that fines enforced by the scheme should be paid into the central funds. A ways and means resolution has been tabled today to enable this action to be taken.

    The withdrawal of the three provisions to which I have referred has been the subject of some adverse press comments in recent weeks, with the conjecture that there is profound disagreement among the council, the Home Office and the Metropolitan police. I must inform the House that the media's interpretation is inaccurate. The council is grateful for the personal support of my right hon. Friend the Home Secretary for the broad objectives of the Bill and for the Commissioner-designate's expectation that there will be a close working relationship between the multi-purpose inspectorate and the local Metropolitan police. The scale of fines has been discussed with the Home Office, which is in agreement with the proposal that the fixed penalty be equal to one tenth of level 2 of the standard scale, which is currently equivalent to £10.

    Support for the Bill is widespread. Public statements of support have been received from organisations as diverse as Friends of the Earth, UK 2000. the Keep Britain Tidy group and the London Tourist Board. For example, Friends of the Earth has stated that the Bill
    "should benefit all Londoners and visitors by significantly improving our urban environment."
    Three seminars held for residents and business associations within Westminster demonstrated clear support for the proposal. The public opinion poll showed a sample of 81 per cent. of residents in Westminster, 77 per cent. of commuters, 84 per cent. of British tourists and 80 per cent. of foreign tourists to be in favour of the proposals. Similar percentages stated that they would be "very pleased" or "quite pleased" if the fixed penalty scheme were introduced. The £10 penalty was thought to be about right by 64 per cent. Only 9 per cent. considered the present method of enforcement to be effective.

    The hon. Gentleman has statistics that I do not have, and I ask him to tell me whether the 20 per cent. or so who were not in favour of the proposal were unable to support it because they did not like the extension of the law in terms of the Bill's provisions or because they included litter louts. It would be interesting to know whether the city council analysed why 20 per cent. did not approve of the proposed legislation.

    That information is not in my possession. I do not know whether the analysis went that far. We might presume that the proverbial litter lout would not be in favour of the proposition. I do not know, but I presume that that would be the position.

    All local city, borough and district councils in England and Wales were advised by Westminster city council of its proposed Bill. The council has received 274 replies, all expressing interest, with 112 expressing support in principle, or unqualified support. Support has been offered by officers and councillors representing councils of all political dispositions, including many authorities controlled by the Labour party, such as Bristol, Barnsley and Bolton. There has been support also from authorities controlled by the Liberal party and the Social Democratic party, or a combination of the two.

    Is there not all the difference in the world between agreeing in principle to support a measure that is against litter and agreeing in detail to the precise proposals that will be before the House when amendments to the Bill are introduced? To ask whether we are against litter is rather like asking whether we are against sin. It is the detail of how to tackle sin that causes disagreement and dissension. I suggest that many of the authorities that agree in principle will not necessarily agree with the detailed approach.

    The Bill is a simple measure, and in its discussions with other local authorities the city council has had no difficulty in conveying to them the provisions in the Bill in its current form. The concessions that I have offered to the House on behalf of the city council make the Bill in some respects a softer vehicle. It diminishes to a degree perhaps its intention and presumed effectiveness. There can be no doubt that 112 councils which were approached by the city council expressed support for the Bill as presented to the House. That shows the degree of support that the council has throughout the country for this measure, and to that extent it is something of a legislative acorn. It is to be hoped that its objectives and principles will grow, should the House see fit to pass the Bill.

    Many councils have stated that if Westminster city council's Bill is successful they will seek similar powers or press for similar national legislation. I think that that deals with the point that the hon. Member for Battersea put rather well. That is surely the central issue for the House to bear in mind this evening. Westminster has taken the imaginative step of proposing a Bill that offers better scope for the enforcement of the Litter Act 1983. It is a valuable initiative which I hope will be monitored closely by the city council, by other local authorities, the Home Office, the Metropolitan police, the Department of the Environment and by other agencies such as Keep Britain Tidy. It offers a practical addition to legislation in an area where action is sorely needed.

    The Bill's proponents do not pretend that it is perfect, and it is rare to hear that said in the Chamber. My remarks about the destination of the fines will have been noted especially, but I believe that the House should consider favourably the principles and proposals that are set out in the Bill, which may prove to be widely adopted by other authorities in due course.

    7.29 pm

    I blocked this Bill when the House was first asked to give it a Second Reading. I do not think that I did Westminster city council any disservice, because it was only on 29 April that the council was able to secure a confirmatory resolution. I believe that the council has played ducks and drakes with the House in the past about this legislation. It has not been sufficiently aware of the needs of its internal practices or of the wishes and requirements of the House in bringing forward this legislation.

    In blocking the Bill I was able to secure a debate on Second Reading, because several important principles should be debated. I accept that I am not gazing on packed Benches and therefore most hon. Members are not so concerned about the principles as I and a few of my colleagues are, but we should have an opportunity to discuss the principles before the Bill goes into Committee.

    We shall all be saying tonight that the object of the Bill, to reduce the amount of litter deposited on the streets, must be supported by all Members. It is unfortunate that Londoners seem to be among the worst litter louts in the country. That is not easy for a London Member of Parliament to say, but I will go further and say that I am distressed by the amount of litter deposited on the streets in my borough of Newham.

    I take issue with the hon. Member for Westminster, North (Mr. Wheeler) and say that the City's centre of gravity is to the east, rather than in the city of Westminster. I know that not many tourists yet come to Newham, despite the attractions we have to offer them, so the litter on our streets is deposited by the residents. I live in my constituency and, when I go around the corner in the morning to get my newspaper from near the Princess Alice, I am often confronted by the ugly eyesore of litter on the streets. Many people stop me and say, "What will the council do about this?" It is a problem for councils. I have as much regard for Westminster's problems as I do for the problems of the London borough of Newham. I point out to those people that it is not the councillors who go around dropping litter on the streets. The habits of the people who live in the area should be looked at, rather than the policies of the local authority.

    I have always advocated to my colleagues, while I was both in and out of local government, that if councils can collect the refuse on time, ensure that the streets are clean and the street lights are on, they are most of the way to getting the total support of the population. The population will let councils have as many sub-committees as they want, as long as they provide the basic services, because people form their impressions of local authorities on the basis of the refuse collection service and the state of the streets, even though it is unfair to blame the local authority for the state of the streets.

    I accept that Westminster has a problem with the large number of tourists, visitors and people who work within its boundaries, including Members of Parliament. If I saw a Member of Parliament dropping litter on the street, I would be the first to see that he got a fixed penalty, once that measure is introduced.

    Before the hon. Gentleman issued the fixed penalty, he would perhaps invite the hon. Member to recover the litter, so that only at the end of a discussion would he feel that he would have to proceed to a fixed penalty.

    That is one of the things which bothers me about this Bill. Some people drop litter in the streets because they are forgetful, but the anti-social nature of people who drop litter extends to other aspects of their personality, including sticking one on somebody who says, "Would you mind picking that up?" I confess that I am a devout coward and when I see someone dropping litter in the street I make a fairly quick mental assessment about whether or not I could ask the person to pick up the litter without fear of danger to myself. I have often decided that discretion is the better part of valour and I have allowed the paper to stay there or I have picked it up as I tut-tutted.

    Some people who drop litter can be fairly objectionable when someone points out to them that they have just done something wrong. Many people get stroppy when they know they have done something wrong and someone points it out to them. That is one of the reasons why I asked the hon. Member for Westminster, North whether the relevant trade unions had been consulted and were in agreement with this legislation. I imagine that if I were still a union official I would be asking the employer questions such as "How many times do you have to ask the person?", "What if the person offers violence?" and "Will my members be given additional security support: for example, two-way radios?". The hon. Member did not raise that matter, but it is something on which the Committee can decide. There is a security aspect because there is a potential threat to the safety of the employee who will have to ask litter louts to pick up the litter. That must be taken into consideration by the promoters.

    The Government, having recognised that dropping litter is a social problem, should have been prepared to have introduced wider national campaigns to try to get the message through at an earlier stage. For example, it should be a continual feature of education in schools. Littering affects our way of life; it is not just an accident in which one is involved.

    People live in a chuck-away society. The hon. Member for Westminster, North mentioned that companies promote their goods with more and more packaging, and are thereby encouraging litter louts. Manufacturers who use packaging should be asked to make some form of reparation to the state for the amount of ammunition they place in the hands of litter louts. The Minister may care to reflect on the need for more national and local campaigns and more education in schools about litter. He may care also to take up the point raised by his hon. Friend as to whether there are any proposals to enforce and change the current litter legislation and the penalties incurred by those who drop litter. I would argue for a coherent national strategy, which I am sure would be welcomed by all hon. Members.

    I have a number of objections to the Bill. First, I object to the manner in which this Bill has been promoted—not in the House, because the hon. Member for Westminster, North has done a very good job. He and I have had discussions, since the Bill first appeared on the Order Paper, about the provisions, how the debate would go and what we were trying to achieve.

    I object to the way that the Bill has been promoted outside the House. We have had a plethora of litter in the form of press releases from the city of Westminster's press office. The latest one, dated 1 May, entitled "Litter Bill takes another step forward", points out that the special resolution passed by the council on 29 April meant that the council's
    "much-publicised Litter Bill took a major step towards becoming law last night…when the Council passed a Motion which will enable the House of Commons to give it a second reading."
    Whether the House of Commons consents to give it a Second Reading is something for the House of Commons to decide. I ask the Minister whether the press release is an accurate reflection of the Government's policy. It says:
    "The Bill, which is supported by the Government, will get its second reading on May 7."
    That is fairly optimistic. It goes on:
    "Hitting at reports that Home Office amendments would emasculate the proposed legislation, Lady Porter, Leader of the Council, said: 'The Home Office, which have expressed total support for the Bill, believe that it would not be practical for the Police to give litter offenders a fixed penalty ticket. We are quite happy to accept that advice.'".
    There is some straining of the truth in that press release. The Government clearly did not support the Bill as it was proposed. The hon. Member for Westminster, North has already told us about the discussions that took place between the leader of the Westminster city council and the Home Secretary, or officials of her council and the Home Office, on the amendments which the promoters are now prepared to accept. I do not know whether the Minister is happy with that description.

    As for the Home Office expressing full support for the Bill, again that is rather straining at the truth. As my hon. Friend the Member for Battersea (Mr. Dubs) said in an intervention, we are all against litter being dropped. Clearly, every Department of State or local authority that might have written to Westminster city council would, on being asked their opinion about the dropping of litter, express their support for measures which seek to eliminate such litter dropping. However, Westminster has gone heavy on the publicity on this without having checked to see that its claims are accurate.

    In a way, the Bill is very much a piece of private enterprise by the leader of Westminster city council. Many of us know that she takes a highly individualistic approach to local government. The hon. Member for Bournemouth, East, (Mr. Atkinson) says, "Very good." Whether one thinks that the estimable Shirley Porter is someone that one can go along with depends on the hue of one's politics. It will not surprise hon. Members or the good lady herself to hear that I find her politics anathema. I have some regard for her, but I cannot say that it stretches to affection.

    However, I shall not make a personal issue out of this, despite her highly irresponsible attitude towards strategic local government in London. She was one of those Tory town hall toadies who put party politics before the needs of London in respect of the abolition of the GLC. Nevertheless, I do not want any hon. Member to think that this colours my feelings towards Westminster city council or the Bill.

    There has been little if any consultation with the other London local authorities, either Labour or Tory, on the Bill. I understand that the London Boroughs Association, the Tory association in London, has reservations about the Bill. I know the views of the Association of London Authorities, the Labour grouping in the capital. In response to a request from me for the ALA's opinion, the secretary, Derek Prentice, said:
    "What is of more concern however is that the London Coordinating Committee agreed that the promotion of such Bills should be handled by the two London Local Authority Associations in order that a comprehensive approach to such issues could be adopted. Clearly in this case Westminster has decided to go it alone and therefore the contents of the Bill have not benefited from a London-wide discussion and input."
    That is a serious point because other local authorities, and, indeed, the House, are in danger of being railroaded by the leader of Westminster city council.

    As we all know, if such a proposal had surfaced in the past it would probably have been part of a general powers Bill sponsored by the GLC which would have come after a great deal of consultation within London. We have not had such consultation over this Bill.

    My second objection is one of principle, not to stopping people dropping litter, but to the Bill's proposals for the power to levy fixed penalties to be extended to council officers. I do not favour a further extension of fixed penalty powers beyond those that already exist within the capital. I certainly do not approve of them being extended to local authority officers.

    One of the things that bothers me is that the power might not stop at local authority officers. It could involve another group of people. Westminster city council is, as one would expect under the leadership of Lady Porter, keen on privatising as many of its services as it possibly can. One knows that waste disposal services in Westminster are being examined as a potential candidate for privatisation. Can the hon. Member for Westminster, North tell me what will happen if Westminster privatises the services where council officers are charged with handing out fixed penalty tickets? Will that be part of the privatisation proposal? It is bad enough council officers being given these powers, but the thought that the powers might be handed over to Securicor or to an enforcement branch of a private cleansing company would raise more objections about the principles within the Bill.

    The Bill, which the hon. Gentleman will have an opportunity to study later, says:

    "'authorised officer' means an officer of the council authorised by the council in writing to act in relation to the provisions of this Act".
    I think that the hon. Gentleman will agree that that makes the matter clear. It is to be an authorised officer of the council. Finally, there is nothing novel in a citizen seeking to enforce the law of the United Kingdom. Such rights exist for us all.

    The hon. Gentleman does me a disservice by suggesting that I have not read the Bill. I have underlined the part that he has just quoted because I wondered how comprehensive it would be in a new situation.

    On Second Reading one is supposed to stick to principles, but I am not likely to find myself on the Opposed Bill Committee, much as I should like that. Therefore, can the hon. Gentleman tell me whether, if Westminster city council privatised the services, art authorised officer could be someone who was part of a service that was carrying out official duties on behalf of the authority but was acting as an agent of the council but employed by another organisation? That is one of the points I am worried about.

    Of course, we all have the power to make a citizen's arrest but we do not all have the ability to go round issuing fixed penalty tickets when we see people doing things wrong. If I were allowed to do so, I could think of a range of things for which, in my eccentric way, I would like to give people fixed penalty tickets. However, I doubt whether the House would give me such powers and so I shall quickly move on.

    Let me return to waste disposal in Westminster, which is the central part of the Bill. Westminster city council is not above and beyond criticism. It likes to make great play of its efficiency, but I noticed recently that the district auditor ruled that the council had acted improperly in failing to charge for trade refuse collection, something that the council conceded. I should like to know why the district auditor did not recommend that Lady Porter should be surcharged for that. After all, there was clearly a failure to carry out fiduciary duties on behalf of ratepayers. Having been in a number of altercations with the district auditor about surcharge, I must say I think he missed a trick on that occasion.

    The hon. Gentleman must know — because he is a Westminster Member, and no doubt he lives in his constituency—that Westminster's cleansing department consistently out-performs those of many other London councils. I doubt whether it out-performs the refuse collection department in the London borough of Newham, but it certainly out-performs many others. Yet, as I understand it—this returns me to my earlier point—Westminster is paying consultants £25,000 in fees to plan the privatisation of refuse collection in the borough. I should like to know—the matter will no doubt need to be pushed in cross-examination in the Opposed Bill Committee — what will happen to that aspect of Westminster's refuse responsibilities in the Bill if the House is minded to grant the powers sought.

    I gather that Westminster has earmarked 13 services for competitive tendering. Clearly, the function of issuing fixed penalties for litter dropping is one that the council's Tory leadership will wish to privatise at a later date, unless the House specifically precludes it in the Committee stage. I hope that, when hon. Members get round to reading this debate, they will think carefully about imposing such a condition.

    Let me deal now with the objections of the police. We have heard some of them this evening. I feel that it would have been far better if, before the Bill was brought forward, Westminster had consulted in some depth not only the London boroughs but the Home Office and its Ministers. After all, there is considerable political affinity between the Home Office Ministers and the leadership of Westminster city council. Besides, it is not as if the distance between their headquarters was very great.

    It seems rather strange that the Home Office has recommended, in such a way as not to be refused or gainsaid, suggestions for amendments at the Committee stage. I asked the Parliamentary Under-Secretary a question on Wednesday 6 May, to which he replied making it clear that discussions had taken place between the Home Office and Westminster, and that a series of amendments that would effectively knock a chunk out of the middle of the Bill were being proposed by the Home Office and accepted by the Bill's promoters. It is a pity that Westminster had not done that beforehand; a great deal of time could have been saved.

    I also wrote to the police to find out what objections they had to the Bill. Although amendments have now been made, I should like to read into the record the letter that I received from Assistant Commissioner G. D. McLean of New Scotland Yard. It reads:
    "I am replying to your letter of 30 March to the Commissioner about the City of Westminster Bill. Our formal observations on the Bill were conveyed to the Home Office by letters dated 19 January and 20 March."
    That is very late in the passage of a piece of private legislation for the Home Office to be consulting the police—or, indeed, for the police to be asked by the Home Office. I think that that reinforces the point that I made earlier.

    The letter continues:
    "Briefly, we support in principle Westminster City Council's initiatives to deal with the litter problem but we have reservations about the way in which those initiatives are proposed to be implemented by way of this Bill. In particular, we would not wish to see any active police involvement in the issue of 'fixed penalty notices' for litter offences and we would be concerned about the possibility of involvement by police at a secondary level in dealing with disputes between the City Council's authorised officer and the alleged offender to whom a fixed penalty notice was issued.
    Naturally we do not relish the prospect of this involvement at a time when our initiatives are being directed at more serious matters and the utilisation of resources are under continuing close scrutiny."
    It is clear that, if the police had been asked earlier, they would have told Westminster council officers what provisions should be put into the Bill to make it acceptable to the Metropolitan police and, in turn, to the Home Office.

    The hon. Member for Westminster, North said that amendments proposed by the Home Office were being accepted. I understand that the Minister is prepared to accept that assurance, and that the House will not be asked to issue any directions to the Opposed Bill Committee. I trust that the members of that Committee will pay some heed to what was said on Second Reading, and will ensure that that happens.

    To sum up my remarks about my second objection, I believe that the police should have been consulted considerably earlier, and certainly before the Bill was published.

    I cannot escape the thought that, although the Bill has a good central intention, it has been used very much as an ego trip by the leader of Westminster city council. As I have said, Westminster is a wealthy borough, but the hon. Member for Westminster, North correctly pointed out that there is a good deal of poverty within it. It is a pity that Westminster city corporation does not direct its attention to doing more to alleviate that poverty.

    The hon. Gentleman says that it does. However, I understand that Westminster has spent well over £40,000 on campaigning in relation to the Bill. It had good lobbyists. I know them well, and they have done a good job with fairly poor material. But I remember the time when the leader of the council bitterly attacked the Greater London council for spending ratepayers' money on what she considered to be propaganda.

    There is an element of double standards here. I understand that Westminster is now spending over £1 million on public relations: that is a great deal of money to be spent by a borough which, as the hon. Gentleman suggested, has many problems. Many Conservative Members would call the things that Westminster is doing propaganda on the rates if they were being done by a Labour council. However, in a Tory authority they are considered a proper and fitting use of ratepayers' money, although I do not think that that is neessarily true. Westminster is now spending a higher percentage of its budget on public relations than the GLC did on a London-wide basis. It is no wonder that the leader of Westminster city council has been referred to, somewhat unflatteringly, as Ken Livingstone in drag.

    While we know that Westminster's litter problem is fairly acute, I feel that the Bill shows that its priorities are wrong. Surely a council that has underspent by some £11 million in the past two years on housing and housing repairs could use its great promotional ability to do something about the level of poverty within its boundaries, and campaign for more resources from central Government so that something could be done about the scandal of bed-and-breakfast accommodation from which Westminster tends to suffer. As well as those within its boundaries, it has to take in a large number of people from other boroughs. My own borough of Newham, for example, has been forced to send people to bed-and-breakfast accommodation in boroughs such as Westminster.

    Rather than bringing forward this Bill, we should like Westminster to do something about the 10,000 on its waiting lists and its 6,000 homeless families. We should like it to do rather more than build nine council houses, as it did last year, or proposes to do this year. It is pathetic, and shows that the Tory leadership of Westminster city council has a perverse set of priorities.

    How effective will the Bill be? I understand that in some of its propaganda Westminster claims that its ratepayers will save a great deal of money. I should like to know how much Westminster ratepayers will save. If everybody stopped dropping litter, it would save the council a very great deal of money but we should like the savings that Westminster intends to secure by this legislation, if it is passed, to be quantified.

    Earlier I asked the hon. Member for Westminster, North why Westminster has only brought one prosecution in the last three years for the dropping of litter in its streets. Westminster already has the power to prosecute. Through its public relations department, which seems to be growing larger and larger under the leadership of Lady Porter, it has made a great deal of fuss about people dropping litter, and it could have prosecuted them in the courts, using the existing legislation. That would have had a great impact on potential litter louts.

    I accept that the existing legislation is unsatisfactory, but Westminster could have used its great influence in the Conservative party to persuade Ministers to introduce legislation to cover the whole country, not just Westminster. I hope that the Minister will give us his views about further legislation.

    I should also like to know how many additional staff Westminster proposes to employ, if this legislation is passed. I can probably answer that question myself. It is a big zilch. The council will employ no additional staff. And if Westminster is granted these powers, I wonder how effective its policing of the legislation will be. I should also like to know what negotiations there have been with the unions and whether they agree with these proposals.

    The Bill is designed to deal with people who make a mess. The Bill is a complete mess, and it has not been assisted by the Government's amendments. It owes much more to Westminster city council's obsessional desire for publicity than it does to a serious attempt to deal with a serious problem in Westminster and throughout this capital city. The Bill is decidedly bedraggled and it will undoubtedly be further amended in the Opposed Bill Committee.

    It is not my intention to force a Division, but I suggest that the promoters should quietly drop it, in so far as Westminster city council is capable of doing anything quietly, and wait for a coherent attempt to deal with litter louts who affect not only Westminster but our capital city and many other cities.

    8.2 pm

    I offer a warm welcome to this long overdue Bill and congratulate Westminster city council on its initiative. My colleague, the hon. Member for Bournemouth, West (Mr. Butterfill), has asked me to associate him with these remarks.

    The Bill has the enthusiastic support of my council, the Bournemouth borough council. Like Westminster, Bournemouth is very much in the business of tourism and welcomes many thousands of visitors from home and abroad every year. Our new international conference centre—the Labour party enjoyed it the year before last and my party enjoyed it last year — and the growing number of all-year-round, all-weather leisure facilities will, we hope, attract even more visitors.

    As with Westminster, litter is a seemingly uncontrollable problem. It has grown with the number of take-away food shops, although the fault does not lie with them. They are usually very co-operative in providing bins and in appealing to their customers to be tidy. However, we in Bournemouth cannot ignore the fact that the borough receives letters of complaint from visitors, including letters from abroad — I have had them myself — that demonstrate that they find the litter on our streets and beaches and in our parks and gardens wholly incompatible with the clean, attractive and elegant resort which, of course, Bournemouth is. It is putting them off returning to us.

    A recent tourism study of Bournemouth and south-east Dorset has shown that, while the town is highly favoured as a holiday resort, a major criticism of it is the amount of litter on its streets. But, like Westminster, until now we have been powerless and frustrated in dealing with this problem. For several years now we have been urging that there should be legislation of this kind to provide local authorities with the power to impose on-the-spot fines on those found dropping litter. That would act as an effective deterrent. Apparently, it works in other European countries.

    Representations have been made through the Association of District Councils and, through me, to successive Governments. However, the last Labour Government concluded that such powers would be undesirable—that legislation of that kind would impair relations between the police, who would have the responsibility for implementing the powers, and the public. It was understood that the police were opposed to being placed in this position. In any case, it was felt that they were better occupied in fighting crime. We can all sympathise with that.

    There has, the therefore, been a singular lack of prosecutions under the Litter Act 1983, as my hon. Friend the Member for Westminster, North (Mr. Wheeler) has already said. Governments continue to resort to education and persuasion and there is no doubt that the Keep Britain Tidy group is doing an excellent job. But the problem remains, and it is growing. If the Bill is passed, undoubtedly a great many local authorities such as mine will seek similar powers. Indeed, instead of wasting parliamentary time on private Bills of this nature, perhaps there ought to be a Government Bill to deal with the problem. I look forward to hearing the views of my hon. Friend the Minister on that point.

    Turning to the Bill itself, at first sight the prospect of authorised municipal officers roaming the streets to nab and fine may be regarded as more characteristic of Eastern Europe, but that is not what the Bill proposes. The precedent for what it proposes has long been set by traffic wardens and fixed penalties. I understand that Westminster city council already has officers who are authorised to control street markets and to deal with other planning considerations. Henceforth, they will have the power to approach those whom they see drop litter— not to impose a fine but to ask that it be picked up. Only a refusal will lead to a fixed penalty which I should have thought was wholly reasonable.

    Once the public get to know the form in this way, the problem will be overcome. My only reservation is that I hope that these officers will always try to avoid fining visitors from abroad. I foresee headlines in foreign newspapers that will wholly distort the picture. It will create an unjustified image here that will not be at all helpful to our tourist prospects.

    I hope that the whole House will applaud Westminster city council on its initiative and, indeed, on its entire cleaner city experiment. We in Bournemouth will be closely following the passage of the Bill and will seek to introduce our own as soon as possible.

    8.8 pm

    The hon. Member for Westminster, North (Mr. Wheeler) graphically described the litter problem in the city of Westminster. All hon. Members understand that the problem is at its most severe in the city of Westminster because of the vast body of visitors, commuters and tourists who throng its streets.

    The problem is getting worse almost daily. Westminster city council states that the volume of litter taken from its streets has increased by about 20 per cent. in the last three years. The rapid increase in littering means that we cannot hang around waiting for a perfect solution to arrive from central Government. The Westminster initiative may not be perfect and may have to be refined, but at least Westminster is having a go at the problem, and that is welcomed.

    Over the years much effort has been directed to solving this problem. The hon. Member for Newham, North-West (Mr. Banks) referred to the Westminster city council's cleaner city campaign, a very interesting initiative that was followed up by a number of other local authorities in sponsoring litter bins and so on. That campaign, despite all the effort that went into it, did not slow down littering in our streets, which in London has been aggravated by the rise in the number of visitors over recent years.

    In 1976 there were 7¼ million visitors to London from overseas and about 11 million from other parts of the United Kingdom, a total of a little over 18¼ million. By 1985 that had shot up to more than 9 million overseas visitors and 14 million visitors from other parts of the United Kingdom, a total of over 23 million people visiting London in one year — a 26 per cent. increase over a nine-year period.

    I do not suggest that we should blame the litter problem on those who visit our city. There is some evidence to suggest that visitors are more concerned about litter and in general have a better performance in that respect than some of the inhabitants of London. But the sheer number of visitors means that there is more litter even if the percentage of visitors doing the littering is comparatively small.

    Other hon. Members referred to the need for an education campaign, which I support, but we have been trying that. I have sponsored many of the Keep Britain Tidy group efforts to undertake sensible initiatives in our schools to try to get this message across to young people before they reach maturity. Perhaps these initiatives did not have sufficient resources behind them, but they really have not been able to struggle against and have been overwhelmed by the sheer momentum of the increase in litter.

    In my own borough of Greenwich, which is another very important tourist area of London, virtually all our shopping centres are a sea of litter by the end of a shopping day, with the rubbish blowing everywhere in the wind. The fast food chains have a lot to answer for in generating litter. A number of them—McDonalds are probably the foremost among them—go to great lengths to try to tackle the problem even to the extent of having a litter patrol to collect some of the refuse from their own operations. Away from the shopping centres, residential streets which are probably swept once a week become a sea of accumulated paper and piles of bottles and tins. Many residential streets in areas like the one in which I live are disfigured in this way.

    There is the problem of public open spaces. My local authority provides very pleasant small parks and garden areas which ought to be a delight for people to enjoy; but they are not, because flower beds and grassed areas are spoiled by bottles, cans, ice-cream wrappers, cigarette wrappers and the whole plethora of rubbish dumped by insensitive and unfeeling people.

    The wooded areas, of which there is a vast expanse in my area, come in for very heavy and systematic dumping of large black sacks of accumulated refuse, furniture and other things. It is not necessary to dump in the woods because my authority, like many others, operates a very effective and efficient recycling depot which can collect and take in that sort of rubbish.

    Indeed, it was a recycling depot that we inherited from the Greater London Council—one of the forward looking steps of the GLC, and I am in favour of that recycling approach to litter—but we have not got across to people that they do not need to take rubbish into the woods but can take it to the recycling depot.

    One of the most depressing things that I see when driving in and out from my home to this House is the car or lorry driver in front who winds down the window and throws out accumulated litter in the cab—cigarette ends, cigarette packets, apple cores, or whatever. It all goes out of the vehicle and on to the road.

    The hon. Member for Newham, North-West said that these people are anti-social. I accept that some of them are, but many of them are downright thoughtless. The saddest aspect of the public attitude to litter is that we are beginning to learn to live with it. People have stopped complaining about it, because they say, "What is the good of complaining?" Nobody cares, and the problem continues to grow and get worse; the more we become accustomed to lower standards, the worse our environment comes.

    Will the hon. Gentleman tell the House whether there is any alliance policy on the problem of litter, particularly in terms of requiring manufacturers to spend a proportion of their profits on finding ways of making their packaging biodegradable.

    We follow the same policy in the alliance as in other parties, that the polluter should pay. A great deal more could be done by manufacturers to encourage by a combination of stick and carrot, but at the end of the day even biodegradable refuse is left lying on the streets for a long time before it biodegrades, and in that sense it is degrading our environment while that process continues.

    We have heard of the defects of the Litter Act 1983, which has not tackled litter. Nationwide there has been a singular lack of prosecutions. The police feel, with understanding from most members of the public, that they have more important functions than to struggle with littering. In any case, the Act is not cost effective. The likely cost of a prosecution under the Act is about £200 and the average fine would be about £40. Cash spent on pursuing individual prosecutions through the courts would be better utilised in dealing on the ground with a large number of offenders through the fixed penalty approach. That is why I support the general aims and approach of this Bill. Any sensible initiative to support this Bill has to be tried. A fixed penalty system that works is preferable to the cumbersome procedures of the Litter Act.

    Having enforcement officers asking people to pick up litter, with the back-up of the fixed penalty system, could have an impact on people's behaviour, and that is what the Bill is trying to achieve. The Bill, to be effective, has to have not just an effective punitive system, but a proper information and advertising campaign. I understand that is part of the Westminster approach.

    I am sorry that the Government appear to have decided that all fines should go into the Exchequer rather than back to Westminster city council. If the number of fixed penalty notices is small because offenders pick up the litter when they are asked, there would still be an incentive for Westminster in having less litter. If Westminster does not receive revenue from fines, it has little initiative to issue penalty notices or to increase the number of enforcement officers. I should have thought that, when central Government is telling local authorities to tighten their belts, a little in-built financial incentive from the Government would not have gone amiss.

    Like other hon. Members who have spoken, I am interested in the wider application of these powers. There is a great deal of public interest and support, and certainly much interest and support, too, from local authorities across the political spectrum. We have to ask what form the development of such a power will take. Will other councils be expected to promote their own legislation? Will we have to wait years for central Government legislation or can we not ask for an enabling measure so that the local authorities which want it will have power to do something? That is the way forward rather than requiring every authority to do exactly the same about the problem. I hope the Government will say that such enabling leglislation will be forthcoming.

    There will be an Administration in power. Whichever Administration is in power, I hope that such an approach to the problem will be an important priority. All of us agree that litter disfigures our major cities, particularly London. It contributes to the shabby, dingy, down-at-heel appearance which too much of central London now gives.

    There is also broad agreement that the quality of the environment must be improved. The tight against litter, however mundane it may appear, is very much part of the fight to improve the quality of life in London. To win the fight we need to change public attitudes. A punitive system on its own cannot do that. But the Bill, backed up by an education and information campaign, can contribute to the changes that we all want to see. For those reasons support the Bill.

    8.21 pm

    I spent some years as a Westminster city councillor. Although these issues were not before the council at the time, I am fairly familiar with the problems of the city of Westminster. It is perhaps a matter of regret that this is not an occasion for me to say what I think about the council's appalling housing policy, the homelessness, the neglect of social services, the difficulties elderly people face and so on. The hon. Member for Westminster, North (Mr. Wheeler) should be familiar with those problems. One difficulty underlying Westminster's approach is polarisation because the affluent areas of the city are so far away from the poorer areas. All too often city hall is remote from the poor and disadvantaged people in the northern part of the city who desperately need more attention than they are getting.

    I agree with the hon. Member for Westminster, North that litter is an enormous problem. We are an extremely wasteful society. I wish local authorities went to more trouble to separate litter that can be recycled from litter that cannot. As a society we are exploiting our planet and we are not seeking to minimise the damage that we are doing to it. Litter is one manifestation of that damage.

    London has always struck me as a particularly dirty city —and by London I mean inner London and the city of Westminster. It is always remarkable how much cleaner cities in the north of England are. That may be because of tourism or it may be because many cities in the north have Labour authorities which deal better with such things. At any rate, it is disagreeable to note on arriving back in London how dirty it is. To that extent, I agree that there is a problem.

    Of course, litter on the streets encourages more litter. If people see litter lying about, they will not look for rubbish bins but will simply throw the extra bits of paper on the street. If our cities were cleaner, there might be more pressure on individuals to throw their rubbish into rubbish bins and not on the street.

    Given the difficulties, the streets of the city of Westminster are not at all bad. I fear that if the street cleaning services are privatised—as the threat appears to be—standards will go down. I need only to invoke the experience of the borough of Wandsworth, in which my constituency is situated, to show what happens when a council hands over responsibility to a private firm. The streets get dirtier and dirtier.

    We are all against litter, and it is understandable that other local authorities are interested in any initiative which seeks to reduce litter. The hon. Member for Westminster, North read a list of local authorities that were for the Bill either in principle or in detail; he used words similar to those. There is all the difference in the world between being interested in an idea in principle and supporting it in detail. I suspect that many local authorities that have shown an interest in the scheme would be interested in any new idea that attempted to deal with the problem of litter, but most of them are not necessarily in support of the details because the details represent a sticking point. Therefore, I do not think that the hon. Member for Westminster, North should have said that all these authorities are in support of the Bill. I do not believe that support in principle represents support for the Bill as it stands.

    In contrast to my hon. Friend the Member for Newham, North-West (Mr. Banks), I am not sure that for all the money that has been spent Westminster city council lobbyists have done all that good a job. It was only yesterday afternoon that I first received background information. Then I got something from them in the post today. Fortunately, I still have friends on Westminster city council who were able to brief me more thoroughly than the city council itself did, although I had a conversation with an official in city hall about some details this morning. That was when I first learnt about the amendments that are to be introduced later.

    I have several reservations. My first reservation is that we are told by the sponsor of the Bill that three major amendments are to be introduced. I can understand that, on Second Reading, sometimes criticisms may provoke a Minister or the sponsor of the Bill to say, having heard the arguments, that there may be a case for changes in Committee. But what we were told today by the hon. Member for Westminster, North as soon as he started was that there would be three amendments. What is more, those amendments will not deal with minor points of detail to tidy up small matters, but amendments which will change the Bill fundamentally.

    I think that it is virtually without precedent for us to be presented with a Bill and to be told on its Second Reading that it is not right and will be completely different if it is passed. The House should not be treated in that way. The first I knew of these changes was late yesterday afternoon when I got a letter from someone who had been advising the city council. I learnt more about it this morning. It must be unheard of for the House to be presented with a Bill and to be told, "We have got it all wrong; we will make three major changes but you will have to wait and see because we cannot give you the details now."

    The Bill will require much amendment to incorporate these three changes. Given the length of time the Bill has been around since Westminster city council embarked upon it, the least that could have been done was to withdraw the Bill and present it later in the form in which the council would like it to be. It is treating the House with less than normal courtesy and respect to deal with it in this way.

    My second reservation concerns whether the measure will work. If I thought it would work, I would support it, but I have serious doubts about it. My first doubt concerns the 60 individuals who are called the multi-purpose inspectorate. Apart from the fact that all my instincts tell me that an expression like "the multi-purpose inspectorate" ought to be thrown out of the window and that we should start again with common sense English, I find it hard to see how this system will work.

    The hon. Member for Westminster, North, who is sponsoring the Bill, said that there would be a means of identification. I understand that the inspectors will have badges. For some purposes they will not wear badges because when they are inspecting street trading it is better that they come upon the scene unannounced and then identify themselves. I do not know the background; there may or may not be good reasons for that. But if they are going to various parts of Westminster looking for litter louts, they will put on a badge. I question whether this is good enough. I question whether the process of approaching an individual and telling him that he must pay a penalty would work. If the individual does not pay the penalty, he is liable to be charged with a criminal offence, if I understand the system corectly. That is quite serious. I am not sure that a multi-purpose inspectorate, not easily identifiable and getting into a very sensitive area indeed, will be in a position to enforce this in a satisfactory way.

    We are told that the inspectorate will consist, at least partly, of former police officers and that they will have had experience of dealing with these matters. But what about the others? It is one thing to visit a street stall and see whether all the traders are licensed by the city council. That is a straightforward process and should be easily understood, and street traders are aware of a local authority's powers in this respect. It is quite another matter to approach an individual in the street and, possibly after attempted conciliation, such as saying, "Why do you not pick that up, otherwise you are for it?", to deal with the matter in what could be a difficult situation. People will not be particularly amenable to being reprimanded. The majority may be, but some will not. I wonder whether the inspectors will be able to do this job properly unless they can be easily identified.

    I wonder whether the hon. Gentleman would disqualify those who currently do the valuable job of traffic warden because of the problems that he has just mentioned.

    Not at all; the position of traffic wardens is entirely different. Traffic wardens are easily identified. They wear a uniform and they have one function only— to be traffic wardens. Secondly, they are concerned with where vehicles are parked. They are not obliged to get a name and address from an individual. Their job is to slap a parking ticket on a vehicle. I appreciate that sometimes they may have a bit of an altercation with a motorist who arrives as the parking ticket is being put on the car. Nevertheless, their job is to identify the motor car, not the driver. That comes later.

    The hon. Gentleman must admit that traffic wardens take part in traffic management in the metropolis, and their background is not that of the police. They are ordinary citizens who have been trained. Surely the inspectors which my hon. Friend the Member for Westminster, North (Mr. Wheeler) mentioned would be similarly trained and would probably have a similar background.

    I understand what the hon. Gentleman is saying, but I believe that he is missing the point. When traffic wardens are carrying out one of the other functions, such as acting on point duty, their job is still to point cars in particular directions and give signals. They are dealing essentially with vehicles. That is rather different from approaching an individual and saying, "You have committed an offence and I am going to give you this ticket; if you do not pay up, you will have committed a criminal offence." It seems to me that the likelihood of altercations, confrontations and arguments is much greater. That is why I issue a warning that it may not work quite so easily. If someone approaches an individual and tells him to pick up litter that he has dropped, he may get a rather unparliamentary reply. Then the individual may say, "Anyway, who are you?" The reply will be, "I am a multi-purpose inspector." I leave hon. Members to judge how that will develop.

    The inspectors may be issued with smart uniforms, will look as if they represent officialdom and will be given the status and backing necessary for them to do their job. All I am saying is that I do not see the system working easily on the basis of the information that we have had so far.

    There are other difficulties. What happens if people throw litter from motor cars? One often sees a motor car going along and out comes a hit of paper, a cigarette packet, or whatever. It is not clear to me whether the multi-purpose inspectors will have the power to record the registration number of the vehicle and then do something about it or whether they can simply use their powers, and get the name and address of the individual so as to issue the necessary ticket. I suspect from the way in which the Bill has been drafted that motorists will be exempt from this.

    My third reservation is this. Surely what we are doing in effect, although in fact we are not creating a new offence — and I understand that — is creating a new offence, because, although the offence of littering is on the statute hook, it is not being enforced at the moment. So that there will be one part of the country, the city of Westminster, in which throwing down a cigarette paper, a packet or a sweet paper will now be an offence and something will be done about it. To that extent, the city of Westminster will be quite different from any other part of the country, or indeed any other part of London. I am reluctant to go along with having an offence which will be treated quite differently in one part of the country as compared with another. It will lead to misunderstanding and uncertainty, quite apart from the obvious problem of what happens on the boundary between Westminster and Kensington or Westminster and Camden and how far along Westbourne Park road an individual was when he threw down the litter. These are obvious problems, and perhaps the inspectors will steer clear of the boundary areas.

    Far more likely to cause difficulties is the positon of visitors to London from other parts of the country, for they will suddenly find themselves becoming well nigh criminals for doing something which at home they certainly should not do — and I do not condone their behaviour—but for which there is no penalty. I question whether we should change the law in this respect in one part of the country only. I believe that this is a point of principle to which we should address ourselves. If we had a Government measure which sought to strengthen anti-litter legislation on a national basis, we would have the benefit of everybody in the country knowing what was going on. There would be a uniformity of enforcement procedures throughout the country and people would not be able to say that they thought they were in Kensington rather than Westminster, that the law is unfair and they will not give their names and addresses.

    These are real problems because we are dealing with a problem on the street, not with a ticket on a motor car. This is a pretty sensitive matter. In practice, the multipurpose inspectors will obviously steer clear of the difficulties. They would not be human if they did not, knowing that they have no powers to back up what they are doing. There will be no police officers to help them because police officers cannot get involved in this, as we understand from the amendments.

    Therefore, I envisage enormous difficulties. My original instinct was to welcome this legislation, but the more I think about it the greater become my misgivings about whether it will be workable. It is a question not of the aim or the motive but of whether it is workable.

    I cannot help feeling that the right approach would be a national one in terms of both uniformity of enforcement of the legislation and massive national publicity. I agree that Westminster has gone in for publicity, and I am sure that at a local level that has been beneficial; and it does have more litter bins than other local authorities. But I do not think that this matter should be left to one local authority. We are seeking to influence people's attitudes, to make people more conscious of pollution and of the harm that they are doing by throwing their rubbish down rather than putting it in rubbish bins and receptacles. Therefore, we need a national approach and a national education campaign.

    Furthermore, I should like to see most packaging material and most of the plastic bags issued by department stores carrying an exhortation to the individual to put the item in a rubbish bin and not to dispose of it in the street. If we had a national campaign or effort, we might begin to get somewhere and, in that process, we could consider what sorts of sanctions there ought to be against individuals who ignore them and how they should be enforced.

    I am sorry that I cannot give the measure my enthusiastic blessing because we are all aware how difficult the problem is. Although we in Britain are worse at littering our streets than people in some other countries, it is clearly not just a British problem. I should like to say that it is a wonderful idea and to give it an enthusiastic welcome, but it is not workable. It has not been thought through properly and, therefore, I felt obliged to express my reservations this evening.

    8.41 pm

    Before the debate closes, I should like to say that, while the House recognises the sincerity of the objections raised by the hon. Member for Battersea (Mr. Dubs), they seem to be ones that could be overcome. The city of Westminster is to be congratulated warmly on its initiative. On behalf of residents in the royal borough of Kensington and Chelsea, I can say with certainty that we would welcome similar legislation, whether by way of a private Bill or by national legislation.

    8.42 pm

    The Parliamentary Under-Secretary of State for the Home Department
    (Mr. Douglas Hogg)

    It may be helpful if I give a brief summary of the Government's attitude to the Bill, the main features of which have been so admirably and lucidly described by my hon. Friend the Member for Westminster, North (Mr. Wheeler). Subject to certain proposed amendments, to which I will refer shortly, the Government welcome the Bill and hope that it will receive a Second Reading. As has been said so notably by my hon. Friend the Member for Westminster North, litter anywhere, especially in our capital city, is an increasing and unsightly characteristic of our streets. It can also constitute a threat to public health.

    For that reason the Government have taken or have sponsored a number of policy inititiatives, of which I mention two. We currently allocate some £500,000 a year through the Keep Britain Tidy group to a number of local initiatives undertaken by local authorities, schools and voluntary organisations. In July last year my right hon. Friend the Secretary of State for the Environment launched the United Kingdom 2000 scheme under the chairmanship of Richard Branson. The objective was to increase the quality and quantity of work being done to improve the environment. I am glad to say that over 200 projects have been started involving some 4,200 volunteers. For the current financial year we have increased our funding for this project to around £1·5 million.

    It has been asked whether the Government have some national scheme in mind similar or analogous to the scheme proposed in the Bill. We do not have such a general power, nor do we propose to introduce enabling legislation of the sort advocated by the hon. Member for Woolwich (Mr. Cartwright). On the other hand, it is quite clear that if the Bill receives the assent of the House and is put into practice, it will provide an interesting experiment on which we can form a judgment as to the viability of future legislation.

    The principal Act is the Litter Act 1983. Hon. Members might like to know that each year about 1,600 successful prosecutions are brought under the 1983 Act and that the average fine currently being imposed is around £32. However, as has been stressed by a number of hon. Members, invoking and enforcing the 1983 Act is a complex and, to be fair, expensive procedure. The Bill is designed to achieve a more effective and simpler method of enforcement.

    We support the objectives of the Bill and, subject to certain changes being agreed in Committee, we shall support the passage of the Bill. The changes that we seek have been clearly outlined by my hon. Friend the Member for Westminster, North and I am glad to hear that he and the council agree to them. There are two changes. First, we believe that fines levied under the Bill should go into the Consolidated Fund and not into local authority funds. This represents a long-standing principle which was given statutory force in the Justices of the Peace Act 1949. The principle is that where a local authority levies a fine that money goes not into its own resources but into central Government funds.

    There is an important principle which underpins that proposition. It is wrong in principle to allow an authority to enforce a law if it has a pecuniary interest in the manner in which it is enforced or the extent to which it is enforced. For that reason the Government wish to see the Bill amended in the way that I have outlined. If the House gives a Second Reading to the Bill, it will then have the opportunity of considering the Ways and Means resolution proposed in the name of my right hon. Friend the Financial Secretary. If that is approved, the Committee would have the opportunity to make the amendments that I have described.

    The second group of amendments relates to the power of police officers. The Government would be reluctant to see the Bill used as a means of imposing an additional burden on police officers. Those hon. Members who represent the capital well know the burdens that police officers of the Metropolitan force already carry. Therefore, the House will understand my reluctance to see the Bill being a vehicle for additional burdens being imposed on the Metropolitan force. Consequently, the Government would wish to see the Bill amended so as to delete from it those parts of it which empower a police constable to issue a notice. That will require an amendment to clause 4. It will remain possible for a police officer to institute proceedings under the 1983 Act if he thinks that that is appropriate.

    Will the Minister tell the House when the Metropolitan police were first asked their opinion on the provisions in the Bill, unamended, as it is before us tonight, because they should have been consulted at a much earlier stage? In terms of discussions with the police, who took the initiative?

    I am sorry that I have to disappoint the hon. Member in that I am not able to give him the answer to the detailed question that he has raised. He should more properly pursue that with the chairman of the Westminster city council.

    The second group of amendments I referred to includes clause 9 which, as presently drafted, would impose additional duties on the police service. Clause 9 as drafted makes it an offence for somebody to refuse to give his name and address to an authorised officer of the local authority. We wish to see that provision deleted. If it remains in the Bill, it is bound to result in additional work being imposed upon the police service, which is not something that I wish to see happen.

    I know that my hon. Friend the Member for Westminster, North has given careful consideration to the changes that the Government wish to see and I know too that he has discussed the Bill with the council. He has indicated that the three changes I have mentioned in the course of my remarks are acceptable both to himself and to the council. I am pleased about that. Subject to that understanding, the Government would wish to see the Bill receive a Second Reading and wish it well in its passage through Parliament.

    8.49 pm

    With the leave of the House, I shall reply to the debate.

    I am grateful to my hon. Friend the Under-Secretary of State for what he has said and I again confirm that the proposed amendments to be moved in Committee, which I discussed earlier, will be proceeded with. I am glad that he and I are of one mind on that matter.

    Clause 9(2), which I understand will be deleted, says that it will be an offence to refuse to give a name and address. On the assumption that the amendment is incorporated into the Bill, would it be an offence under any other legislation for anybody to give misleading information to one of the officials? In other words, if they give a false name and address, is that an offence?

    I can confirm that Clause 9(2) will be amended in Committee to remove the creation of an offence of failing to give a name and address. I cannot be precise on the other point the hon. Gentleman has raised. It is a matter to be answered in Committee. I hesitate to put myself in the role of the Attorney-General or anyone else, but it has always been my understanding in the enforcement of minor summary offences that it is for the enforcement officer, whoever that may be, to use his or her best endeavours to ascertain a proper name and address for the service of any document or process, be it a fixed ticket or a summons. As I speak I know of no criminal offence that would arise under the criminal law of the realm should a person, whether a citizen of the United Kingdom or of any other country visiting the United Kingdom, give a false name and address. I speak unaided and without the benefit of lawyers.

    The hon. Member for Newham, North-West (Mr. Banks) quite fairly and properly raised a number of issues about principles. All of us in the House are the guardians of liberty. We are concerned about the interaction between enforcement agencies and citizens using the streets and the public highways wherever that may be, in the city of Westminter or elsewhere. As I said earlier, the city of Westminster proposes to train its staff who will form part of the multi-agency inspectorate. That is a cumbersome title but it is intended to include those officials of the council who are concerned with environmental enforcement, street trading enforcement and other matters for which the council has responsibility in addition to its new role. Those officials will be properly trained in the discharge of that duty. They will, of course, be equipped with proper identification of a sort that will leave the citizen in no doubt as to their status and credibility.

    Whether they will wear a uniform is a matter for the council to decide on some future occasion in conjunction with its officials. However, I do not think that that is a matter of great principle.

    The hon. Member for Newham, North-West referred also to who might be supporting the Bill. I have a copy of a letter from the London Boroughs Association dated 3 February 1987 in which it confirms that it is supporting Westminster city council's endeavours to achieve this legislation. It goes on to say that it has written in appropriate terms to the Home Office and to the LBA's parliamentary panel in the House and in the House of Lords.

    I understand that as part of the wide consultative exercise in which Westminster city council engaged it received encouragement, if not support, from the London boroughs of Tower Hamlets, Waltham Forest, Southwark, and Camden.

    I can put at rest the mind of the hon. Member for Newham, North-West about consultation with the police. He is quite right to raise that matter. I can say that the commissioner of police was consulted at the beginning when the Bill was being proposed by the city council. He and his officers were able to spend some time considering the matter. Indeed, I had a discussion with the deputy assistant commissioner of police responsible for the city of Westminster district and I know that he and others had a most fulsome exchange with officials of Westminster city council and its leader. It is true that the police did have reservations about their involvement in this process. That matter, as the House knows, has been properly dealt with.

    The hon. Gentleman also asked whether the unions had been consulted at Westminster city council. I can tell him that the offices which form part of the multi-agency inspectorate are fully aware of the measure and have been consulted. As far as I am aware, they, as a group, raised no objection to their involvement in the enforcement of the legislation. I can give an assurance to the hon. Gentleman and the House that, although Westminster city council is a pioneer in the privatisation of its services because it wishes to obtain value for money for its ratepayers and the most effective services, it is not intending to contract out those employees of the council who are involved in the inspectorial duties to do with environmental health, street trading or enforcement of the Bill.

    My hon. Friend the Member for Bournemouth, East (Mr. Atkinson) welcomed the Bill and I am grateful for his robust support. He understands the problems that large numbers of visitors can cause to an important town that is popular with tourists from both home and overseas.

    The hon. Member for Woolwich (Mr. Cartwright) was also robust in his support for the Bill. He said that the problem of litter is getting worse and he commended Westminster city council's initiative in bringing this measure before the House. He understood the extent of the difficulty since his own borough is a mecca for visitors and suffers from the problems of litter. I am glad that he was able to give such fulsome support to the measure.

    The hon. Member for Battersea (Mr. Dubs) raised a number of points He inquired about the measure of support from councils in the country for Westminster city council's proposals. I can tell him from the information given to me that some 112 local authorities expressed support—I use those words carefully—for the measure we are considering. A further 162 local authorities expressed their interest in the proposal. That is a remarkable record of consultation and betokens the energy displayed by the city council in its efforts to attract the widest possible interest in its endeavours.

    The hon. Member for Battersea complained about the three amendments to which I referred earlier and said that the House had not received proper notice. But the purpose of consultation, particularly with a measure of this kind, is to ascertain the degree of support that it has, whether from the police, the Home Office or any other interested party, and to listen to representations that are made and amend the Bill accordingly. The council did just that. I t should be commended not only for consulting but for heeding the advice that it received.

    But surely the hon. Gentleman accepts that amendments such as this reveal that Westminster city council did riot consult properly before drafting the Bill. My hon. Friend the Member for Battersea is right. It may not be unprecedented, but it is unusual for a great hole to be kicked in a Bill on Second Reading. This clearly reveals that, for all the hon. Gentleman's loyal protestations, Westminster did not consult as it should have done.

    I reject the hon. Gentleman's assertion that the consultation was ineffective. The hon. Gentleman has been here long enough to know that amendments to Bills arise with remarkable speed and at extraordinary hours of the night, according to the needs and interests of this House and its Members. I do not think there is a great issue of principle here.

    I welcome the fact that Westminster council went in for consultation. My complaint is that Westminster council should have given us the Bill when the consultation was complete rather than have presented us with a Bill which, we are told, is defective in a number of respects. That seems to be the wrong way to go about it, and it means that we do not yet have before us a Bill representing Westminster council's intentions.

    Surely it is relatively easy to scan such a short Bill and the amendments. There is no great difficulty here. This is not a Bill of several hundred pages with dozens of clauses but a Bill of two or three pages with only a handful of clauses. I am sure that the hon. Gentleman understands that.

    The hon. Member for Battersea went on to ask whether the Bill would work. The litter legislation that the House passed in the 1950s has had a very chequered career as a piece of criminal legislation and has resulted in relatively few prosecutions in England and Wales. As my hon. Friend the Under-Secretary of State—the hon. Member for Grantham (Mr. Hogg) —said, there have been about 1,600 prosecutions a year, which is a very small number. That reflects the difficulty of making the Act work. Westminster city council's proposals offer the reasonable expectation of a more effective form of enforcement. That is welcomed by a number of bodies outside the political machine with an interest in the environment. Therefore —and I believe that many hon. Members agree—it is worth running an experiment in the City of Westminster to see what progress can be made.

    The hon. Member for Battersea suggested fairly that the Bill will create different enforcement practices as between one part of London and another as well as between other parts of the United Kingdom, and of course that must be true. However, if Westminster's experiment is found to be successful, no doubt other local authorities —for instance, the borough of Bournemouth—will exert pressure because they will want to try such an experiment in their districts. At that stage, the local authority associations may well persuade the Home Office to introduce enabling legislation to cover the country as a whole.

    I am grateful for the encouragement that my hon. Friend the Member for Kensington (Sir B. Rhys Williams) gave in his short and helpful intervention. I know that his local authority will be among those watching Westminster's experiment with great interest. I am grateful to my hon. Friend the Under-Secretary of State for his remarks and for his wholehearted support of the Bill, subject to the amendments to be properly moved in Committee.

    Question put and agreed to.

    Bill accordingly read a Second time and committed.

    Ways And Means

    City Of Westminster


    That, for the purposes of any Act resulting from the City of Westminster Bill, it is expedient to authorise payments into the Consolidated Fund.—[Mr. Douglas Hogg.]

    Financial Services

    Question again proposed.

    9.4 pm

    We have moved downstream from the city of Westminster to the City of London, where the problems are perhaps graver than those of litter bugs and where there are miscreants on whom we seek to impose more substantial fines and penalties than were the subject of our earlier discussions.

    I reiterate my warm welcome for the orders. As I said, this legislation and the delegation order are important in giving to the Securities and Investments Board considerable powers and authority of regulation and investigation in the City. The financial services sector is of pre-eminent importance to the economy, deploying more than 1 million people and contributing more than £7·5 billion in overseas earnings. This legislation, of which the orders are a subsidiary part, is effectively the most comprehensive overhaul of investor protection and legislation for 40 years. The House and the public should be aware of the magnitude of what the Government are doing—for the first time, both establishing and delegating to a body of this importance and stature significant responsibilities in terms of future regulation of the City.

    It is appropriate to remind my hon. and learned Friend the Under-Secretary of State and hon. Members that the principal object of the legislation and of the orders is to enhance investor protection. Our principal concern must be to improve the lot of investors. We are not, I hope, giving powers to a body that will be an apologist for the City or a greaser of wheels. That is not our principal objective, although obviously we hope that this body will not stand in the way of an efficient, profitable and vibrant City, especially the investment industries.

    I should like to ask my hon. and learned Friend the Minister a number of specific questions which, although I have paid tribute to the legislation, are of some concern. I note from the orders that a number of important powers are being transferred. As I understand it, a number of the powers which were added in Committee to the SIB will be delegated under the order. I am interested in those powers that are not being transferred, which my right hon. Friend the Secretary of State has deemed appropriate to keep unto himself. He is empowered under the relevant section of the Financial Services Act 1986 to delegate to the SIB a wide range of responsibilities. In fact, he has chosen to delegate the majority of those powers, but it appears that some significant ones have not been delegated, and I should like to ask why.

    Why, for example, is the power to withdraw authorisation not being delegated to the SIB? It is nonsense that the SIB will be responsible for granting certain businesses authorisation if they seek it from the SIB, but the SIB will not be empowered to take that authorisation away—that power will still be vested in the Secretary of State. The SIB will be responsible for overseeing the self-regulating bodies which, in turn, will grant authorisation through membership to institutions, yet the SIB will not in those instances be able to withdraw authorisation. That is a fairly minimalist approach. Perhaps, if we intend the SIB to be taken seriously in the City, we should have been a bit more courageous in the teeth and the power that we are giving to it.

    It seems rather odd that the SIB will not be allowed to make statements on misconduct in the City. Why not? The watchdog body, the SIB, is responsible for ensuring, on a day-to-day basis, that people are conducting good business. If it finds that they are not, that there are misdemeanours or possible criminal activity, why should it be prevented from making statements about that misconduct? I want it to make statements about misconduct, and I want it to be respected and fair. It should be able to say, in the City and publicly, that certain activities are unacceptable and that they need further investigation. It should be able to pin the blame, where it is justified, on certain institutions and persons, be they authorised or not. Why is the power to make statements on misconduct reserved to the Secretary of State? It could have been transferred to the SIB. The Minister has deliberately chosen not to do so.

    Why are the powers on injunctions not being transferred to the SIB? It will he able to investigate, authorise and bar businesses. It will be able to grant authorisation and set up a long and detailed rule book on the way that the City should operate, yet when it discovers that something is going wrong it will not only be unable to withdraw authorisation or make a statement on misconduct, it will be unable to take out an injunction to prevent that misbehaviour. The power to ask a court for an injunction rests and remains with the Secretary of State. That would have been a reasonable power to give to the SIB if we are sufficiently satisfied that it has the personnel, rules, authority and statutory identity to he able to do the job that Parliament is setting for it.

    I see why, by way of contrast, my hon. and learned Friend the Minister has said that the rules on indemnity should not be transferred to the SIB. It is wholly proper that indemnity from the civil law should not be delegated to any body other than the Government. Rightly, my hon. and learned Friend and the Government have kept that power for the Secretary of State.

    In all other respects we are adopting a softly-softly approach, but we could have gone further in giving the SI B the teeth to do the job that we envisage for it.

    Those matters relate to the powers that will not be transferred. I ask my hon. and learned Friend why some of the powers that will be transferred are to be exercised concurrently with the Secretary of State. In other words, the order is saying that some of the orders that the Government give or delegate to the SIB are powers that both the Secretary of State and the SIB will be able to exercise. Why is it necessary to have a concurrent exercise of power for injunctions against unauthorised people? It is strange that under the proposed order the SIB will not be able to take out an injunction to stop an authorised institution doing something but it will be able to take out an injunction against unauthorised people doing something that they should not. It seems an arbitrary and questionable decision to provide a distinction in this case. The SIB should have the power of injunction in authorised and unauthorised cases. I do not see why, in the case of unauthorised concerns, it has been deemed permissible to give that power concurrently to the SIB yet not in the case of authorised businesses.

    I turn to the delegation of investigations. It is proposed that the power to investigate certain misconduct will be exercised by the SIB. In Committee that power was envisaged and extended. The SIB will be able to exercise that power currently with the Secretary of State.

    Who is to take the lead? Where will the responsibility lie, in certain instances, to investigate suspicious cases? Will certain activities be the responsibility of the Department and others the responsibility of the SIB? Will it be the body to which the complaint is made in the first instance that will take up an investigation?

    At some stage, we shall need some rather clearer guidelines if there are not to be gaps in or, conversely, overlapping of responsibility and an explanation of why such a concurrent exercise of power is deemed to be necessary.

    The SIB will take on significant powers. I have three points of advice. First, I urge it to think ahead and not respond only to past events when framing its rules or making any statements on matters concerning investor protection and the running of investor markets. Secondly, I advise it not to be nobbled. It is easy to be nobbled in the City. The City and many investment institutions have a way of making people who are not part of its inner circle believe that they do not understand the principles or mechanics of their operation. In fact, the City is by no means invulnerable—nor should it be invulnerable—to questioning and supervision. I hope that the SIB will continue to have the independence and authority that it has already demonstrated and will not move into the cosy club of the City and be nobbled by City opinion and City experience.

    Thirdly, the SIB must remember who sent it there. Parliament did. It is not the creature of the City, set up either to preserve a closed shop or to establish the smooth running of the City. It is there principally to do the job of investor protection. In my judgment, the relationship between the SIB, SROs and the many institutions under them should be slightly uncomfortable at all times. They should not get on too easily and too well. They should be slightly fearful and respectful. In striking the right balance between co-operation, in which the SIB must engage, and the vigorous pursuit of control and supervision, they should err on the side of recognising the principle of investor protection as paramount.

    For those reasons, the debate and the orders are important. The orders are the culmination of a trilogy of important pieces of legislation that not only will transform the regulation of the City but will create a more vibrant, profitable and respectable City whose integrity and profitability will earn the respect of the world.

    9.17 pm

    I declare an interest as the non-executive chairman of Fraser Green Ltd, a firm of investment managers who are licensed dealers and who have applied for membership of the Investment Managers Regulatory Organisation. I also help to run courses teaching members of the Financial Intermediaries and Managers Brokers Regulatory Association their rules. I assure the House that it is in nobody's interest to make sure that the rules are difficult so that as many people as possible come to me for guidance. It is in everybody's interest that the rules are workable, that they are able to be understood by people in the investment world and that they are flexible enough to deal with changes as they occur.

    As Professor Jim Gower said, the most important point of the rules is that FIMBRA members should be able to carry them out. If the retail end of the market cannot accept the rules and finds that it cannot work to them, the whole edifice will come crashing down. The framework that is set out in the Financial Services Act 1986 is the right set of rules to give the best possible chance to all those involved in investment business to carry out their operations and, at the same time, to give the best chance of effective investor protection.

    I welcome the order and pay tribute to my hon. and learned Friend the Minister. When he took on his onerous task, he little saw the difficulties with the legislation that lay ahead. I would not mind betting that, had he seen the rocky road in front of him, he would have considered rejecting his position. He has gained the admiration and respect of those in the City and of hon. Members for the way in which he tackled the legislation.

    I must also pay tribute to my hon. Friend the Member for Chichester (Mr. Nelson). His speech was typical of the care and consideration that he has given to the legislation throughout its progress. I know that my hon. and learned Friend the Minister would agree that my hon. Friends the Members for Chichester and for Beaconsfield (Mr. Smith) — it is invidious to choose but two — made such constructive contributions in Committee that, through their own power of persuasion and depth of knowledge, they improved a Bill that has since become a workable, practical Act.

    Some unavoidable problems still remain. The bulk of the SIB's rules, for example, is unavoidable. Anyone confronted with that draft set of rules would be daunted by the task of reading through them—yet many people will have to do that if they are to adhhere to the rules properly. The legalistic language in the rules is extremely difficult, and it would be better if it were not quite so complicated. However, I see no alternative to the way in which the rules have been drafted. As my hon. and learned Friend the Minister said, they are merely the codification of best practice. They are not a couple of hundred pages of legislation or brand new rules to which people must adhere, but a catalogue of what they should be doing already, coupled with some extra requirements to ensure that they fit into the self-regulatory framework.

    Other remaining, unavoidable problems are the complicated formulae that are to be found from time to time in the rules, and the procedures through which many people will have to go. Some of the remaining problems are regrettable; happily, they are open to review in the future. One of them is the abolition of the requirement for professional indemnity insurance. I understand why that has been removed and many small businesses will be happy that that requirement has gone, because it reduces an extra cost for smaller businesses. I fully recognise that it has been replaced by the compensation scheme, which I believe is one of the most hopeful aspects of the legislation. It represents genuine investor protection. The fact that an investor is guaranteed his losses up to £48,000 out of £50,000 is a comfort that many investors wish had existed in the past.

    I regret the fact that the registration of individuals under the SIB's draft rules will not extend to those who deal with the public but do not have management authority. The registration of individuals, which is limited to principals, directors and partners, has not gone far enough. Many people deal directly with the public and they, too, should be registered and their qualifications for doing their jobs should be open to scrutiny.

    There could be stronger inspection and suspension regulations in cases in which those who inspect the finances of an organisation are not yet satisfied. I further regret the fact that foreign-owned branches are still not being properly controlled. They could still avoid full scrutiny. They should be required to deposit an amount equal to that required in the financial resource rules with a bank in the United Kingdom to make sure that there is no possibility of their failing to meet the requirements that they would have to meet were they part of a wholly United Kingdom group. However, I am sure that experience during the months and years ahead will show whether the rules must be tightened in that regard.

    I also regret that cold calling is still allowed in its present form and has been extended in some respects. I do not like cold calling when it is practised on me. It is an extremely annoying intrusion, especially when done by telephone. However, it is a well-established principle. Those in the investment industry who use cold calling have persuaded my hon. and learned Friend that the practice is necessary and not especially harmful and that through its use many who would not have been able to benefit from investment and savings have been able to enjoy the advantages of so doing. Therefore, I can understand why the rules are as they are. Against this background, I hope that there will he regular scrutiny of the experience of investors, of' the industry and of the public generally over the months and years ahead. If rules need to be tightened, I hope that the process will be put in hand quickly and effectively. When a new form of investment is created or when a new investment practice is conceived, I hope that the changes that flow from these developments will be carried out quickly and effectively so that loopholes are not allowed to continue for too long.

    There are certain regulations that I consider to be too harsh. I understand, however, that it is extremely difficult to get anything right in legislation of the sort that we are considering. It is clear that one is open to subjective judgment.

    Many small firms may find themselves defined as category 4 firms and therefore required to produce a minimum liquidity requirement that is more suited to that of a larger stockbroking firm. This will be unfortunate, but I am sure that the problem can he dealt with in time.

    I welcome the strong stand on polarisation that has been taken by my right hon. Friend the Secretary of State and by my hon. and learned Friend. I would hate the message to go from the Chamber to the other place that we do not feel firmly and strongly that we are introducing investor protection and not investment business protection. That is the basic principle and the pivot of the Act. We believe that the public should know with whom they are dealing and what they are buying. They should understand what they will get for their money and the risks that are involved in getting it, and any confusion of these principles must be eradicated by this measure. Many hon. Members have supported the principle of polarisation even though they have been subject to extremely strong lobbying and even though the basic Conservative philosophy would be to leave that which has been successful and which has not been proved to be abusive to continue as it is. In this instance we can see that the public need to be protected, and I am pleased that the banks in different ways are adjusting to their task. I do not see the likelihood of a strong battle for polarisation to he reversed, and I hope that wisdom will prevail in another place. I am sure that it will.

    The message from this Chamber is that what has been achieved on polarisation is for the benefit of the general public. It is not every piece of legislation that is so clear in its objectives.

    I welcome also the reduced costs for small firms. The Act was not intended to drum out of business the sole trader, and that should not have been its objective. That would have been anti-competitive and grossly unfair. It does not follow that a person who happens to work in a large firm is competent and that someone who works for himself is incompetent. However, if small traders in the investment world do not have the resources that are necessary to carry on with their business, they should not be in business. It is strange that many stockbrokers carp at the amount of capital that they are required to have to survive, yet would never consider the flotation of shares in another business unless it were vastly bigger. Businesses must have sufficient capital to be able to survive and sufficient liquidity and solvency to enable them to carry out their work effectively.

    On the other hand, there is no need for unnecessary costs that lead successful individuals towards insolvency. The reduction of costs that we have seen during the formulation of the draft rules by the SIB, the reduction of costs for those not handling clients' money and the withdrawing of the insistence on professional indemnity—although I hope that many firms will take that up voluntarily — is a constructive step in helping small businesses.

    When Opposition Members read the report of this debate in Hansard—they are certainly not here to listen to it — I hope that they will understand that we have arrived at the right framework for investment protection. The Securities Exchange Commission in America has said repeatedly that if it were to begin again it would choose the framework which my hon. and learned Friend has ferried so successfully through Parliament, in a measure that has been amended as a result of detailed consideration and consultation with all interested parties and right hon. and hon. Members. This is exactly the right framework, as it produces effective and qualified people to regulate those in investment.

    Order. I have given the hon. Gentleman much licence because of the technical nature of the matters with which we are dealing, but I remind him that we are not dealing with a Bill or an Act. We are dealing with a very limited order, which seems to have little to do with the point he is raising.

    I am most grateful, Mr. Deputy Speaker. If I may continue with my conclusion, I hope that you will forgive me for the enthusiasm of my speech because I have been unable before now to speak at length on this matter.

    Given the powers which have been granted to the SIB., and the fact that a child has now been born, I congratulate all of those concerned and say that this is the right framework. I am merely responding to points made by Opposition Members earlier. As long as this framework is shown to be flexible, it will serve extremely well not only the nation but those in the investment world.

    9.31 pm

    Like all my hon. Friends, I welcome this delegation order. I wish the greatest of good fortune to the SIB in the marathon task it has been given by this legislation. I utter the tiniest word of caution, following what was said earlier by my hon. Friend the Member for Crawley (Mr. Soames), who requested the Minister to—if I can paraphrase him —hasten slowly on the basis that we had better get it right rather than get it fast. It is difficult to disagree with that sentiment, but I remind the Minister that we are substantially behind the timetable upon which we embarked after the Second Reading of the Bill some 18 months ago when, although no specific date was given, the hope was expressed that it would be operational by the middle of 1987. That cannot now be the case.

    While I endorse the statement that we have to get it right, I hope the Minister will take on board that with the acceptance of this delegation order there should be a continuing sense of urgency. I put it no stronger than that. The rules of the SIB, which are now available to us, are opaque and complicated, but it is little short of a miracle that we have been able to produce in a relatively short time rules which had to be started from scratch. The rules are changed slightly from those proposed originally. Whether the Financil Services Act is seen as a protection for the investing public or a vehicle for regulating practitioners, there can be no question that the rules of the SIB are the test of the effectiveness of the new system.

    For that reason I express some concern that professional indemnity cover—a point referred to by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) — is no longer a requirement under the SIB rules. I have long taken the view that the existence of professional indemnity is of benefit to both the public and the intermediaries. I feel a sense of loss that this requirement is no longer part of the SIB rules.

    I recognise that professional indemnity cover must be paid for and some intermediaries will shed few tears over the fact that they are no longer required to effect it. But that is a rather short-sighted view. Here I should declare an interest, which I have declared on the many occasions that I have addressed the House on this subject, in that I am parliamentary adviser to the British Insurance Brokers Association, a trade association of some 4,000 member firms, of which approximately 3,000 could be categorised as small brokers. Yet there is no doubt that the BIBA is full of regret that the previous requirement for professional indemnity cover is no longer part of the SIB rules.

    Some people will say that the compensation fund is sufficient. But I would venture to question whether that is so. Let me pursue separately the two points of the cost to small intermediaries, in particular, and the fact that having a compensation fund makes it less necessary for us to have professional indemnity cover as a requirement.

    Many small intermediaries will contend that professional indemnity cover will be too costly at a time when many people are calling, successfully, it would seem, for a reduction in the costs to the small intermediary in particular. That overlooks the fact that the existence of a professional indemnity policy can sometimes represent the difference between a company staying in business and being sued out of existence. There may well be a powerful argument, particularly for small intermediaries, for requiring professional indemnity cover.

    From the investor's point of view, even if the company with which the investor entrusts his savings were to act fraudulently, professional indemnity underwriters have shown over the years that they will pay up in such circumstances, enabling——

    Order. I may not fully understand these matters, but I find it difficult to understand what this has to do with the delegation of the Secretary of State's responsibilities to this new body. Perhaps the hon. Gentleman will tell me to which part of the orders his remarks relate.

    If you are telling me, Mr. Deputy Speaker, that it is out of order to refer to the SIB rule book, which is part and parcel of the Secretary of State's decision to introduce the order, clearly I have wasted my time in waiting for the past four hours to be called. However, I respectfully suggest that that delegation——

    Order. I am at the hon. Gentleman's feet in these matters. If he honestly assures me that these are relevant matters, I shall accept his word.

    My powers of persuasion are clearly greater than I had expected. I was ready to make the case more extensively, but the fact that I am now permitted to continue will enable me, to your pleasure, Mr. Deputy Speaker, and to that of the House, to restrict my remarks to a shorter period than might have seemed necessary a few moments ago.

    In the event of a professional indemnity policy being in existence, even if there is an element of fraud, underwriters have shown over the years that they will pay up, thereby enabling the excess above the compensation fund limit to be recovered. That is clearly in the interests of investor protection.

    That brings me in turn to the compensation fund, which, again, is very much part of the rule book to which I have taken the liberty to refer. I welcome the existence of a compensation fund, but £48,000, although it sounds a good deal, is not a vast sum in 1987. Besides, if there is no professional indemnity protection, more claims are likely to be lodged against that compensation fund.

    If my prediction in that respect is correct, this welcome compensation fund may soon come under some strain. I do not know why, if professional indemnity were thought necessary by the SIB before, it is not considered necessary now. I cannot understand why all mention of it is now absent and I cannot understand what has changed to persuade the SIB that it is no longer necessary.

    But again, thinking in terms of the SIB rule book and the effect that that would have on not only that institution but the self-regulatory organisations to which the Minister referred, if the SIB intimates that it no longer requires professional indemnity insurance, it follows that it will be acutely difficult for any of the SROs to require professional indemnity cover under their rules.

    FIMBRA, to which my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) referred, clearly intended, and still intends, to require professional indemnity to be affected, but there is no way that I can see that that requirement could be maintained if the SIB withdrew from its earlier suggestion that it should be effected.

    Let me point out to my hon. and learned Friend the Minister the effect on the Insurance Brokers Registration Council, a body that arguably runs in parallel in investor protection with the SIB. Since 1980, professional indemnity cover has been required before an intermediary can register as an insurance broker under the legislation. Part of the requirement to enable an intermediary to do so is the possession of a professional indemnity policy. If the SIB drops the requirement, what will be the effect? I venture to suggest that a great many companies involved in non-life assurance business would be inclined to deregister. What price consumer protection then?

    Let me try to summarise the case. In my view, professional indemnity insurance has, and must have, a place in any total regulatory regime. As with the Insurance Brokers Registration Council, it must be viewed in conjuction with capital adequacy rules and a compensation fund. Without a professional indemnity requirement, a gap, through which consumer protection may be lost, still exists.

    I accept that professional indemnity insurance has a cost attached to it. However, I would argue that the cost is borne by the firm of intermediaries, and will bear a direct relation to the claims record of that firm. I raise that point to underline that, if there is no record of fraud or negligence, the cost in many cases will be quite reasonable. That compares equitable with the proposed compensation fund, where the cost w ill he borne by every firm other than the one that has caused the problem. Secondly, the amount of contribution to a compensation fund required, and thus the costs incurred, will increase if PI insurance is not required, and the cost of PI may therefore not outweigh the increased cost of contribution to a compensation fund.

    I apologise for having concentrated almost exclusively on what may seem to many to he a narrow point. I hope that, if I have done nothing else, I have at least underlined to the House the importance that I attach to it, as do a great many other people. I hope that a message will go out from the House that, while welcoming the SIB, supporting the delegation order and wishing that body the best of good fortune, we feel that there would be some advantage in reconsidering its decision to drop its previous requirement that PI cover should be effected.

    9.42 pm

    When we started out on the Financial Services Bill, I think that all of us on the Standing Committee, whatever our party, had certain specific objectives. One was to ensure, first and foremost, that investors were properly protected. The second was to establish a fair market in which there was a level playing field, and in which all the players were at least as equal as we could make them. Our third objective was that regulation should he achieved at reasonable cost, and that it should be flexible in itself. Our final objective was that any form of regulation that we proposed should not impede the proper development of the market, and its future expansion for the prosperity of the nation as a whole.

    However, we perhaps little realised when we embarked upon the legislation the extraordinary pressures that would be brought to bear on us from all sectors and all sides of the market, and the learning process that many of us would have to go through. I pay tribute to my hon. and learned Friend the Under-Secretary of State for Trade and Industry for having achieved these objectives and for the extraordinarily flexible way in which he has dealt with the problems. We are all greatly in his debt regarding the activities to date of the Securities and Investments Board.

    As for flexibility, it is essential that the market should be allowed to develop new products and to deal with new products. It would be tragic if today we created a precedent that set the SIB rules in tablets of stone for all time. That is not our intention, nor is it the intention of the SIB. It is important that the message should go out that all hon. Members regard the development of a prosperous and thriving market as vital and that it should be possible to incorporate future developments.

    I am particularly interested in the development of a unitised property market. I hope that it will be possible to accommodate it within the SIB rules and that nothing we do today will impede the development of that or similar markets.

    As for the level playing field, it is vital that either old or new products should not have an unfair advantage over other products. Both the current and future regulations should be as fair as possible to companies that offer different products. We have gone a long way down that road. It has been a difficult process and there has been a good deal of controversy. I am not convinced that we have gone as far as we could over the disclosure of expenses on with-profits policies. I understand the difficulties, but I hope that the SIB and the Department will continue to think about the problem and that they will introduce practical proposals.

    On cost, I am pleased that it has been possible to reduce the cost of regulation for smaller firms. In the early days of the legislation there were many scare stories in the popular press and in the financial press about cost. It was feared that smaller firms would be driven out of business. Very few people now think that that is so, even though the costs are so high.

    One hopes that it will be possible to reduce the costs even further. Nevertheless, there have been developments in the market, and some of the larger elements in the industry have supported some of the smaller elements. I hope that that process will continue so that the establishment of small firms is not inhibited. They can contribute to variety in the market and to the range of advice that can be given to potential investors.

    Furthermore, the SIB must be seen to be fair. It must clamp down on abuses, wherever they arise. It is no use passing legislation if people are able to get away with practices that all of us would regard as reprehensible. There has been quite a lot of that in the recent past. We hope that it will not arise in the future.

    We should all support the actions of the SIB and the SROs in policing this legislation. I hope that none of us will be backward in supporting those actions as and when necessary. I have been pleased to see the firm line that the SIB has taken on polarisation. That was the first big test of the resolve of the SIB and of this House in the face of immense pressure from the big battalions of the banks and building societies, who wanted to be a case apart.

    The banks said that the friendly neighbourhood bank manger was able to speak to his clients quite differently from the way sharp insurance salemen would talk to their so-called clients. The banks are thrusting, aggressive commercial organisations and are quite different from the friendly old banks that we were used to in the past, and the new market players are also quite different.

    Today's bank managers are motivated to achieve results for a financial conglomorate. Sadly but truly, they cannot be relied upon to be totally impartial because the pressures on them are far too great. It is right that they should be subject to exactly the same rules as everybody else in this market. There can be no exceptions. They must decide whether they can give impartial advice to the public or sell their own products. The two are not compatible and cannot be conjoined.

    The message should go out from this place to another place and elsewhere that we will not be moved. Despite all the insinuations that we will be moved, polarisation is an essential part of these proposals and cannot be removed without destroying the legislation that we have strived so hard to put into place.

    9.47 pm

    The Parliamentary Under-Secretary of State for Trade and Industry
    (Mr. Michael Howard)

    This has been a most interesting debate, characterised by thoughtful and constructive contributions from my hon. Friends which has marked this legislation from the outset. I say that not in any sense of undue controversy in relation to the hon. Member for Livingston (Mr. Cook). I am grateful for the kind remarks of my hon. Friends, and I pay tribute to the part played by my hon. Friends in Committee in the formulation of this legislation.

    The hon. Member for Livingston suggested that if we were starting again we would do it differently. I reject that assertion unhesitatingly and unqualifiedly. That suggestion springs from a profoundly mistaken view which the hon. Gentleman and some of his hon. Friends have held, or pretended to hold, about the legislation from its commencement — that it is a soft option or halfway house between statutory regulation, which they purport to see as tough and fierce, and unmitagated self-regulation, which they rightly see as being more of an easy option.

    This legislation was not put on the statute book as an easy or soft option. It was formulated in the way in which it was because it represents the most effective way of regulating financial markets, and it incorporates a flexibility and an ability to respond quickly to developments in the market place which a fully statutory system would not have done.

    Is the Minister saying that, if he could transport himself back two years and drafted the Bill afresh, he would still say nothing in that Bill about the Takeover Panel?

    Unhesitatingly. The Takeover Panel is under review. We may before too long learn more about improvements which can be made in the operation of the Takeover Panel. But it by no means follows that taking a statutory approach necessarily improves the way in which the provisions regulate the markets with which they are concerned.

    The other point about the hon. Gentleman's speech which ties in with this relates to resources. He talked about the resources which are available to the Securities and Exchange Commission in the United States. The SEC has been bedevilled by endemic complaints of lack of resources. Only recently its chairman asked for an increase of a third in his budget. It is absurd to suggest that putting such a body in the public sector would assist in making resources available for it to do its job properly. It is another of the fundamental misapprehensions which Opposition Members have had about the legislation from the outset.

    Does not my hon. and learned Friend also agree that the point the hon. Member for Livingston (Mr. Cook) was making was that more resources will find more fraud? In fact, in the Boesky case it was a tip-off to Merrill Lynch that brought about the disclosures. No amount of money in the SEC would have opened up that can of worms.

    I prefer not to comment on individual cases, tempting though it is, but the point underlying my hon. Friend's intervention is undoubtedly valid.

    My hon. Friend the Member for Crawley (Mr. Soames) urged caution about the timetable and raised issues which he said are not yet fully resolved. In answering him, I would very much pray in aid the observations of my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), who rightly pointed to the need to get the system in being as soon as we can. I am not sure that there has been a slippage. I think the phrase we used when the legislation was under consideration was that we hoped to get the system in place in the second half of this year. We now say by the end of the year; that comes within the second half of the year. I hope that the main provisions will be in place by then.

    We must be on our guard against falling into the trap of allowing the best to become the enemy of the good. It is important that the issues raised by my hon. Friend the Member for Crawley should be resolved, and I am confident that they will be. We must try to get them right. But ordinary savers and ordinary investors should have the right to compensation if they lose money because of someone's misconduct, and they should have that right as soon as possible. That is an important factor to be borne in mind.

    My hon. Friend the Member for Chichester (Mr. Nelson) raised several points springing from the deep concern which he has displayed on the legislation from the outset and from the important part which he has played in shaping it. He asked why a number of functions have not been transferred. I hesitate to say this, but there may have been a tinge of misunderstanding at the bottom of the points which he raised because the powers to which he referred will he transferred in nearly all cases.

    The limitations on their transfer are narrow and somewhat technical. For example, the power to withdraw the authorisation to which he referred is reserved to the Secretary of State only when the grounds for doing so are a contravention of a reciprocity notice issued by the Secretary of State. The power to issue reprimands is reserved only when misconduct relates to business at Lloyd's because of the separate arrangements being made for regulating Lloyd's. The power to seek injunctions is reserved only when the contravention in question is a contravention of the provisions on the promotion of foreign insurance contracts. I hope that those observations will reassure my hon. Friend about the concern which he expressed.

    My hon. Friend also asked why some matters were still concurrent in relation to the SIB and the Secretary of State. That is of importance in the early stages of the system while the SIB begins the task of exercising its powers, and not necessarily something which is to be regarded as a permanent feature of the system. We do not anticipate that it will lead to problems about who should take the lead in the specific difficulties to which my hon. Friend referred. There will be close co-operation between the Secretary of State and the SIB on these matters, and I suspect that in practice it will largely depend on to whom the information leading to the action is given. I do not expect this to give rise to any difficulty.

    I hope also that, in the light of what I have said, my hon. Friend will acquit us of any half-heartedness in our desire to see the SIB playing its prominent role with the full force and powers which all of us who have been concerned with this legislation have always had in mind.

    My hon. Friend the Member for Richmond and Barnes made a number of points. He referred to foreign-owned businesses. They will of course be subject to the rules, including the financial resources rules, and in appropriate cases where it is necessary to protect investors the SIB will be able to require a business to keep assets in the United Kingdom.

    My hon. Friend raised a number of other points on the rules, some of which he said were too harsh and some not harsh enough. One of the great advantages of the system, largely missed by those who keep talking about some other ill-defined system, is that it will have the ability to change its rules with a minimum of legislative formality so long as they comply with the provisions of the statute. The rules are not writ in stone but will develop with time, and I am sure that points such as those raised by my hon. Friend will be taken into account by the SIB when it reviews the matter, as it inevitably will.

    My hon. Friend the Member for Brentwood and Ongar, in particular, referred to the lack of a requirement that there should be indemnity cover. I understand the point my hon. Friend made, but he wil, particularly in view of his own experience and intimate knowledge of the industry, understand the importance of balancing against those requirements the need to limit costs. If one takes into account the compensation fund which will be available, it is difficult to find serious fault with the reasoning process which led the SIB to come to the conclusion which it did. Again, this is not necessarily a matter which is writ in stone; it is a matter in relation to which it is possible for the system to develop. But one can readily see the reasoning process which led the SIB to its conclusion.

    My hon. Friend the Member Bournemouth, West (Mr. Butterfill) pursued some matters which he originally raised in Standing Committee. He played his part in ensuring that some of those concerns were fully taken into account in the rules and in the process of evolution. I am sure that he will welcome the study that has been set up by the SIB into the degree of information which can be made available, in particular in relation to endowment insurance policies.

    I have already emphasised that these orders are but one step in the process of implementing the framework envisaged by the Financial Services Act 1986. Once the orders are approved and made, the way will be clear for the SIB to recognise self-regulating organisations — assuming of course that they meet the criteria set down in the Act. Those recognised SROs will then need to consider the applications of thousands of businessess, which will be seeking authorisation. The SIB, for its part, will need to process applications for direct authorisation.

    Both the SIB and the SROs will be building up their staffs to cope with the requirements of day-to-day regulation. This cannot be done overnight. Indeed, it would be idle to suppose that an entirely new system of regulation which was both effective and balanced could be introduced with the stroke of a pen. But I have no doubt that all these matters will be resolved as quickly as possible. Investors have a right to expect an adequate level of protection. That is why we passed the Financial Services Act. Investors naturally wish the Act's provisions to be introduced as quickly as possible. That is why we have forged ahead with these orders. The SIB has shown itself alive to the requirements of the new requirements of the new system and determined that the United Kingdom will be, and will be seen to be, a "clean" place in which to do investment business. That is why I ask the House to approve the draft orders.

    Question put and agreed to.


    That the draft Financial Services Act 1986 (Delegaton) Order 1987, which was laid before this House on 22nd April 1987, be approved.


    That the draft Finacial Services (Transfer of Functions Relating to Friendly Societies) Order (Northern Ireland) 1987, which was laid before this House on 22nd April, he approved.


    That the draft Financial Services (Transfer of Functions Relating to Friendly Societies) Order 1987, which was laid before this House on 22nd April, be approved. — [Mr.Howard.]

    Statutory Instruments &C

    Motion made, and Question put forthwith pursuant to Standing Order No. 101 (Standing Committees on Statutory Instruments, &c).

    Atomic Energy And Radioactive Substances

    That the draft British Nuclear Fuels plc (Financial Limit) Order 1987, which was laid before this House on 23rd April, be approved.— [Mr. Sainsbury.]

    Question agreed to.

    Territorial Sea Bill Lords


    That Standing Committee F be discharged from considering the Territorial Sea Bill [Lords] and that the Bill be committed to a Committee of the whole House—[Mr. Sainsbury.]

    Committee tomorrow.


    South Park Primary School, Ilford

    10.5 pm

    It is my honour to present a petition that includes over 400 names of parents of pupils at the South Park primary school, Ilford.

    The Petition showeth
    That their children are at risk by virtue of their inability to cross the road outside the school without having to move between parked motor vehicles, in that the zig-zag, no parking, school lines are advisory and not mandatory.
    Wherefore your Petitioners pray that your honourable House will urge the Government to make the said signs mandatory as soon as possible.
    It is a special pleasure to present this petition, not only because the school is an excellent one with a splendid headmaster, Mr. Drew, and a dedicated staff, but because it is where I started my full-time education. The petitioners hope that the Government will take note of the petition for the benefit of pupils in schools throughout the country. I am indebted to Mrs. Janet Smyth of Tavistock gardens, Mr. David Peacock of Brixham gardens and Mrs. Jean Jones of Breamore road, Seven Kings, for their splendid efforts in bringing forward this petition, of which I hope the Government will take due note.

    To lie upon the Table.

    Mentally Handicapped Persons (Mid- Kent)

    Motion made, and Question proposed, That this House do now adjourn.— [Mr. Sainsbury.]

    10.6 pm

    In recent years there has been a great movement endeavouring to get people with mental disabilities out of the Victorian institutions in which they have been incarcerated back into the community. or, in the case of some older people, into the community for the first time. They may have been incarcerated in those large Victorian asylums for their entire lives. Those asylums are all over the country and are being closed. They seem ghastly and grim to ordinary people. Therefore, those closures are generally welcome. But we must remember that much good and dedicated work has been done in those places over the years and, in looking forward to their closure, we must not forget their past good work.

    Tonight I want to talk about Leybourne Grange in Mid-Kent, whose position is completely different, as it is not a great Victorian monstrosity. The hospital is based in a house that was given in the 1930s by its owner for the welfare of those with mental disabilities. Some 27 houses and bungalows have been built since then in the extremely pleasant grounds of about 150 acres. It has farm, horticultural, workshop and other training facilities, including a school which is widely used by those with mentally disabled people from outside the hospital area.

    Leybourne has been the happy home for many children, many of them well advanced in life. This excellent establishment was formerly run by the Kent county council and since reorganisation by the Department of Health and Social Security. It has a capacity for some 1,500 patients, of which only some 600 places are currently being used because of the rundown. Leybourne is now threatened with closure. I received a courteous and helpful letter from the chairman of the Tunbridge Wells health authority which administers it. It is curious that the hospital is not within the Tunbridge Wells health authority area. It is an offshore hospital, for want of a better description. Therefore, perhaps the health authority does not have quite the affection for it that we have in my part of Kent. It is not in my constituency but a few hundred yards outside. However, the whole of Mid-Kent is within its catchment area. It is important to my community in Maidstone and it is important to my hon. Friend the Member for Medway (Dame P. Fenner) who has spoken to me about this but is, unfortunately, unable to be with US.

    With the threatened closure, parents and families of the patients—some of the parents are dead—are concerned for the future. Leybourne Grange has attracted great loyalty from the parents and many of them have urged me to sign early-day motions 424 and 425, which to date have 113 and 109 signatures respectively. I do not hold early-day motions in high esteem; they are a pretty useless part of our procedure. However, the fact that those two have achieved such a high number of signatures shows the genuine anxiety that there is on both sides of the House about the sweeping move to change the system without going into greater depth about the needs of the patients. I think that it is well worth my right hon. Friend the Minister considering those early-day motions.

    My purpose in raising this with my right hon. Friend is to re-examine the working of the policy of care in the community. I have seen for myself some of the excellent work being done by the Maidstone district health authority in placing patients in the community. In general, I am a supporter of the principles outlined in Cmnd. 4683 about community care. However, its ideals are not suitable for each and every case.

    We know that the system has worked well for many years in Holland, but there have been disastrous results when this sort of system has been applied in the United States and Italy. One must also remember the unhappy attitude of the property owners in properties adjacent to those where the health authority seeks to set up small homes. It is the awful "not near me" syndrome which is all too prevalent. That point is made strongly in the excellent notes that have been produced by the parents of the Leybourne Grange patients.

    In one village in my constituency there are several residents clamouring about the fact that people from institutions should not be put near them. Yet, there are parents of a Leybourne child living a few houses away who are most anxious that their child should stay in Leybourne. Therefore, it seems that there is a great contradiction and muddle in the thinking of ordinary members in the community.

    I want to urge my right hon. Friend to consider the fact that, if Leybourne is to be closed, the needs of each patient should be considered individually, carefully and fully. Those who can benefit from a return to the community should be so returned. However, let there be a modern pleasant alternative, a new Leybourne, for those patients for whom a caring, quality institution is still needed. I believe that that new village community might well be established at the very place where the present hospital is situated. There is no tradition of grimness. Indeed, it is a most excellent place.

    I would now like to turn to the notes that have been produced by the parents of the Leybourne children. They make the point that the children are much happier in a stable community, and we all know that. If they are living in Leybourne or in a new Leybourne, rather than being shuffled from small hostel to small hostel, they will be happy. In small units, one is unlikely to achieve the continuity of care that is possible in Leybourne.

    I am most concerned, too, that if the children are driven out into the community, the community will be unable to cope. I question whether the county councils' social services — I am talking on a broader national basis, because I believe that Kent county council runs a pretty tight ship and is pretty efficient and very caring—will be able to cope with the extra burden that will be placed upon them. I do not think that they are geared to it at all. I want to draw attention to this as a national problem and I urge my hon. Friend the Minister for Health to get better liaison going between county council social services and the Department of Health and Social Security. After all, if the sites are to be sold—Leybourne is a valuable site — the cash will flow into the Health Service regions rather than into the county councils, which will have to foot the bill for looking after the patients. I fear lest some less caring county council drive some of the patients into bed and breakfast or similar accommodation, which would be deplorable.

    I mentioned my hon. Friend the Member for Medway because many of her constituents are patients in Leybourne, and she takes a great interest in the well-being of the institution. My hon. Friend the Member for Exeter (Mr. Hannam)—who is unable to be here tonight, for obvious reasons — also shares my concern about the relationship between county councils and the DHSS. I hope that my hon. Friend the Minister will be able to do something at a national level to put our minds at rest.

    As I have said, Leybourne is no Victorian monstrosity. It has always been a centre of caring excellence. The staff have always been superb, and it is not surprising that their morale is temporarily rather low because of the uncertainties that they face. I believe that if we could create a community village on the Leybourne site—if my hon. Friend could persuade the Tunbridge Wells health authority to take that path—we would have many much happier parents and the children in Leybourne and in our part of Kent would continue to be happy. Therefore, I ask my hon. Friend for his help tonight.

    10.17 pm

    I congratulate—rather more than is the convention—my hon. Friend the Member for Maidstone (Sir J. Wells) on his success in securing the debate. I know from the correspondence that Health Ministers—not only me but many others before me—have received from him on this subject that it is very close to his heart. He has pursued it on many occasions as a Member of this House.

    I join him in recognising the equally active concern of my hon. Friend the Member for Medway (Dame P. Fenner). Both my hon. Friends assiduously pursue the interests of their constituents. Having been Minister with responsibility for the disabled for some time, I also know of the long-standing interest shown by my hon. Friend the Member for Exeter (Mr. Hannam) which is well known to the House.

    I shall address some of the anxieties expressed by my hon. Friend the Member for Maidstone about the implementation of community care policy throughout the country before dealing with Leybourne Grange. I should like to refer in particular to the co-ordination between health authorities and social services departments that is required.

    I am grateful to my hon. Friend for his generally supportive expressions about the generality of community care policy and the objectives that are being pursued. That would put my hon. Friend very much in line with, perhaps not all opinion, but the overwhelming majority of opinion about the way in which these developments have been moving and the way in which the Government have encouraged them to move. I recognise that the coordination to which my hon. Friend referred is a vital part of a successful change from institutional care to care in the community and that it has not been achieved to perfection in every part of the country. I share my hon. Friend's view that the Kent health authorities and the Kent social services department generally have a good record in working together in these matters, and I am sure that they are grateful for what my hon. Friend said.

    I hope that my hon. Friend recognises that those same flattering observations could be made of numbers of other health authorities and social services departments. I recognise that in some places this co-ordination does not yet work as well as we would like. We are giving it a good deal of attention and have sought to encourage it by various changes, including the improvement in the so-called joint finance arrangements, which have been made over the past few years.

    The deputy chairman of the NHS management board, Sir Roy Griffiths — my deputy — has been asked to undertake a 12-month review of community care and to advise on options that would contribute to making it more effective, to ensuring that we get value for money from the very large sums that are spent, and to ensuring that the policies are properly targeted and are as effective as they can be. I am sure that he will wish to take account of my hon. Friend's observations when carrying through that work.

    The Tunbridge Wells health authority envisages the closure of Leybourne Grange by 1994–95 as local services in the community are fully developed. That was stated in the authority's strategic plan, and that plan is consistent with Government policy. I assure my hon. Friend that the needs of the residents of Leybourne Grange will dictate the time scale for reducing the number of patients and for the eventual planned closure of the hospital. The South East Thames regional health authority has set up a coordinating group of health and local authority officers who are drawing together all the district plans for the placement in the community of their residents at the hospital. That co-ordinating group is also establishing service development policies, personnel policies and resettlement policies relating to the hospital and drawing on the wealth of experience gained by a similar group which planned the community care of patients who were at the Darenth Park hospital, with which my hon. Friend will be familiar.

    Administrative systems such as those to which I have referred are necessary to achieve effective co-ordination, but we fully recognise that, however much co-ordination there is, there can be legitimate concerns in the minds of the families of mentally handicapped people when the possibility arises of their son, daughter or relative transferring from a hospital, which may have been his or her home for many years, to the community. I am conscious that, because of some of those concerns, the Save Leybourne Grange Association has been campaigning against the planned closure of the hospital.

    I am glad to say that the chairman of the Tunbridge Wells health authority and its general manager have met the association's chairman to discuss its concerns. I emphasise that, in the Government's policy and in my personal view, no one should be discharged without the prior development of community-based services and careful consideration of the future needs of each individual. In general in mid-Kent the health authorities and Kent social services department have been working together closely and effectively to develop a range of community provision for mentally handicapped people. I shall give one or two instances.

    The Medway health authority and local social services operate a community living project using premises at Leybourne Grange to prepare individual residents to make the transition between an institutionalised model of care and the community model of care that the project provides in its staffed houses. So far that project has resettled 32 residents from Leybourne Grange into the community and it plans to resettle a further 20 people each year.

    Maidstone health authority, to which my hon. Friend the Member for Maidstone paid tribute, in which I would wish to join, and the local social services run the Maidstone community care project. That has resettled into the community 39 residents from Lenham hospital which, as my hon. Friend will be aware, is another hospital for mentally handicapped people in Mid-Kent, and the authority plans to resettle a further 36 people. It hopes to resettle successfully into the community 75 residents of Leybourne Grange between 1987 and 1991. I am glad to say that the build-up of community services also involves, and it is important that it should, the voluntary organisations. In Maidstone, for example, MENCAP is actively involved in consultation and joint development plans for setting up a health authority project for mentally handicapped people.

    My hon. Friend the Member for Maidstone and I have mentioned the need to give careful consideration to the future of each resident. That should involve not only the professionals who are responsible for the individual's care but also the parents and the mentally handicapped person wherever possible. Individual assessments are essential—I want to underline this again — because of the individual's specific needs, the wide range and type of community provision, the experience of professional staff and the views and needs of close relatives. All those matters need to be taken into account. I am glad to say that we have been assured that that careful and individual consideration will continue to take place before any resident is discharged from Leybourne Grange hospital.

    I understand that the Save Leybourne Grange Association has recently suggested to the South-East Thames health authority that the hospital should be retained to provide a more local service to mentally handicapped people from Maidstone and the Medway towns only, rather than as at present to all health districts in Kent. My hon. Friend the Member for Maidstone made a suggestion which I understand is associated quite closely with that thought. That is primarily something to be considered by the health authorities concerned, since they have the statutory responsibility for the provision of services. I understand that the association can expect a reply on its suggestions shortly. I will undertake to ask that the health authorities' attention should be drawn to the remarks that my hon. Friend has made so that they can be taken into account in its considerations.

    My hon. Friend mentioned staff. I would wish to echo what he said about the tremendous work that we can all too easily forget has been done by the staff of these large residential institutions over the years in caring for the people in their charge. The change of policy is no criticism of the efforts that so many of them have made to providing care, but rather a change in the perception of how the care should be provided in the long-term interests of the patients.

    It is important that we should have in mind the needs and interests of the staff when we are making these changes. I know that, with regard to Leybourne Grange, a co-ordinated personnel policy is being worked out which will give staff full opportunities for employment in those districts which are receiving patients. That will include the early interview of staff and, in some cases, protection of salary and conditions of service. The personnel policies will be based on those that were introduced and are successively operating for staff at Darenth Park hospital.

    I hope that in some of what I have said tonight I have been able to reflect, if not allay, the concerns that my hon. Friend expressed and to show that I agree with him on the essential need for individual assessment and the importance of improving co-ordination between the different authorities involved in those areas where it does not work as well as I am glad to say it does in Kent.

    I hope that I have said enough to make it clear that the move to community care is not, in any sense, a careless or thoughtless policy. It is a policy that needs the careful planning that has been mentioned time and again in the course of this short debate; and it needs the individual assessment that I have emphasised.

    When concerns of this kind are expressed, I never tire of saying to people that we do not regard community care as a cheap option. We do not want to hear it described —let alone describe it ourselves—in terms of decanting people from old institutions into some new environment.

    In the long run, it is a better way of providing individual care for people who need the care of the community, because we believe that that can best be provided in the community. I am certain that the policy, if properly implemented as we want it to be, will be better for many of what is becoming an earlier generation, who have spent too long in the older institutions. It is certain that it could, should and will provide in due course a much better future for new generations of people who may need our help than could have been provided in the past.

    The task is a difficult one, not yet always achieved with perfection, but I hope that, through my hon. Friend's speech and his dedicated work for this cause, we have the opportunity to contribute to ensuring that in future progress is even better than ii has been in the past.

    Question put and agreed to.

    Adjourned accordingly at twenty-nine minutes to Eleven o'clock.