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Orders Of The Day

Volume 350: debated on Tuesday 23 May 2000

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Crown Prosecution Service Inspectorate Bill Lords

Order for Second Reading read.

4.30 pm

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

This is a concise but important measure. Its purpose can be summarised shortly: it places the Crown Prosecution Service inspectorate on a statutory basis. I am pleased to say that, so far, it has received a warm welcome from both sides of the House.

The CPS inspectorate is a non-statutory body, operating within the CPS itself. The current chief inspector and his staff are all members of, or on loan to, the Crown Prosecution Service. They therefore report to the Director of Public Prosecutions. Although the inspectorate has produced valuable work since its inception in 1996 under the previous Government, there is no doubt that the current arrangements are not ideal. It is important that an inspectorate should he not only independent in practice but demonstrably independent. The current arrangements do not necessarily achieve that purpose, which is why we are introducing this Bill.

The Government attach considerable importance to having an effective and efficient CPS. We believe that an important part of building a credible organisation is ensuring that it is subject to rigorous inspection. The Glidewell report into the future of the CPS, published in 1998, reached the firm conclusion that it is essential to retain and expand the role of the CPS inspectorate. It said that public confidence in any organisation is greatly enhanced if it has an efficient and effective inspectorate system, advising those at the top of the organisation as to its corporate health and publishing the results of its work.

Glidewell recommended introducing an independent element to the inspectorate in the form of a part-time independent chairman. I am pleased to say that, in this respect, the Bill goes further than the Glidewell recommendation. The independent chief inspector will occupy a full-time post.

The Bill will guarantee that the inspectorate enjoys the same independence and status as other criminal justice inspectorates, such as the inspectorate of prisons and the inspectorate of probation. Importantly, the inspectorate will be separated from the CPS. It will be financed separately and located in separate accommodation. The chief inspector will be appointed by the Attorney-General, who will have the authority to appoint other inspectors. That is the effect of clause 1.

I intend no disrespect to existing members of the inspectorate, whose work was praised in the Glidewell report, when I say that that change of status will also provide an opportunity to bring into the inspectorate additional staff with a wider range of backgrounds. In other words, there will be staff members whose background and experience are quite distinct from the CPS. A number of outside people have already been appointed as business management inspectors and legal inspectors. They will bring fresh ideas and a different perspective to supplement the existing expertise in the inspectorate. The chief inspector will acquire management responsibility for the inspectorate, again separate from the CPS.

The chief inspector's overriding responsibility will be to inspect the operation of the CPS. That duty is cast in wide terms in clause 2. The clause is drafted to ensure that the chief inspector has independence. He can inspect and report on any matter connected with the operation of the CPS that concerns him. However, the Attorney-General may refer matters to the chief inspector to report on. The chief inspector is thus responsible to the Attorney-General and, ultimately, to Parliament. The chief inspector will have to submit an annual report to the Attorney-General, who is then under a duty to lay that report before Parliament.

A further change to the inspectorate since the Glidewell report is that it now no longer concentrates exclusively on matters of case work. In accordance with the report's recommendations, its remit has been broadened to include all aspects of the CPS operation that support its case work. Inspectorate reports will continue to concentrate on case work, but will also provide a complete overview of CPS performance in the area inspected, including management and operational issues.

The CPS inspectorate will also undertake more inspection work of a thematic nature. It recently published a report on disclosure of unused material, which attracted wide attention. In February, it published a report on advocacy and case presentation. Although that did not attract the same attention, it was important.

Preparation of such thematic reports will continue once the inspectorate is placed on a statutory footing. The chief inspector also proposes that more work should be undertaken with other criminal justice inspectorates. Some such work has been undertaken, such as the joint report by the CPS inspectorate, the magistrates courts service inspectorate and the inspectorate of constabularies, "How Long Youth Cases Take". More recently, the first joint inspection by all six inspectorates with an interest in the criminal justice system has been completed. Their report—"Casework Information Needs Within The Criminal Justice System"—was published at the end of April.

Such joint scrutiny of aspects of the working of the criminal justice system supports the Government's establishment of overarching aims and objectives for the criminal justice system. We are determined that individual agencies should provide a more coherent and effective service without compromising their individual, and sometimes independent, roles.

Clause 2 allows the chief inspector to designate an inspector to discharge his functions when he is absent or unable to act. Clause 3 simply sets out the short title, extent and commencement arrangements.

This is a short, but important, measure. It has obviously gripped the attention of the whole House. I am convinced that it will make a significant contribution to the effective operation of the criminal justice system.

4.37 pm

As the Solicitor-General correctly said, he and I have managed to attract our usual adoring fan clubs to the House this afternoon. I am grateful to those who have come to see us.

The Bill has been described as modest, short and uncontroversial. In some quarters, those epithets might lead people to think less of it, but, despite, or even because of, its brevity, narrow compass and inoffensiveness, it should command the support of the House.

It is perhaps surprising that the Bill has taken so long to get here from the other place. Second Reading in the Lords took place on 30 November last year, when the Attorney-General stated with pride that it was only the second piece of legislation promoted by a Law Officer in 50 years. The first had been a Bill to increase the salary of the then Solicitor-General, the noble and learned Lord Falconer of Thoroton, and any other Law Officer who was a member of the other place rather than this House. Lord Williams of Mostyn said that that was
plainly a piece of legislation of the utmost importance—[Official Report, House of Lords, 30 November 1999; Vol. 99, c. 761.]
Now the Solicitor-General has introduced the second Bill to this House, and the beguiling tones of the Wales and Chester circuit have been replaced by something a little more antipodean. As the House will know, Australia House is just across the street from the London School of Economics.

The Bill itself is none the worse for that. I congratulate the Solicitor-General on bringing to the statute book an idea whose genesis is to be found in the period of office of my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell). When he was Attorney-General, the Conservative Government decided that an inspectorate of the Crown Prosecution Service was needed, and there has been a non-statutory inspectorate within the CPS since 1996. Had we been successful at the general election, the Bill, or something very similar, would have been introduced by my right hon. and learned Friend.

It is fair to say that the idea behind the Bill was given further impetus by the Glidewell report on the Crown Prosecution Service, which was published in 1998. As the Solicitor-General told us, once the Bill is enacted the inspectorate will have a status equal to the other statutory inspectorates with which we are already familiar—such as those for prisons, the probation service, magistrates courts and the constabulary. They have proved to be powerful and useful additions to the armoury for public accountability of the public services; I welcome the Bill on that ground alone.

In clause 2, the chief inspector's functions are spelt out in a general fashion. Having been to see the current chief inspector, Mr. Stephen Wooler, in his offices in Ludgate Hill in the City earlier this year, I have no doubt that both he and his staff will carry out their duties well and with great thoroughness and independence. They have already built up an ethos that suggests that they take seriously their responsibilities to the public and to the CPS. They will look into specific issues referred to them by the Attorney-General and they will also, I understand, prepare thematic reports that will flow from longer and more detailed inspections of particular aspects of the work of the CPS—such as prosecution policy in respect of certain types of crime or the use of resources in a particular field of CPS work.

However, may I suggest that one of the first things the statutory inspectorate considers is the current state of morale among CPS staff—lawyers and non-lawyers alike? Is the Solicitor-General aware that, according to a survey carried out by the Association of First Division Civil Servants, the levels of stress-related illnesses among the CPS work force are so high that the association described the CPS as being
on the brink of crisis?
One in four of its 9,000 staff suffer high levels of stress. The proportion of lawyers and administrative staff shown to be affected is greater than in similar findings anywhere in the private or public sector. That comes from a survey that had a 65 per cent. response rate—a remarkable statistic in itself.

The Government propose to cut the CPS budget by almost 5 per cent. next year. I am as keen to see the proper use of taxpayers' money as any Member of the official Opposition, but there are ways and ways of ensuring that the public receive good value for money. The Labour Government's approach to the finances of the CPS appears to be unintelligent, and calculated to have an even more depressing effect on the performance and morale of its staff.

The present Director of Public Prosecutions is an extremely able and justifiably respected criminal lawyer of the first rank. He has not been afraid to appear in cases in the magistrates courts to see for himself the work of his most junior lawyers. From my visits to CPS offices, both as a constituency Member of Parliament and as the shadow Attorney-General, I am aware of the stresses and difficulties faced by the CPS; they need to be addressed speedily and effectively by the Government.

As a recorder of the Crown court, I see the results when ill-prepared cases come to court—the avoidable delays and frustrations for witnesses and other court users, and the general air of hopelessness that often seems to pervade junior and middle-ranking CPS lawyers, who are overworked and under-resourced.

It is incumbent on the Government to get a grip on aspects of our criminal justice system where they can do some real good—as with this Bill—rather than wasting time, money, energy and the good will of the legal profession, and of many others who care for the rights of the citizen, on destroying the jury system by means of the Criminal Justice (Mode of Trial) (No. 2) Bill. I urge the Government to use the Bill for the benefit of the CPS certainly, but, above all, for the benefit of the public by whose interests they ought to be guided.

4.43 pm

If the Bill results in the creation of an independent and autonomous inspectorate, it cannot come into force too soon. I shall refer later to such matters as independence and annual reports, but I must first express my great concern about the state of morale in the Crown Prosecution Service. I endorse wholeheartedly the comments of the hon. and learned Member for Harborough (Mr. Garnier). I, too, pay tribute to the Director of Public Prosecutions. His integrity and independence are not in question.

My awareness of the state of morale in the CPS does not come only from recent newspaper reports; it also results from my discussions with members of the service. Because of their fear of recrimination, I cannot disclose their names to the House; indeed, I have given my word that I shall not do so.

The hon. and learned Member for Harborough referred to a recent independent report. On 20 May, The Times carried an article with the headline "Stressed CPS—Staff Close to Crisis". It stated that, according to the survey published the previous day, the CPS was on the brink of crisis, with one in four of its 9,000 staff suffering high stress levels. The survey had a response rate of 65 per cent., and was carried out last year by an independent organisation. I gather that it was commissioned after a female member of the CPS sadly committed suicide, allegedly because of the stress of work.

The First Division Association is using the survey in an attempt to reverse a 4.6 per cent. cut in the budget for next year. That information is in the public domain, but members of the Crown Prosecution Service have told me directly that there are reasons other than funding for the rock-bottom morale in the service. They say that they lack the most basic resources and equipment for the job.

The House will be amazed to hear that the 10 Crown prosecutors in one team, many of whom deal with road traffic matters, have one textbook to share between them. The support given to the CPS is negligible. I am told that there is also a lack of computer and secretarial back-up. It is very difficult for Crown prosecutors to get up-to-date information on any law. There is no link to Lexis or to any other computer-based information service.

It is a disgrace that the Government should fetter and hamper their prosecution service so dreadfully. It is no wonder that the record of the CPS is criticised so frequently. The service has many very able people, who are dedicated to doing their jobs as fairly and efficiently as they can. How can they achieve that with both hands tied behind their backs?

It makes a mockery of our criminal justice system if the state is not able properly to mount a prosecution. There has been a lot of talk recently about new offences such as corporate manslaughter, but it is useless if there is no confidence that the Crown can mount a compelling prosecution in the first place.

I am told that in the west country, the CPS cannot keep up with its commitments in the magistrates courts, let alone in the higher courts. The House will recall that the Access to Justice Act 1999 gave properly qualified members of the CPS rights of audience in the higher courts. Liberal Democrat Members supported that provision, but I remind the Solicitor—General that the Act made it clear to all lawyers that their first duties are to the court and to the integrity of justice. Many CPS members believe that the underfunding and underresourcing that I have described have put them in breach of the relevant section of the 1999 Act. I understand that, this year, the CPS in Devon and Cornwall must make good a budget shortfall of some 8 per cent.

I hope that the Solicitor-General has something to say to the House on the matters of funding and morale, as the current state of affairs is utterly unacceptable. It makes a mockery of any attempt by the Government to deal adequately with their responsibilities for the criminal justice system. We want the Bill to establish a scrupulously independent and autonomous inspectorate. It must report annually to Parliament. Its chief inspector must come before the appropriate Select Committee after the annual report has been published, and at any other time that the Select Committee may determine.

There should be no inhibition or strictures on any CPS employee contacting the inspectorate at any time to make known the misgivings that he or she may have about the service. Those misgivings do not necessarily have to involve matters of funding or resources; the employees should be able to raise other matters and, most important, to refer to any endeavour by any person to exert undue influence on a Crown prosecutor.

I remind the House that one of the conclusions of the Glidewell report was that it was essential to expand the role of the Crown Prosecution Service Inspectorate and that the inspectorate should have an independent chairman. I welcome the fact that there will be an independent chairman and I welcome the Bill. However, I hope that the Solicitor—General can assure the House that members of the CPS will be free to make complaints to the inspectorate without recriminations. Furthermore, I look forward to hearing from the Solicitor-General that the chairman will be independent and autonomous and will report to a Committee of the House at any time that that Committee should determine.

4.51 pm

With the leave of the House, Mr. Deputy Speaker.

I am grateful for the warm welcome that has been given to the Bill. I thank the shadow Attorney-General, the hon. and learned Member for Harborough (Mr. Garnier), and the hon. Member for Torridge and West Devon (Mr. Burnett) for their support for the principles behind it.

I shall deal briefly with a few points that have been raised in the debate. The shadow Attorney-General said that he had visited the Crown Prosecution Service Inspectorate and I am grateful that he did. I am sure that the visit gave him a greater insight into its operation. He mentioned thematic reports, which the Attorney-General and I have encouraged the inspectorate to carry out. At present, the inspectorate is undertaking reports on the handling of ethnic minority issues, custody time limits and offences arising out of fatal road accidents. I know that they are three issues of concern to both sides of the House.

The shadow Attorney-General and the hon. Member for Torridge and West Devon referred to the recent stress survey. The Government should be commended for undertaking that survey, which produced results that were not exactly unexpected. Prosecutors work under great time constraints, there is a problem of funding—I shall come to that point shortly—and, at present, there is a lack of sufficient information technology facilities in the service. None the less, the report identified the strength of the CPS; the nature, diversity and importance of the work that prosecutors and the non-lawyers in the service carry out and which is appreciated; and the good terms and conditions that they enjoy as part of the civil service.

Let me make it clear that funding is an historic problem. It harks back to the founding of the CPS and the Conservative party cannot avoid responsibility for that. The CPS was underfunded from the outset and it is only now that the position is being redressed.

The Solicitor-General says that the CPS has been underfunded historically, but why are the Government cutting its budget for next year?

I was just about to say that the Attorney-General is making great efforts in putting the case to the Treasury for an increase in funding for the CPS. That case has been supported by the Lord Chancellor and by my right hon. Friend the Home Secretary, who both understand that an effective CPS is necessary if other parts of the criminal justice system are to work. At present, I cannot tell the House the outcome of those negotiations, but I am optimistic that there will be good news in the near future.

Are financial deficiencies carried forward from previous years included in the discussions and representations of the Home Secretary and the Chancellor?

As I said, the problem is historic. The previous Government underfunded the CPS and we have a lot to make up. The hon. Gentleman mentioned information technology, which is one area in which we have made progress. As I have told the House before, we successfully obtained an extra £12 million in the capital modernisation programme and, as a result, the Connect programme will be implemented later this year. It will provide all prosecutors with basic information technology, and will enable the CPS to access databases and send e-mails via the internet to other criminal justice agencies.

Will the computer technology that is being funded and installed include Lexis or some other legal information and case law network accessible to Crown prosecutors, enabling them to know the up-to-date law to which they must refer in court?

It certainly will. In the pilot projects, Archbold, the standard textbook on criminal law, is available to prosecutors.

I refute the view that morale is at rock bottom. Certainly, that was not the case in Derbyshire and Hertfordshire, where I visited CPS officers last week. I did not conclude that morale was at rock bottom when I visited the Devon and Cornwall CPS last year with the hon. Gentleman. No doubt, there are stresses and strains and the situation could be improved, but the bleak picture painted by Opposition Members does not reflect reality.

In response to a point made by the hon. Gentleman, there is no reason why the CPS inspector should not appear before the Select Committee on Home Affairs. Indeed, in relation to the independence of the CPS, all prosecutors are fiercely independent and must act in accordance with the statutory code for Crown prosecutors.

Will individual members of the CPS have access to the inspectorate so that they may discuss anything that is germane to their job in the service?

The chief inspector's main function is to ensure that the quality of work is up to standard. However, as he goes round different areas, I am sure that individual prosecutors and others will have an opportunity to raise and discuss matters with him.

The Bill goes considerably beyond the recommendations in the report by Sir Ian Glidewell. I believe that the statutory inspectorate will continue to develop within the framework established by this simple measure. Of course, it is of paramount importance that the CPS gains increased public confidence. However, an open, accountable and vigorous inspectorate will go a long way towards developing that confidence.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).

Crown Prosecution Service Inspectorate Bill Lords Money

Queen's recommendation having been signified—

Motion made, and Question put forthwith, pursuant to Standing Order No. 52 (Money resolutions and ways and means resolutions in connection with bills),

That, for the purposes of any Act resulting from the Crown Prosecution Service Inspectorate Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of—
  • (1) sums in respect of salary, pension, allowances and compensation for Her Majesty's Chief Inspector of the Crown Prosecution Service; and
  • (2) expenditure incurred by the Chief Inspector in the discharge of his functions under the Act.—[Mr. Dowd.]
  • Question agreed to.

    Limited Liability Partnerships Bill Lords

    Order for Second Reading read.

    4.59 pm

    The Parliamentary Under-Secretary of State for Trade and Industry
    (Dr. Kim Howells)

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

    The creation of limited liability partnerships adds to the variety of business entities available to those wishing to set up in business in Great Britain. Firms can usually choose between being a company—which is good if one wants a split between ownership and management—and being a partnership, which is good if one wants greater flexibility in arranging the internal affairs of the business and does not mind unlimited liability. However, firms will now have the option of becoming a limited liability entity with the internal flexibility of a partnership.

    Limited liability partnerships, or llps, were first proposed by the previous Administration, and responses to a consultation on the general principles were clearly in favour of their introduction. The Government agreed that the concept had merit and published a draft Bill in September 1998. That, too, was well received, and consultees provided feedback on the detail of the legislation. I should add that consultees represented a wide range of interests, including accountants, lawyers, actuaries, architects, surveyors, academics, trade associations and those representing the potential clients of an llp. The measure has wide support across the professional business community.

    The Bill was subject to pre-legislative scrutiny by the Select Committee on Trade and Industry. The Committee's comments were a valuable contribution to the development of the Bill.

    To explain the way in which we have chosen to construct the llp, I need to say something about where the idea of limited liability partnerships comes from. In 1996, the Department of Trade and Industry published for consultation an authoritative investigation by the common law team of the Law Commission into the law of joint and several liability, a complex area of common law.

    The report examined the problems that resulted from joint and several liability for professional defendants. For example, defendants might find themselves liable for the whole amount of the damage caused to the plaintiff, even where other wrongdoers were involved. However, the report concluded strongly against any reform of the law of joint and several liability. The main reason was that a change towards a system of proportional liability would favour the wrongdoer at the expense of the plaintiff. This is a simplified summary of the report's detailed conclusions.

    The common law team's remit did not extend to looking at joint and several liability in partnerships, but the Department of Trade and Industry at the time took the opportunity to consult on the question whether to allow for llps in Great Britain.

    Llps were already a well-known concept in the United States of America, and Jersey—not New Jersey, but Jersey in the Channel islands—was also planning to introduce them. As a result of the process of consultation, we concluded against any reform to the law of joint and several liability, but gave our commitment to the introduction of limited liability partnerships.

    Surprisingly, there has been no fundamental change to business entities in Great Britain since 1907, when the Limited Partnerships Act was introduced. Only a company offers all its members limited liability, which perhaps seems a little odd in the 21st century. The creation of llps demonstrates the Government's commitment to ensuring that Britain maintains its competitive and up-to-date legal framework for business.

    The development of llps takes account of the changing business environment, which has become increasingly litigious in recent years. The structure of an llp means that some firms may find it an advantage over a company, as it offers the freedom for members to arrange their internal relationship to each other and to the llp as they wish, while having the benefit of limited liability. That is likely to be popular with those who already have partnerships, but it may also prove to be of some benefit to start-up businesses.

    I am grateful to the Minister for giving way. I shall refer to this in my speech, if I am fortunate enough to catch your eye, Mr. Deputy Speaker. The Minister says that the limited liability partnership will be useful for other businesses. Will it be useful for other incorporated businesses? If so, it would be a lot more useful for incorporated businesses—that is, limited companies—if the tax penalties on disincorporation were eased.

    I hope that the hon. Gentleman will bear with me. I shall deal with tax separately and in some detail, as it is a crucial component of the Bill.

    In November 1999, the Bill was introduced in another place, where there was wide support for the concept. That is not to say that the Bill's passage through the other place was uneventful. A lively and useful debate took place, and the Government made a number of amendments, with which I shall deal later.

    I am pleased to say that the Bill is in very good shape, and I thank Members of the other place for their contribution to bringing that about. We believe that the right balance has been struck between the interests of those who will want to be llps and of those who will do business with them.

    Although the new entity is called a limited liability partnership, in many ways it is neither fish nor fowl. In some respects, it is closer to a partnership, while in others it is closer to a company. That hybrid quality has been at the root of most debates on the measure, with some wanting the entity to be allied more closely to a partnership and others wanting it to be allied more closely to a company.

    We had to strike a balance. While members will be free to agree among themselves, their relationship being rather like that of members of other kinds of partnership, the llp itself will be a separate legal entity, owned by the members. That means that it will be able to enter into contracts, hold property and continue to exist independent of changes in membership. In that sense, llps will be closer to companies than to partnerships. We will therefore apply to llps, by way regulation, appropriately modified companies legislation—for example, the Companies Act 1985, the Insolvency Act 1986 and the Company Directors Disqualification Act 1986.

    The limited liability of the members is also clearly more closely akin to the position of a company than to that of a partnership. Limited liability is a privilege, and we need to ensure that it is not abused. The companies and insolvency legislation will help to do that.

    Clause 6 makes it plain that a third party dealing with an llp will be entitled to rely on the fact that the member is an agent of the llp, but because the llp is a separate legal entity, we expect the third-party contract to be with the llp rather than with the member. That mirrors what happens in the case of companies. It is anticipated that, in the event of a claim for negligence, the claim would be against the llp rather than the member.

    I thought that an overriding principle of the Bill was that a member who conducted work for an individual client would be liable to the extent of the entirety of his assets, if he was found to be negligent.

    That is absolutely true. If he is found to be negligent, he will be liable to exactly the same punishments, and to be pursued in the same way, as the director of a company; there is no doubt about that. The llp, however, is the first port of call when there is deemed to be a problem.

    The llp would be liable to the full extent of its assets, but—I think that this is what the hon. Gentleman is getting at—that does not rule out the option of the third party's pursuing the negligent member as well. The third party, however, would only be able to sue the negligent member in tort, as the contract would have to be with the llp. Tort liability may be much more difficult to prove.

    Clients of the llp will need to be made aware of the nature of the entity with which they are dealing. To help ensure that, firms using the abbreviation "llp" after their names will have to mention on their business letters and order forms that the letters stand for "limited liability partnership".

    The Bill also requires that two or more people must be associated for the carrying on of a lawful business with a view to profit, and that their names must be on the incorporation document. The limited liability partnership and its members must be registered at Companies House. Its records must be kept up to date. The llp must also have two designated members whose responsibilities include filing the annual return, notifying Companies House of changes in membership and of any change to the address of the registered office.

    Taxation is the other main subject of the Bill. The hon. Member for Torridge and West Devon (Mr. Burnett) asked about that. The Bill expressly provides for llp to be taxed as though they were partnerships. Without such provisions, they would be taxed as companies because, elsewhere, the Bill provides that they are corporate bodies. Although llp will be corporate bodies, they will retain the partnership ethos at their core. Like partnerships, llp will consist of members who are involved in running the firm. We anticipate that they will continue to be an important source of working capital. It was therefore agreed that it was more appropriate for an llp to be taxed as a partnership than as a company.

    Several amendments were tabled to the tax provisions in another place. They were technical amendments, which were intended to ensure that the legislation achieved our objectives more effectively. One amendment was intended to apply sections 117 and 118 of the Income and Corporation Taxes Act 1988, with appropriate modifications, to llps. The purpose was to ensure that they could not be exploited for specific forms of tax avoidance. That would have involved members of llp being able to obtain tax relief for a loss sustained beyond their personal obligation to meet it.

    Amendments were also made to ensure that the transfer of partnership assets from an existing partnership to an llp would be tax neutral. We thus maintain our policy of ensuring tax neutrality when conventional partnerships transform themselves into llps.

    When the Minister considers tax neutrality, I hope that he will refer to the possibility of limited liability companies becoming llp. Will he also confirm that, when he says that the transfer of a business or partnership into an llp will be tax neutral, it includes stamp duty?

    I shall find out by the end of the debate. I believe that the provision includes stamp duty, but I shall confirm that later. Although I appreciate that the hon. Gentleman understands the purpose of the Bill, his initial and follow-up questions suggest a misunderstanding. I do not expect the Bill to be especially useful to incorporated businesses because they already have limited liability and have already organised themselves as a company. There is no reason for them to organise themselves into llps, which will be taxed as partnerships while companies are taxed as companies. I envisage no reason for, or easy way to make, the transformation of a company into an llp tax neutral.

    Members of a limited company might want to become an llp for good tax reasons.

    That would be up to different companies. We hope to provide a new vehicle for companies and business; clearly, the decision would be up to them.

    Another amendment was made to ensure that members were treated for national insurance purposes as if they were partners in a partnership. Although we believe that it is right to tax llps as partnerships, we are aware that the tax treatment may allow scope for llps to be used when the primary or only attraction of llp status is tax treatment. I sense that the hon. Member for Torridge and West Devon was hinting at that when he spoke. Clearly, that is not intended. We shall consider that issue carefully with the Inland Revenue and, depending on our conclusions, measures may be introduced in the 2001 Finance Bill. The Revenue will consult widely on its intentions. It is important to emphasise that we do not intend to undermine the commercial certainty of llps' taxation treatment for those businesses for which llp status was intended. That will be at the forefront of our minds, whatever options are proposed.

    Apart from those on tax, several amendments were made in the other place, the most notable of which included clarifying that an llp's members will not be its employees and putting it beyond doubt that, if an llp member were liable to a person for a wrongful act or omission in the course of the llp's business, it would be liable to the same extent as the member.

    We intend to apply secondary legislation to llps, which will include similar requirements to those for companies; it may be useful if I touch on what that will mean. The regulations will include a requirement for financial disclosure equivalent to that required of companies, provision that members of an llp can be sued for wrongful or fraudulent trading and provision that members can be disqualified from being members of an llp and a company director. The regulations will apply, with appropriate modifications, the provisions of the Insolvency Act 1986. Those modifications include a measure that will deter members from siphoning off funds to the detriment of creditors.

    We have published the draft regulations for consultation twice—in September 1998 and July 1999. We shall amend the regulations to take account of the concerns expressed by consultees and by Members of another place about the disapplication of partnership law to llps. That is part of considering how far we treat llps as partnerships and how far we treat them as companies. As a result, we shall include a default provision that will apply if there is no llp agreement or if the agreement does not cover a particular issue. The draft proposals were consulted on and generally welcomed by those who responded.

    It might be suggested that a significant weight of legislation will be applied to such an entity and it would be understandable if hon. Members asked whether a lighter touch were preferable. The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) knows full well that I am very much in favour of a lighter touch. However, I would argue strongly that we shall provide for an entity that will have the privilege of limited liability and we must ensure that a balance is struck between the interests of business and an llp's potential clients. Becoming an llp will be a purely voluntary and commercial decision. Any firm that chooses to become an llp and wants limited liability will compare the llp with a company. Anyone who makes that comparison will find that the regulatory requirements applied to an llp are not unreasonable.

    The Bill has benefited from the careful and measured attention of learned consultees, learned Members of another place and the Trade and Industry Committee. As a result, we have achieved the right balance in creating a new entity that combines limited liability with the organisational flexibility of a partnership while ensuring that appropriate safeguards are applied to protect those who deal with the entity. I am pleased to commend the measure to the House.

    5.19 pm

    I declare an interest. Actually, it is not really an interest; it is more a confession: I am a chartered accountant. Some of my best friends are chartered accountants. Many of my friends work for chartered accountancy partnerships. I worked for such a partnership for 13 years before entering the House.

    The Bill is welcome. It started life under the last Conservative Government in response to concerns, particularly from the accountancy and legal professions, about the difficulties of unlimited liability. The prospect of losing one's house and savings because of the negligence of a fellow partner whom one may not even have met in a larger partnership was becoming a huge impediment to recruiting and retaining key personnel.

    I am sure that the hon. Gentleman will go on to paint the tear-jerking spectacle of those in accountancy partnerships living in terror in case their yachts, farms, pubs and holiday retreats are suddenly confiscated, but has it ever happened? We estimate that the total revenue set aside from the fee income for contingency claims was no higher than 2.7 per cent. Most of the things that are claimed to be a threat over accountancy never materialised.

    It has happened in the United States. A number of medium-sized firms have got into severe difficulties and partners have lost their personal assets, but it is the fear of losing, through no fault of their own, assets for which people have worked all their lives that is wrong. It also has an unhealthy effect on the working method within the firms. People might argue, as the hon. Gentleman no doubt would, that the prospect of losing everything if one does poor-quality work for a client concentrates the mind wonderfully and so increases the quality of work. My experience is that the determination to keep clients is the driving force behind doing good work. The fear of negligence action acts as a dampener on the work.

    Letters giving advice are packed full of caveats and disclaimers. Sometimes it is barely possible to discern the actual advice that the letter seeks to give. Huge resources are pumped into ensuring that terms of engagement are correctly documented and filed, not to improve the quality of the work, but to safeguard the firm in case of legal action. That is the consequence of the ever-present threat of legal action.

    Even under the Bill, it will still be possible for partnerships to be sued, but the prospect of partners unconnected with the negligence losing everything will go. It is wrong that, in circumstances where—the Minister alluded to it—99 per cent. of the blame for something going wrong attaches to, say, the impecunious fraudulent director of a company, and the audit firm or solicitor can be shown to be just 1 per cent. to blame for what went wrong, they can be sued for 100 per cent. of the loss. Because many of the partnerships have deep pockets, it is to those firms that aggrieved investors turn for recompense.

    The general legal concept of joint and several liability will not be changed by the Bill, but the concept and joint and several liability within a partnership will. The limited liability partnership will be suable for breach of contract to the full extent of its assets. The partner responsible for any negligence will, as the Minister said, be liable under tort, but the remaining partners will be able to sleep easy at night knowing that their personal assets will be safe.

    The Bill has been through an enormous number of stages. The last Conservative Government issued a consultative document in February 1997. A draft Bill issued by the present Government in September 1998 was scrutinised by the Select Committee on Trade and Industry. The Government issued a new draft in July last year and a final Bill came out in November. Despite all that pre-legislative scrutiny, during which many of the less attractive options were dropped, the Bill that went to the other place still had a number of problems.

    Conservative Members were concerned that the Bill provided no default mechanism to the existing body of partnership law in circumstances where the partnership agreement is silent: for example, the right to share in capital and profits, the right of a member to take part in the business, procedures for retiring as a member and procedures for holding and calling meetings. We believe that there should be a default mechanism, so that those rules are covered.

    We were concerned about the inherent ambiguities that could enable partners or members to be regarded by the Inland Revenue as employees of the llp. We were concerned about the absence of any definition of "designated member". There are plenty of subsections about the appointment of designated members and the requirement for two such members, but no mention of what they are meant to do.

    We were concerned about the inadequacy of the taxation provisions. The Bill is meant to be tax neutral, as the Minister said, but, before it went to the other place, there was no clarity over whether transferring a partnership to an llp would trigger a tax charge on the cessation of the old partnership. There is no mention of stamp duty consequences. We had enormous concerns about the insolvency provisions, which appeared to apply much stricter tests on trading while insolvent than similar provisions applicable to companies. We were concerned about the acquisition accounting requirements that llp would automatically be required to adopt. As hon. Members will clearly understand, that method of accounting for the merger of two llps would be absurd given that they do not issue shares.

    All those issues were raised in the other place by my noble Friend Baroness Buscombe. Thanks to her effort—and, one must acknowledge, to the reasonable approach of the Minister, Lord McIntosh—those concerns were largely taken on board and substantive amendments were made in Committee. We have always said that, as an Opposition, we will say it as it is. If the Government do the right thing, we will say so; if they do the wrong thing, we will oppose them. This is a good Bill—much better, it must be said, thanks to my noble Friend's scrutiny—but one or two loose ends and remaining criticisms need to be aired, to which we can return in detail in Committee.

    Far too many key provisions are hidden in secondary legislation. From the now 19 clauses and one schedule, one would have no idea of some of the Bill's basic tenets. One would have no idea that a member of an llp will remain liable to the full extension of his personal assets, notwithstanding the limited liability, for negligent work that he or staff reporting to him had carried out; no idea about a host of important issues relating to the legal position of members if the llp trades while insolvent; no idea about which company law and which partnership rules will apply to the llp. Those matters are in a host of regulations to be issued under sections 14, 15 and 16.

    The Trade and Industry Committee was highly critical of the degree of use of secondary legislation in the Bill. Its report states:
    There does not at first sight seem to be any over-riding reason why the Regulations and schedules should not be incorporated into the Bill…We would…far prefer that the detailed secondary legislation proposed be incorporated in the Bill.
    The Committee recommended that revised drafts should be resubmitted to it for re-examination. Has that happened? Was the Committee asked to have a look at the revised draft statutory instruments?

    Lord Goodhart, a Liberal Democrat peer, said in the other place:
    The Delegated Powers and Deregulation Committee in your Lordships' House, of which I am a member, accepted the Government's proposals to put these provisions in regulations. But it seems to me that this comes close to the borderline and the more I look at sonic aspects of this Bill the more doubtful I am whether the Delegated Powers Committee was not rather too lenient.—[Official Report, House of Lords, 9 December 1999; Vol. 607, c. 1438.]
    He was right to express concern. The Committee's report draws attention to the fact that what is now clause 16 is
    a Henry VIII provision which allows regulations to amend or repeal primary…legislation.

    The hon. Gentleman's criticisms are well placed: he is a well-known deregulator. However, is he aware that the first set of regulations will be subject to the affirmative procedure and that affirmative resolutions will then apply to anything that we introduce immediately afterwards? That should be some defence.

    I am aware of that, but I am grateful to the Minister for bringing it to the attention of the House. However, affirmative secondary legislation is still a far cry from primary legislation. Many regulations in that pile of draft regulations amend primary legislation. I have great concern, shared by many Members of both Houses, about secondary legislation amending primary legislation.

    That was not the Committee's main concern. Its main concern was that the draft regulations created offences punishable on summary conviction by a fine, but the way in which those instruments were drafted was wide enough to allow the regulations to provide for imprisonment or for trial on indictment. The Committee thought that the Government intended to use those powers only to provide for summary trial and fine, and wanted that limitation to appear on the face of the Bill. As Lord McIntosh admitted in the other place,
    it is our intention to apply to LLPs the same offences as apply to companies…In some cases these offences are triable on indictment and punishable with imprisonment.—[Official Report, House of Lords, 9 December 1999; Vol. 607, c. 1421.]
    The Government wanted to see those powers to create offences which carry a punishment of imprisonment. Given that admission, and the fact that the Delegated Powers and Deregulation Committee had assumed in its conclusions that the delegated powers would not be used for such purposes, I urge the Committee's Chairman to look at the Bill again. I shall be interested to hear the Minister's response on that concern.

    The over-use of delegated legislation is a serious matter, which should be of concern to all hon. Members. We shall seek to put it right, regardless of administrative inconvenience or precedent.

    Our remaining concern over the drafting of the Bill relates to what have become known as the default provisions. The Minister also referred to them as such. Under clause 1, the whole body of partnership law is disapplied as regards llps except where it is explicitly provided for in the Bill. This is of concern because most of the firms that will want to convert to llp status will simply use their partnership agreement as the basis for the internal arrangements within the llp. The agreement may well be silent on a number of important issues, because well-established partnership law provides these details where they are not explicitly set out in the agreement. Small partnerships in particular will have relatively short agreements which may not include details such as the rules for the retirement of partners, the detailed rules about calling meetings or rules giving all parties the right to see the books and records. Those rights and rules are all there in general partnership law. To disapply that law may well cause difficulties for such smaller firms.

    Presumably the hon. Gentleman is not arguing for over-prescription in terms of what a partnership should or should not be. One of the strengths of partnerships is the flexibility of arrangements. We are not seeking to take that away.

    I am grateful to the Minister for that intervention, but he misses the point. Our proposal in the other place was for a simple default provision where there were no provisions in an agreement about certain aspects of the partnership arrangement. When a crisis arose, those involved in a partnership could always fall back on those partnership laws that had evolved since 1890 through the courts and in statute. The Bill explicitly removes that default provision and could therefore give rise to difficulties. That is why in the other place my noble Friend Lady Buscombe proposed a provision that, for the avoidance of doubt, partnership law would apply if not otherwise excluded by the Bill. The Government rejected it on the grounds that, as the llp had a separate legal identity and would need primarily to adhere to the Companies Act rules, having a default to the partnership law rules might result in confusion and possible conflict.

    I agree with the central thrust of what the hon. Gentleman is saying. Does he agree that one of the great advantages of the Partnership Act 1890 is that not only has it stood the test of time, but a great deal of case law behind it is intelligible and easy to understand?

    The hon. Gentleman makes a very good point. We can never anticipate all the problems that will arise, but a hundred years of case law will probably have covered almost every likely contingency. We are rejecting that hundred years' experience in having clause 1(5) disapply all that body of partnership law.

    We do not accept the Government's argument about why there should not be a default provision, because we are talking about the rules relating to the partnership agreement and the relationship between partners. The Law Society is also clear on that point. In its briefing for this debate, it states:
    The Law Society has always considered there to be the need for some default provisions that would operate in the absence of agreement to the contrary within a limited liability partnership and which would cover certain basic matters relating to the mutual rights and duties of the members of an LLP.
    In response to such concerns, the Government issued a consultation document in February, which proposed incorporating specific partnership law rules into delegated legislation under clause 15(c) of the Bill. The Government amended the Bill in the other place to enable that to happen. We will no doubt debate the issue in detail in Committee, but key provisions such as fundamental partnership rules should appear in primary legislation. We stick to our view that the Bill should contain an overall default provision.

    I would also be grateful if the Minister could address another important concern raised by the Law Society over whether the Administration of Justice Act 1960, as in force, will permit firms of solicitors to adopt the new form of incorporation. It understands that the Act will need to be amended, so I hope that the Minister will respond to that point.

    This is now a much improved and useful Bill that will assist professional firms to recruit and retain top-quality staff and partners who otherwise might be put off by the prospect of perpetual unlimited liability arising from the negligence of others. It should also reduce the risk of such partners fleeing to non-UK jurisdictions. Subject to our remaining concerns, which we will address in Committee and about which I trust the Minister will be as reasonable as his colleague in the other place, we remain supportive of an important and useful Bill.

    5.37 pm

    I tend to get suspicious when I hear bipartisan bleating about how wonderful a Bill is, although that is not why I wished to speak. I do not know whether we will have a tripartisan bleat from the Liberals, although they put in some good work in opposition to the Bill in the House of Lords. I hope that that might be followed up here.

    The Bill is not the epoch-making measure that it has been portrayed as, by both my hon. Friend the Minister and the Opposition. It is a shabby measure. If not sordid, it is at least suspect, and it is interesting that the songs of praise for it have come largely—in fact, overwhelmingly—from the vested interests. It is regarded as a technical Bill, but it will have enormous repercussions that should be more widely discussed. Unfortunately, we cannot discuss them in an atmosphere in which everyone agrees that the Bill is wonderful.

    The Bill will take the limited liability partnership—a device that began as a vehicle for tax evasion in Texas and Delaware, specifically to limit the tax obligations of partners in firms—and turn it into a new vehicle for corporate business. We do not know what the consequences of doing that will be. They could be substantial or they could be minimal. I fear that they will be more substantial than we think.

    The change in company and partnership law is being done at the behest of the mighty and the greedy, and indeed the mighty greedy. The lobby for the Bill comes overwhelmingly from the big five—formerly big six, until they started eating each other—accountancy houses. The fee revenue of the big five was £4.5 billion in this country alone in 1999. That makes them powerful organisations, and I do not like the spectacle of the Government rushing to serve their purposes, their greed and their desire to protect their profits, revenues and incomes as partners. I can understand the Conservatives doing that, because that was the whole process of Conservative Government for 18 years, and it is fitting that they began the Bill. I am more doubtful when a Labour Government pursue the measure. After all, Labour is a new and pristine party that will not make concessions to vested interests. We must ask why the Bill is being introduced—and especially why now?

    We know that the legislative timetable is packed. We know that there is a long queue of Bills. Discussions at the meeting of the parliamentary Labour party last week produced an enormous list of proposals from Labour Members for the legislative programme next year. These proposals included measures to deal with hunting with dogs; housing, including multiple occupancy; pensioners and carers, especially action on long-term care; the regulation of the private security industry; regulation and reform of park homes; equality and employment legislation; and consumer protection measures.

    Those proposals are only a part of the list. There is an enormous list of socially responsible and sensible legislation that needs to be introduced, but we are told that that cannot happen because of pressures on the legislative timetable. However, one of those pressures is this sordid little Bill. Why is it being introduced, and why now?

    It is a concession to a major vested interest, that of the big five accountancy houses. Unfortunately, it is not matched by any balancing changes to afford protection against any of the powers that are being given through the Bill. The Bill includes no protection for consumers of accounts—they are pretty weak or impotent when it comes to dealing with the big five or with unreasonable audits. Stakeholders in companies have very few rights to protect them from negligent auditors, but we are rushing to strengthen the position of those auditors. It is unreasonable to proceed in that way.

    If we are to make such a concession to the big accountancy houses—we are giving them a special privilege—let us also give some privileges to the consumers of accounts, to stakeholders and to those who suffer from negligent auditors. We should reverse the Caparo judgment; we should impose a duty of care on auditors; and we should stop auditors taking on other business and thus introducing dilution. Company law imposes liability. Directors are responsible and liable if they publish false and misleading accounts. However, if an auditor publishes such accounts, there is no responsibility. Nevertheless the Bill will give auditors increased privileges.

    The provisions that I have suggested could have been dealt with at the same time as the Bill. There is no reason for haste. That is why I have asked why the Bill is being dealt with so quickly. The Department of Trade and Industry company law review is continuing. It may propose some of the changes that I would like to see to redress the balance towards the consumer. Why not make these changes at the same time? That should be part of the deal.

    If the big accountancy houses want to secure a special concession, in return they should make concessions to protect the consumer. However, they are not doing so, and we are handing them a concession on a plate. That is extremely unreasonable, especially for small shareholders, along with the stakeholders and employees who want to know what is going on in their company and want honest, objective and effective audits. It is unreasonable similarly for those who rely on accounts to make investments. We are not giving those people any concessions while the vested interest is getting all that it wants. It seems that the consumers of accounts were not consulted in that process.

    What about Lord Paul and his experiences with the purchase of a Fidelity radio? He found that if he was to sue the auditors he had to buy the company and sue the directors, who then had to sue the auditors. That sort of experience gives me no faith in redress against auditors, yet auditing is a monopoly granted by the state to a particular class of people. Why are we giving them a concession when it is surely our job to regulate them?

    The United Kingdom has public limited companies and 600,000 partnerships. Now, we are creating an intermediate breed, limited liability partnerships, which might even be called a corporate third way—although I do not think that such a development was envisaged in Professor Giddens's third way. This development could have severe consequences. Such partnerships could be established by fraudsters and by those who have been disqualified as company directors. We are diluting controls over those people, who could slough off their responsibilities.

    I know that new Labour is nice to business, and that it is right that we should be nice to business. All sections of the community have to get on. We are not in a class war and we no longer feel basic antagonism towards business. I also know that the accountancy houses have been very nice to Labour. When we were in opposition, they gave employment to people who have subsequently become Ministers. They have organised conferences for us, provided advisers and advice, and even attended our fund-raising dinners. They have done us good service. I do not think that they did that with any view of a return such as the Bill—they are averse to such sordid motives—but they are not averse to getting this legislation.

    The legislation's origins are very murky indeed. I should like to detail those origins because they are not based solely on a process of consideration, as we have been led to believe by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) and Ministers. The fact is that the big accountancy houses got into a panic—which was well detailed by the hon. Gentleman—because, as they have deep pockets, they felt vulnerable. They were afraid that people would make huge claims against auditors. They were afraid that people were thinking, "If you cannot do anything else, you can make a claim against the auditors." However, the panic that possessed auditors bore no relation to reality. It also took no account of their own involvement in their own mistakes.

    These days, the accountancy houses offer auditing services to the big public limited companies and essentially use those services as a market stall from which to sell other accountancy services. They get their foot in at the plcs by auditing them, and then use the audit service as the basis for selling other services to the company. That practice, however, dilutes the auditing process. Obviously, if they want to sell other services to the firm, they will be complacent in auditing. Audit problems in such situations are, therefore, of the auditors' own making.

    There may be audit problems and dodgy companies, but who made the auditors take on those companies as clients? Who made them take on Maxwell? What force was used to make auditors audit the Maxwell accounts or the Bank of Credit and Commerce International accounts? Auditors do not need to take on the accounts of dodgy companies. They should, therefore, face the consequences of dealing with such companies. The accountancy houses are in that position because of their own greed and their desire to maximise both fee income and the sale of other services to audit clients.

    The hon. Member for Bognor Regis and Littlehampton tried to hype up the houses' panic and alarm, but all the examples that he gave were from America. He could not produce any evidence of huge claims. The Select Committee on Trade and Industry also commented on the lack of evidence. Even the figures that have been mentioned are suspect, because they are the claim figures, not the settlement figures—which have not only been kept very quiet, but are very small indeed.

    The hon. Gentleman also took no account of the fact that those who sue auditors usually come from other parts of the same big five accountancy house. Usually, the insolvency arm of an accountancy house sues to reclaim money from the audit arm at the same or another big five accountancy house. It is the worst type of incestuous suing. The tenor that auditors have expressed is terror of themselves and of other parts of their own firm.

    Does not the small number of settlements and claims to which the hon. Gentleman referred rather contradict his lifetime's work in condemning audit firms' ability to do their job well?

    I do not condemn the ability of audit firms to do their job well, but they are influenced by a desire to sell other services, which might make them more complacent than they would otherwise be. Business needs good, honourable auditors of integrity who provide a true and fair account of the affairs of the company. I do not want any constraint on that. If auditors do not do that, they should suffer the consequences. The Bill does not provide for that. We are protecting them from suffering the consequences by allowing them to escape the liability. We are not giving them any discipline or sanction to force them to provide that service.

    I made it clear in my speech that limited liability partnerships are subject to all the same restrictions and controls as companies on fraudulent dealing or any other form of misdemeanour. I do not understand why my hon. Friend thinks that they are suddenly above the law.

    I do not think that they are above the law, but no protection has been offered to the consumer. Admittedly, partnerships as they exist do not provide such protection, but we need a sanction against bad audits, fraudulent audits or misguided audits, which at present we do not have. The Bill will limit the liability of partners who might have been responsible for such audits. My figures suggest that only 2.7 per cent. of the total fee income of the big five goes on liability-related expenditure. Their huge tenor about the grab at their deep pockets is over 2.7 per cent. of their fee income. It is difficult to get verifiable information about that.

    The accountancy firms tried to panic the Conservative Government, who referred the issue to the Law Commission. On the ground that proportionate liability did not fit in, the Law Commission said no go—it might have said it in Latin, but it said that the firms could not have that special concession.

    The big audit firms then began another devious manoeuvre. They were so anxious to secure limited liability that they went to the Jersey legislature and tried to buy legislation on their own terms. It was drawn up by Slaughter and May and financed by what was then Price Waterhouse and by Ernst and Young at a cost of £1 million. The Jersey law draftsmen found the legislation very unsatisfactory, but it gave the big audit firms all that they wanted. One of the senior partners of Price Waterhouse said that they were promised that it would be nodded through.

    Unfortunately, the legislation that the firms wanted was not drawn up properly and the Jersey legislative draftsmen raised doubts. Attempts to rush it through caused protests and the expulsion of Senator Syvaret. It was delayed and the firms did not get the fast-track procedure that they wanted. When they got the legislation, they were warned by the Inland Revenue that there would be tax consequences if they set themselves up as limited liability partnerships in Jersey—so, after all that effort buying legislation in Jersey, no firm went there. They were using the process as a means of pressuring the Conservative Government. The hon. Member for Bognor Regis and Littlehampton has told us how proud he is of his accountant friends. Some of my best friends are accountants. A fear was created in the Conservative Government that all those black-coated accountants would don their black suits and trot off to Jersey to work in the sun.

    That threat produced action. The Conservative Government began to draw up the legislation, we have continued with that. They did so under pressure from the big five and with a departmental civil service that works in what I would call close collusion—but let us say cahoots or a relationship—with the big accountancy houses. They are anxious not to offend them and are keen to do what they want, as they did in this case.

    I pay tribute to my hon. Friend the Minister for his willingness to listen to the criticisms. The same goes for his predecessor. Changes were made—for example, we warned that if the concession was given just to accountants, other professional groups would have a rights case against the Government that they should be able to set up limited liability partnerships, so the original intention had to be widened.

    However, the pressure was too strong and the Bill is the result. I still do not understand why it is necessary. I sat on the Committee that considered the Companies Bill in 1989—it was my last great effort as a Front-Bench Labour spokesperson. I was fired just before the Committee began its proceedings, but I still took a close interest in it. That legislation gave the accountancy houses the right to set themselves up as plcs if they wanted. They had been pressing for that, claiming that the fate of the accountancy profession depended on being given plc status. We gave them it, but only one accountancy firm took it up, converting its audit arm into a plc. That shows how they panicked. That alternative is still available. Why do they not want to be plcs? Why do they want special limited liability partnership status?

    In 1991, the Institute of Chartered Accountants in England and Wales said that
    the obligation…to publish their accounts is perceived as a considerable drawback.
    In other words, the firms want to keep their business to themselves. They do not want the partners to have to reveal their income. They do not want to reveal anything beyond the firm's total fee income. That is why they did not want to take up the offer of plc status.

    We are giving those firms what they wanted. I am not sure of the tax position. As partnerships, they have advantages over plcs. The Bill does not create a new tax regime for llps. The Bill says that the tax effects are neutral. I am not sure. I hope that my hon. Friend will deal with that. Large numbers of plcs might see the benefits and convert themselves into llps. What is to stop them? There could be a mass exodus, not from partnerships to limited liability partnerships, but from plcs to llps. Do the Government anticipate that? Has there been an estimate of the possible scale of that? What are the restrictions?

    Such a move would minimise corporation tax obligations. Indeed, the firms would escape the corporation tax regime and move on to schedule case 1 and 2. That requires them to be taxed on a cash basis, not an accrual basis. They can stagger their payments over a far longer period than plcs can. That is the advantage. Any account can be shifted from one year to another.

    Expenditure on entertainment—or whatever—for plcs has to be wholly, exclusively and necessarily required. That is three obligations. For partnerships, the word "necessarily" is dropped. That is a much laxer tax regime on entertainment spending. Companies pay corporation tax nine months after the end of the year; llp partners have up to 21 months to pay their tax. That gives much more scope and must offer tax savings. As legal entities, plcs have a liability to pay tax and llps do not. The partners, not the organisation, are liable. The organisation can have no assets and be only a shell.

    It is quite possible that there will be a loss of tax. We estimate that the shift from partnerships to limited liability partnerships will result in a tax loss of about £200 million a year. I can think of a lot better uses for £200 million, if our estimate is correct, than giving it to accountants, such as spending it on social purposes.

    Will my hon. Friend tell me to whom he is referring when he says that "we" estimate that the measure will mean £200 million a year less in tax for the Inland Revenue?

    I am referring to my associated body of accountants. That sounds like a massive Oxford college. Two accountants, another Member of Parliament and I have worked this out on the basis of the existing liability. The figures are perfectly credible. I am not a tax expert but the accountants are, and that is their assessment.

    The limited liability partnership in Jersey was pretty weak, but it required the llps to post a bond of 5 million quid if they were going to operate. There was that to fall back on. I see no similar safeguard in this Bill, which leaves the way open for people to fiddle.

    If I laid a legal claim against a limited liability partnership, it would take years to resolve. The Maxwell case took nearly a decade. As for the Bank of Credit and Commerce International case—

    My hon. Friend is quite right. Let us suppose that my claim against the limited liability partnership is for £50 million. However, the partnership has no assets—it does not exist. There is nothing that can be seized or given to me when I win my case. What is there to stop the partners siphoning off the dosh over the years—the case will take several years to reach the courts—and turning the llp into a shell company with no brass at all?

    The Bill allows for the recouping of payments for the previous two years. That is too short a period, considering that law cases go on for years. All credit to the Government for providing for a two-year period, but why not make it five? Otherwise, anyone winning litigation against a limited liability partnership could end up with nothing because there is nothing to be had. The money could have been siphoned off by the partners, whose liability has been limited.

    We are all in favour of greater openness from companies, plcs, business in general and the Government. We all want to see disclosure. Some—not enough—is provided for by law in relation to plcs but not for limited liability partnerships, which will operate in a fashion akin to plcs. How much the partners are paid should be public knowledge. We need to know what their interest is and what their incomes are. Surely there is nothing to hide. One of the partners in an accountancy firm declared in the House of Lords that he had nothing to hide. He was quite happy for his income to be published. We need to extend the obligation to publish. Indeed, there is much less of an obligation on llps to publish than there is on plcs.

    I hope that there will be new legislation on companies soon. When we use it to extend the obligations on companies to publish in their accounts factors such as low pay or their environmental record, will the same proposals extend to limited liability partnerships? Why are we creating a third category of corporate entity to which the obligations imposed on plcs do not apply? There is not enough information.

    My final point is about regulation. Companies are regulated by the market, competition, the takeover panel and the Competition Commission. There is regulation of plcs, but who will regulate the llps? In accountancy, regulation is provided by professional bodies such as the Institute of Chartered Accountants and the Association of Chartered Certified Accountants. They are small compared with the huge might of the big five. The big five provide most of the staff when it comes to regulation—[Interruption.] It is good to know that my speech is exciting such interest. I am delighted that so many supporters of restricting llp status are gathering, muttering, "My heavens, he's right. This is true—we must take action."

    There is no effective regulation. We do not have the sort of independent regulation that the Securities and Exchange Commission provides in the United States. It is reasonable for llps to have a proper framework of regulation.

    Those are my worries about the Bill. I know that my hon. Friend has listened to our criticisms and I am grateful to him. I hope to make more points in Committee. They have to be taken into account, because the Bill gives privileges to a very wealthy and powerful body, and in particular the big five accountancy institutions. We are disturbing the existing structure of corporate governance and partnership governance to do that, without giving any concessions to the consumers of accounts. I question whether, at this stage, we should be doing that in this way.

    6.7 pm

    I should disclose at the outset that I am a solicitor, although I do not practise as such at the moment.

    The Bill creates an entirely new and separate business entity which will be a legal person itself, similar to a limited company, called a limited liability partnership. It is open to any business to become an llp, provided that more than one individual or company is conducting the business. I shall lead on to the position of overseas partners, corporate partners and other matters. In an llp—unlike like a partnership—the liability of members will be limited. However, each member will owe a duty of care to his or her clients or customers in tort. In the event that an individual member is negligent, that member will be liable to the full extent of his or her own personal assets.

    Other members—innocent members, for want of a better expression—will have no such personal liability. Claims, however, can be made against the llp to the full extent of its, rather than its members', assets.

    The partnership is selling itself on its reputation and its work as a partnership, as a team of people. It might be 600-strong. It is the collective body and it is its reputation that is being sold. Why should not the other partners, whom the hon. Gentleman described as innocent, have a liability too?

    Because a limited liability partnership is a new entity and reflects the facts of life today. Joint and several liability is very unfair in certain circumstances.

    The Bill requires the initials llp or the words "limited liability partnership" to follow the name of the business. That will advertise its status. The llp will be obliged to be registered at Companies House, along with a list of its members, and records must be kept up to date. I shall come back to that point later in my speech, although I understand that there will be a further tier of creditor protection in the requirement for financial disclosure, similar to that required in respect of limited companies. I believe that the Government will in due course publish regulations to deal with insolvency and the winding up of llps, and to deter avoidance of liability by members, which would jeopardise the position of creditors. I believe that the Government intend to apply to llps the same offences that apply to companies under the Companies and Insolvency Acts. I shall refer later to tax treatment of llps.

    There has been much pressure on the Government from large, international legal and accounting firms for the introduction of this new business entity. I understand the reasons for that. One must question whether it is fair for a partner in London to be liable for all his or her assets as a result of the negligence of a partner in some far-off country whom he or she has probably never met—indeed, given the size of some firms, some UK partners have probably not met some others.

    The Bill requires the most careful scrutiny in order to protect the public and the position of creditors of llps. I shall concentrate on the pool of cash and assets available to creditors and the general provisions for protection. The Minister will be aware that if llps make rapid or premature distributions to members, they can run on a deficit basis to ensure that there will be few or no assets to which creditors may have recourse. Professional firms, such as firms of accountants or solicitors, will have professional rules that impose obligations to have what one hopes will be adequate indemnity insurance cover, but the public should realise that that covers clients, not other creditors. It does not cover employees, except in so far as they are clients of the firm.

    The position of creditors could be somewhat shaky under the arrangements. I emphasise the need for full and adequate disclosure at Companies House of the assets and liabilities of the llp. I should welcome the Minister's comments on vicarious liability. In large professional firms, many partners—members, as they will be called in llps—do little fee-earning work. A great deal of such work is done by employees, who will not be members. Is that a means by which members may shield their personal assets from liability? In other words, do direct contact and direct instruction to employees mean that there will be no recourse to any member's private assets? Members, particularly of large firms, can perfectly legitimately argue that their involvement in a practice or firm is managerial only. In cases of direct instruction to employees, what will be the member's personal position, and will employees be personally liable?

    I appreciate that the llp will be liable in such cases, but there are compelling reasons for concern that some Ups may legitimately run on a deficit basis, to the detriment of clients, customers or creditors. My advice to professional clients in practice was always to avoid being a salaried partner: there are none of the advantages, and all the liabilities.

    We all know what partnership liability is about. I was an equity partner in a law firm for many years. Such liability is joint and several, and it embraces all the assets of all equity partners and all salaried partners of the firm. That is certainly the case so far as outside creditors are concerned. A client of a major firm who is successful in an action against that firm may therefore have recourse to all the assets of all the partners, whether or not they are equity or salaried partners.

    I should be grateful if the Minister would say whether consideration has been given to the consequences in the case of an individual who became a salaried member of an llp. Presumably, that individual would have no share in the profits of the firm and no say in its management. If the salaried member does the work for the client, will he or she be responsible to the extent of all his or her assets? If so, presumably the same may be said for employees. Those points emphasise the importance of creditor, client and customer protection.

    The Bill envisages disclosure provisions similar to those applying to limited companies. Will the Minister elaborate on that form of disclosure? Will full accounts have to be rendered annually of the financial affairs of the llp, including details of all shares of profits and salaries, especially those of the higher-earning members or the higher-earning employees? Will details of assets of the llp have to be included? I hope that details of all mortgages and charges, and of the amounts thereof, will be included in the information available to the public.

    I may be able to help the hon. Gentleman. Only those firms in which the amount of profit before member remuneration and profit share exceeds £200,000 will have to state the amount of profit attributable to the member with the largest share.

    I am grateful to the Minister, but he mentions the member with the largest share when he surely means all the members. I shall leave it to the hon. Gentleman to return to that when he winds up the debate.

    Presumably, on disclosure, all changes in membership of the firm will have to be notified to Companies House within a short period. I realise that, for tax purposes, all firms are going on to a full earnings basis. Nevertheless, the valuations for Inland Revenue purposes of work in progress or good will are pretty fluid and do not reflect the true value of such items. It may be that disclosure should be made of those items to show them as a true and fair valuation. That would make further assets of the firm or llp more apparent.

    From a tax and administrative point of view, it will be easier to make distributions or allocations to members of an llp in their personal capacities than it is to make them to shareholders or directors of companies. Will there be rules on a sufficiency of distributable assets before distribution can be made to members? Will the company law offence of trading while insolvent be imported into the affairs of an llp? The last thing that the House will want to create is a business entity that opens up easy opportunities for fleecing the public.

    It will be possible to start an llp by oral agreement, and I join the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) in saying that it is a shame that the provisions of the Partnership Act 1890—an excellent piece of legislation—will not apply. Heaven knows what chaos there will be in the circumstances in which an oral agreement forms the basis of an llp. The courts will be asked time and again to interpret the intentions of members where they have not been recorded in writing. Sometimes, I admit, written records may be even more misleading, but I hope that the Government will think again. The matter has been raised in the other place, and those of us who have worked for a long time with the 1890 Act know that it is excellent.

    Significant tranches of the Bill have yet to see the light of day, and will be introduced by regulation. I noted what the Minister said about that, but I hope that important regulations will be subject to full scrutiny by both Houses. I have already mentioned legislation on insolvency and administration, but other regulations are to come. I understand that discussions are still proceeding with the Minister's Department in relation to clause 7(2) and the position of former members of an llp.

    The main question is whether the DTI will relent on that clause and allow members to agree alternative arrangements to the fixed statutory arrangements. I remind the House of my earlier comments as to the flexibility of the 1890 Act.

    Members of the public and, indeed, professional individuals would be most unwise to enter an llp without full and comprehensive advice from an expert. Presumably, the DTI has considered the foreign law implications of setting up an llp. At first sight, the matter would seem reasonably straightforward—individuals from any jurisdiction can form a UK-based llp. There will obviously be tax considerations, but such an arrangement would not seem inimical to the law of any overseas country, although I should welcome the Minister's comments on that point. Similarly, it would seem to be possible for a person to be a member of an llp that was a limited company that could be registered in any jurisdiction in the world.

    I want to address the impact of revenue law on limited liability partnerships. The Minister has confirmed my understanding that the setting up of an llp is intended to be genuinely tax neutral—for all taxes, including stamp duty. Ministers have made statements to that effect, although they are not wholly correct. The matter depends on the medium in which the trade or profession is carried on immediately before the entity becomes an llp; if two individuals, who are conducting separate trades, decide to combine to form an llp or if an existing partnership or partnerships do so, the arrangement will probably be tax neutral.

    I hope that the converse will apply—that, if an llp decides to dissolve itself into a series of businesses carried on by sole proprietors, a series of partnerships or a partnership, that process, too, will be tax neutral. As I pointed out, since the Finance Act 1998, transitional provisions have brought all firms on to a full earnings basis, rather than their staying on a cash basis. Presumably, such arrangements could be carried over one way or another—I should welcome the Minister's confirmation of that point.

    As I pointed out in interventions on the Minister, a problem will arise when shareholders of a limited company want to form an llp. For about 20 years, Ministers and Inland Revenue officials have been pressed to ease the tax problems—especially those on capital gains—associated with disincorporation. Will the Minister hold consultations with his Treasury colleagues, dust off the disincorporation material and re-examine it? That would add to the flexibility of the UK economy, especially with the formation of this new business entity. There should be few problems in going from sole trader, partnership or llp into a limited company, but to go the other way would pose severe problems.

    Subject to the caveats I have entered, the Bill should put the UK on an equal footing with many of our competitors—most notably the United States and areas of continental Europe where similar provisions already apply. Nevertheless, it is vital to secure proper protection for customers, clients and creditors. The Bill should contain nothing that would relieve individuals of personal responsibility for their actions and for the full extent of their assets.

    Finally, a fundamental principle of the Bill should be that the price for the limitation of liability is full disclosure of the financial affairs of a business and that such information should be readily available to the public.

    6.24 pm

    I apologise to the House for arriving slightly late. For the first time, I discovered the perils of having an office at 7 Millbank—when I read the annunciator screen and had to run to the Chamber.

    I declare an interest as recorded in the Register of Members' Interests. Since last month, I have been parliamentary adviser to the Institute of Chartered Secretaries and Administrators—I have been a member of the institute since 1988 and a fellow since 1997. Before I became a Member, among various roles in management and manufacturing industry, I was assistant company secretary from 1988, and group company secretary from 1991 to 1998, of Redland plc, then a multinational UK FTSE 100 building materials company. Furthermore, between 1983 and 1988, I practised as a solicitor in a City of London firm. Although I remain on the roll of solicitors, I have no declarable interest, as I am non-practising. That qualification enabled me to hold the post of company secretary of a public limited company under the Companies Acts.

    I welcome the Bill and congratulate my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) on a positive and supportive speech and on his identification of issues that remain to be addressed by the Government. That will ensure that the House improves the Bill so that it is of the quality that our professional and business community has a right to expect from us.

    I pay tribute to the calibre of debate on the Bill in another place. I studied the proceedings in detail in Hansard. Their lordships dealt responsibly and forensically with a range of issues. I am happy to offer my support from the Opposition Benches. As has been mentioned, the previous Conservative Government proposed such a measure.

    From my business experience in this country and abroad, I see the Bill as an important step in acknowledging the reality of the professional and commercial world—in the context of today's multinational companies and partnerships. The Bill is necessary not only to retain competitiveness, but to maintain and increase confidence in the corporate and legal structures for professional and commercial enterprises in the UK—whether large, medium or small—so that they can continue to take on all corners.

    In response to the hon. Member for Great Grimsby (Mr. Mitchell), plc status is not the answer. Llp status best enables the retention and enhancement of the special culture of partnerships which is not a hallmark of plcs. It is important to understand the essential business ingredient that such a culture represents.

    In that case, there will be a rush to give us maximum disclosure—as would be appropriate for a plc. If llps want to retain a special culture, the Government are allowing them to do so. There would thus be no objection to further disclosure on, for example, remuneration or internal company accounts—all the information that plcs have to provide.

    I know that the hon. Gentleman has a long track record in favour of that argument. However, it is based on the false premise that disclosure goes hand in hand with the genuine interest of those who need the information. The whole point about partnerships and about llps is that they are a collection of members—they will hold that information among themselves. A plc has many shareholders who have a right to the information. The analogy is not a proper one.

    Does the hon. Gentleman agree that it is in the interests of the public, creditors and clients that, when they deal with a firm with limited liability—because there will be some limited liability—full disclosure should be made?

    Of course. The hon. Gentleman makes a valid point. However, that matter is covered by general rules, regulations and laws that will apply as well as the specific provisions of the Bill.

    I shall focus my remarks on one aspect of the Bill, for the very good reason that all the other points have been fully covered in our debate and in the debate in another place, and I do not want to take up the time of the House by rehearsing those arguments. First, however, I offer a mild, general warning. As has been said, the drive for the Bill came mainly from firms or partnerships of accountants, solicitors and other professional services firms—especially larger, often international, firms. This country can rightly boast of our track record of global, competitive success in those fields. However, in our increasingly litigious and insurance-focused society, the pressures and inappropriateness of partners being responsible—down to the shirt on their backs—for liabilities, acts and omissions of other parties are neither competitive nor sensible. It is increasingly unrealistic and unreasonable for partners to have sufficient knowledge to be held personally responsible. I understand that and thus support the Bill.

    However, I draw the House's attention to experience in the United States, where llps have existed for some time. The equivalent corporate structures apply under Californian legislation, as well as under Texas and Delaware law—a point not lost on the hon. Member for Great Grimsby. In large part, they are similar to the structure promulgated under the Bill.

    I have personal knowledge and experience of how rapidly the llp structure came to be widely used for joint ventures such as those between manufacturing companies. There were many advantages, especially when non-US international companies came together in a joint enterprise for no premium. The structure offered relatively favourable tax advantages, as compared with the traditional company.

    The Government should take advice on the matter from their specialist advisers, to ensure that the Bill has been reviewed in the light of the American experience. There must be no unexpected consequences flowing from the Bill if the llp structure is applied beyond the professional partnerships that the Government appear to have had in mind throughout their approach to its drafting and introduction.

    I shall restrict my remaining remarks to matters of which I have experience and know a little about. Clause 8 deals with designated members. On Second Reading in another place, my noble Friend Baroness Buscombe questioned
    the provisions for service as a designated member of the partnership given, we believe, that the provisions, as drafted, could be open to abuse; for example, as we understand it. an llp could assume as partners one or more offshore companies and register them as designated members, thus making it difficult for the regulatory authorities to ensure compliance or impose penalties.
    I do not agree with my noble Friend's suggestion that
    the concept of designated members be removed from the Bill, making all the partners equally responsible for the llp's conduct, including compliance with the registers.—[Official Report, House of Lords, 9 December 1999; Vol. 607, c. 1424.]
    Lord McIntosh of Haringey replied that
    the noble Baroness was afraid of the role of the designated member. That is very specific and similar to the role of the company secretary. It includes a number of the powers placed on the company secretary under the 1985 Act such as the signing and filing of the annual return…It is desirable to keep the concept of a designated member for those purposes so that the authorities know who to approach.—[Official Report, House of Lords, 9 December 199; Vol. 607, c. 1443.]
    He added that it was equivalent to the provisions in the Companies Act 1985.

    I understand my noble Friend's concern. I agree with Lord McIntosh's response in terms of the desirability of keeping the requirement, but the matter was developed in Committee in another place, when my noble Friend Baroness Buscombe tabled an amendment to clarify the role of the designated member. She said that the Bill did not appear to explain what a designated member was. Lord McIntosh answered that he understood the difficulty with clause 8:
    It sets up all the conditions under which designated members are to be appointed and changed and how notification is to be given, but it does not state what they will do. I apologise for that…but it would be wrong to limit his role in that way.—[Official Report, House of Lords, 24 January 1999: Vol. 608, c. 1387–88.]
    I believe that that problem has not been overcome. The House must ensure that all the terms of good corporate governance that have been learned and applied over the past 15 years are imported into the Bill. One solution, given the broad scale of business most likely to take advantage of llp status, would be to look at the role of secretary for limited companies, as defined under the Companies Acts, and to consider whether those provisions could be imported helpfully and efficiently into the Bill.

    The role of the company secretary is under consideration as part of the Department of Trade and Industry's company law review, and is a matter for consultation. I acknowledge that parallel thinking is going on about the matter.

    I suggest that a designated secretary need not be a member of an llp, just as the Cadbury reforms of corporate governance mean that a company secretary need not be a director of a company. That designated secretary could be appointed—and removed—by all the members.

    I hope that the Minister will consider providing that every llp and its members should have recourse to the advice and support of a named, UK-resident llp secretary. That might meet the concerns expressed by Baroness Buscombe in another place. That llp secretary should be suitably qualified to assist members in safeguarding the llp's rights, advancing its interests and meeting its obligations. The secretary should be able to provide the necessary advice and guidance to members about their obligations and responsibilities under relevant laws and regulations.

    The company secretary is often said to act as the conscience of a limited liability company. Under current company law, company secretaries do not have to be chartered secretaries or members of the Institute of Chartered Secretaries and Administrators. The secretary of a small company can be any person. The secretary of a plc can be a qualified lawyer or accountant, as well as a chartered secretary, so I am not making an exclusive or special plea for chartered secretaries—and in any case the rules of the House would prevent me from doing so, given the interests that I listed at the beginning of my remarks.

    I hope that the Government will consider the proposal that an llp must have a secretary. That would help meet the concerns expressed by the hon. Member for Great Grimsby. More important, it would enable the members of the llp to give proper regard to the interests of the company as a whole. They would be able to monitor the internal activities of the llp, safeguard the interests of all members and ensure that the interests of employees, creditors and other stakeholders were properly taken into account.

    Llp members, in addition, could be confident that the members were being properly informed, advised and supported, individually and collectively. They would be able to help avoid some of the potential for factionalism that can develop in such firms, and be satisfied that there was someone available to take responsibility for internal disclosure in the llp.

    The proposal could also ensure that the llp's decisions were properly made, recorded and implemented throughout the organisation, and that the decisions of the llp executive were properly interpreted and disseminated. Above all, it would ensure proper compliance with all statutory requirements.

    I have listed my caveat, request and recommendation with regard to the Bill, but I am very happy to support what is a very welcome measure.

    6.37 pm

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

    We have had a good and valuable debate. I am pleased that the Bill has aroused so much interest, after an inauspicious start when the hon. Member for Torridge and West Devon (Mr. Burnett) seemed to be on his way out of the Chamber. I was glad that he did a U-turn and came back in. The debates in Committee should be interesting, and I shall try to deal with some of the many questions that have been raised this evening.

    First, however, I want to thank the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). His criticisms were constructive and he made some kind remarks about the way in which the Government have taken the Bill forward.

    The hon. Member for Bognor Regis and Littlehampton asked about the imposition of fines and the power to imprison people for offences. The treatment applied to llps in that regard will be the same as that which applies to companies. The offences in the Companies Act 1985 were agreed to be appropriate for corporate entities such as companies. The Government intend only to apply the same offences and penalties to llps.

    There is no reason why a member of an llp should suffer a lesser penalty than the director of a company for the same offence. I hope that that answer goes some way to satisfying some of the criticisms raised by my hon. Friend the Member for Great Grimsby (Mr. Mitchell), to which I shall turn in more detail in a moment.

    The hon. Member for Bognor Regis and Littlehampton also said that the Law Society wanted the Administration of Justice Act 1960 to be amended to enable solicitors to become llps. Departmental officials have been discussing the matter with the Law Society and the Lord Chancellor's Department, but the hon. Gentleman will know that the legislation governing solicitors is very complex. Further consideration is being given to the necessary changes and to how they could be given legislative effect.

    The hon. Member for Bognor Regis and Littlehampton asked about default provisions, which will be set out in regulation, as clause 5(1)(b) makes clear. I see no strong reason to put the regulations on the face of the Bill. They will apply in default, where there is no agreement, or where an agreement is inadequate. It is not usual for default provisions to appear in primary legislation.

    My hon. Friend the Member for Great Grimsby made some vehement criticisms. I very much welcome his contribution, which was infused with the crusading spirit that he deployed on behalf of the victims of a number of prominent and disgraceful scams in which, I am afraid, accountancy firms played a shoddy and collusive role. In a sense, he asked a question: why should businesses have to organise themselves as a company to gain limited liability, provided that appropriate safeguards are in place to protect clients and third parties? I wonder what harm there is in that choice if the safeguards are there.

    Creation of limited liability partnerships will allow our businesses to compete internationally with those already organised as llps overseas. That is an important issue. It is no good having companies if they cannot compete with similar companies overseas. We shall lose jobs, services and expertise in the long run. That point must be made, as it is a very important one for businesses that operate globally.

    Many firms wish to maintain a partnership ethos, with every member having a stake in the business and a role in management as well as operating in good faith towards fellow members. It is difficult, particularly for a large firm, to sustain such an ethos in a company structure. Several hon. Members have made that point and it is important.

    My hon. Friend asked with great energy whether the Bill was not just a sop to the accountancy profession. Indeed, much sniping has suggested that the Bill is a concession to the profession. That is not the case. As I have said, there is no reason why businesses should have to organise themselves as a company to obtain limited liability, provided that appropriate safeguards are in place to protect clients and third parties. The Bill, along with the intended regulations, will achieve an appropriate level of protection.

    In addition, the llp will not be restricted to accountants nor even to professionals. We took the decision some time ago that the llp will be available to any firm of two or more people. We expect that it will prove attractive to start-up businesses that may or may not be comprised of professionals. Although the internal organisation of the llp will be for its members to agree—that agreement will remain confidential to them—the intention is to make regulations that will apply appropriately modified provisions from company law. Clauses 14 and 15 provide powers to do that. That means that members and/or the llp itself can be pursued, for example, for wrongful or fraudulent trading—a point that was at the heart of my hon. Friend's criticisms. The llp can also be investigated and members can be disqualified from being a member of an llp and from being a director of a company. Specific provision will be made to ensure that members cannot siphon off funds in the event of insolvency. Regulations will also require llps to file financial information equivalent to that required of a company.

    My hon. Friend's underlying criticism related to the regulation of professionals. I want to be clear; it is not the Bill's function to regulate professional activity. Where regulation for a particular activity is thought necessary, the activity—not the entity through which it operates—will be regulated. Regulation will be achieved through a mixture of statutory and non-statutory regulation. That means that it does not matter whether a professional chooses to operate as a partnership, a company, a sole trader or, in future, as an llp. If the activity is regulated, it will continue to be regulated regardless of what status the professional chooses for his business.

    That does not mean that I am unsympathetic to my hon. Friend's arguments about the regulation of professions. I am glad that the Office of Fair Trading has decided, at long last, to take a good look at the way in which some professions operate. However, that is not what the Bill is about.

    My hon. Friend raised the question of company law review and auditor liability. The consultation document published by the company law review steering group in March invited comments on a number of issues relating to the audit and the auditor. In particular, the document expressed the view that there was a need both to extend the range of the auditor's duty of care and to ensure that that extension is not abused. It was suggested that that should be done by introducing effective constraints on the circumstances in which claims can be made. I see no need at this time to take any more of the House's time on the issue of auditor liability, but it is under discussion by the company law review steering group, which has yet to reach any conclusions.

    My hon. Friend and the hon. Member for Torridge and West Devon asked about the disclosure of members' earnings. Regulations will require that the earnings of the highest paid members will have to be disclosed, and total earnings will also be disclosed, as will the total number of members. It will therefore be possible for someone to work out the average earnings.

    My hon. Friend asked whether it would not be wise to require some form of capital maintenance or a guarantee from members to ensure financial provision in the event of difficulties. We have considered carefully the concerns expressed about the lack of minimum capital requirements, which would be similar to those made of companies, or the lack of some kind of financial guarantee from members in the event of failure. In practice, private companies are able to hold capital worth as little as £1 and public companies are required to hold at least £50,000. However, as my hon. Friend pointed out, those sums seem irrelevant when creditors may be owed tens of millions of pounds or, as in the case of the Bank of Credit and Commerce International, billions of pounds.

    A minimum capital requirement does not necessarily translate into the availability of funds in the event of insolvency. Even so, some have argued that there is a public interest in protecting less well informed consumers—who do not expect to become a creditor when purchasing goods or services from an llp—to a greater degree than the level to which they are protected when they deal with partnerships or companies. However, as I am sure my hon. Friend will acknowledge, the difficulty is devising a regime that, while allowing for a reasonable level of funding to protect creditors, is not so burdensome as to prevent firms from setting up in business or to discourage them from trading through difficulties.

    The hon. Member for Torridge and West Devon asked about the overseas members of partnerships. Some firms—for example, a professional firm with branches in the United States—may have members who operate overseas. For a partnership, if the partner in London is negligent, the partner in America is jointly and severally liable to the full extent of his assets. In an llp, the American partner would not run such a risk even if it were possible for a claim to be made successfully against the London partner.

    I may give way in a moment, but I would like to move on.

    The hon. Gentleman asked about accounting requirements. Traditionally, in United Kingdom legislation, the quid pro quo for limited liability is seen to be financial disclosure. It is right that those dealing with a business that has limited liability should be able to discover basic information about its financial status. I agree with him entirely on that. Our intention is thus to require equivalent financial disclosure as between an llp and a company. Using the power in clause 15, it is intended to make regulations applying to llps under the accounts and audit provisions of the Companies Act 1985, but with appropriate modifications. They will achieve financial disclosure equivalent to that required of a company.

    The hon. Gentleman asked about the ability to have salaried partners in an llp.

    Salaried members, I am sorry. Anyone who wishes to become a member of an llp must be registered as such at Companies House and clause 6 will make that person an agent of the llp. As such, the llp will be liable for his actions. If a client can prove that a member owed him a duty of care and was liable for it, the member would be liable.

    The partner would be liable: the employee would not be liable.

    I shall move on, as the hon. Gentleman asked many questions, some of which I shall try to answer. He asked about clause 7 and queried the need to reconsider the position of a former member. The Law Society raised concerns about the Bill's drafting and we are considering whether we agree that there is a potential problem. I assure the hon. Gentleman that that is receiving due attention.

    The hon. Gentleman and other hon. Members asked wide, but vital, questions about accounting requirements. As I said, in UK legislation, the quid pro quo for limited liability has traditionally been seen to be financial disclosure. The hon. Gentleman and my hon. Friend the Member for Great Grimsby asked whether accounting requirements on llps will be different from what is currently in place for companies. Broadly speaking, the answer is no. The accounting requirements on llps will be comparable to those for companies. The detail to be provided in llps' accounts will be comparable to that provided by companies, but the information given will reflect their different structure. For example, llps will not have share capital and will not pay dividends.

    It is intended that all llps will provide information in the notes to the accounts about the aggregate amounts withdrawn or applied on behalf of members during the financial year. That, along with the requirement to disclose the earnings of the highest-paid member in cases in which profit exceeds £200,000, will help creditors to make an informed decision about whether it is in their interest to trade with a particular llp.

    I believe that the hon. Member for Eddisbury (Mr. O'Brien) asked whether the Bill should clarify the role of a designated member by including a specific definition of a designated member; or at least he reflected concerns that were voiced in another place about the matter. We do not believe that a definition would make the role of a designated member any clearer than current provisions in the Bill and regulations. We followed the format adopted in the Companies Act, which imposes duties and powers on an officer of the company. There is no single definition of an officer's role in that Act. As an llp would be a legal entity separate from a limited company, it was felt that it would be more appropriate to have a different title to avoid confusion.

    Several powers placed on a company secretary under the Companies Act, such as the signing of the annual return, will be transferred to a designated member. However, the designated member's responsibilities, such as appointing auditors, will go beyond those of a company secretary.

    The hon. Gentleman asked about designated members and offshore members. An llp must have two designated members and a registered office in England, Wales or Scotland. We do not believe, therefore, that we need to prevent an offshore member being a designated member. Indeed, an officer of a company can be based offshore. If there is a breach, the llp can be pursued, regardless of whether the designated member is based overseas or in this country.

    I hope that I have attempted to answer all the questions that were raised and I am pleased to commend the Bill to the House.

    Question put and agreed to.

    Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).

    Limited Liability Partnerships Bill Lords Ways And Means

    Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a) (Money resolutions and ways and means resolutions in connection with Bills),

    That, for the purposes of any Act resulting from the Limited Liability Partnerships Bill [Lords], it is expedient to authorise—
  • (a) the making of provision about the taxation of limited liability partnerships and their members, and
  • (b) the imposition by regulations under the Act of fees payable into the Consolidated Fund.—[Mr. Pope.]
  • Question agreed to.

    Delegated Legislation

    With permission, I shall put together the motions relating to delegated legislation.

    Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),


    That the draft Army, Air Force and Navy Discipline Acts (Continuation) Order 2000, which was laid before this House on 4th May, be approved.

    Terms And Conditions Of Employment

    That the draft National Minimum Wage (Increase in Development Rate for Young Workers) Regulations 2000, which were laid before this House on 4th May, be approved.—[Mr. Pope.]

    Question agreed to.

    Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation) and Order of 11 May,

    Trade Union And Labour Relations

    That the draft Code of Practice: Access to Workers During Recognition and Derecognition Ballots, which was laid before this House on 8th May, be approved.—[Mr. Pope.]

    Question agreed to.

    Insurance For Members

    6.54 pm

    I beg to move,

    That, in the opinion of this House,—
  • (1) provision should be made for the insurance of Members of this House in relation to the performance of their duties as Members under arrangements (including financial limits to the cover provided) made from time to time with the approval of the Leader of this House and the Speaker;
  • (2) subject to the terms and conditions of any policy effected under the approved arrangements, the insurance for which provision is made under paragraph (1) of this Resolution may cover the following—
  • (a) travel;
  • (b) personal accident;
  • (c) personal accident in respect of employees of Members;
  • (d) employers' liability and public liability;
  • (e) the cost of defending a civil claim for defamation and of payment in respect of any award made by a court in such a claim, where the act complained of was not covered by parliamentary privilege but arose from a Member's duty as a Member; and
  • (3) arrangements made for insurance of the type mentioned under paragraph (2)(a) and (b) above may provide for the spouses of Members to be covered as well as Members themselves.
  • I understand that with this, it will be convenient to discuss the following motion:

    That, in the opinion of this House, provision should be made to reimburse Mr. Peter Luff, honourable Member for Mid-Worcestershire, for legal costs incurred in respect of his duties as a Member of this House in defence of an action for libel in the High Court of Justice (Queen's Bench Division) which was dismissed and the Plaintiff's statement of claim struck out by Order dated 16th April 1999.

    Insurance schemes for Members of Parliament and the case of the hon. Member for Mid-Worcestershire (Mr. Luff) are a relatively small but significant issue for the House.

    The motions arise from the need to protect hon. Members in an increasingly litigious age and are complex because we have taken the opportunity to do some administrative tidying, as I shall explain later.

    Unfortunately, as society becomes more litigious, Members are increasingly faced with the threat of legal action. Parliamentary privilege provides absolute protection against legal action in respect of things said in the course of proceedings in Parliament. However, in an age of modern communication, Members do not carry out their function as Members only in the course of parliamentary proceedings. We all carry out a public role outside the House where, quite rightly, there is no legal protection.

    As public figures, Members are open to the threat of defamation actions. They are not unique in that, but the lack of support available to them is unusual. Public officials, for example, are given public assistance to defend such actions and, in extreme cases, may also be given assistance to bring them. If Ministers are accused of defamation as a consequence of their ministerial duties, they will have their ministerial and legal costs met. However, Back-Bench Members of Parliament are not so protected.

    The experience of the hon. Member for Mid-Worcestershire provides an illustration of the difficulties that Members of Parliament can face. A prisoner at Long Lartin had taken action against the local postmistress for failing to deliver his Financial Times. The hon. Gentleman was reported as saying that the action was ridiculous, and he was sued for defamation, together with the newspapers concerned. The action was eventually struck out, and the prisoner was declared a vexatious litigant. However, the hon. Gentleman was left with a personal liability for legal expenses of more than £2,000 which would have been far higher if The Sun newspaper had not joined in the action.

    It could be argued that the hon. Gentleman's remarks were not strictly related to his business as an Member of Parliament. I reject that assertion, as we value the link to our constituents. Fair, not defamatory, comment on issues of concern or interest to them is crucial in maintaining that link. It would be a strange world indeed if the only person unable to comment on pressing issues was the local Member of Parliament, silenced through fear of aggressive or unfounded actions for defamation. I hope that the House agrees that the hon. Gentleman's action in responding to press queries falls within the wider definition of the duties of a Member of Parliament, and will reimburse him.

    In principle, this case could be taken as a precedent. The House could be asked to judge any later cases on their merits, which would be profoundly unsatisfactory. Leaving aside the parliamentary time that might be taken on such business, we would have to judge the actions of our colleagues, and we are aware of the difficulties in doing that. Moreover, not all cases would be as clear-cut as the hon. Gentleman's and, if proceedings for defamation were brought against any one of us, we would have to incur costs without knowing how much financial support would be available or, indeed, whether financial support would be given at all.

    We considered whether help could be given through the Treasury solicitors, but rejected that. If they were used, the House authorities would have had to refer cases to them and they would be in the invidious position of having to screen Members' requests for assistance. In addition, a Treasury solicitor might well be unable to provide support if a case came to court.

    A legal insurance scheme, on the other hand, covers all those who might come forward. Premiums can be adjusted if demand is higher or lower than expected, and the level of cover can be adjusted in the light of experience, to ensure that it is realistic without being over-generous. The insurer, not the House authorities, will be responsible for deciding the admissibility of cases and an unsatisfactory insurer could be changed. We consider that the most practicable route to provide Members with some limited protection.

    The first motion invites the House to give authority for expenditure on an insurance scheme for Members to meet limited legal expenses that may arise from defending defamation actions. If cover is fixed at, say, £10,000 per Member, the cost to cover all hon. Members is estimated to be around £18,000 a year. That can be met from the amount currently voted to the House.

    I now come to the administrative tidying that I mentioned earlier. There is already a range of insurance policies in force on behalf of Members, as the motion shows. These were originally borne on the Administration vote, and authority for them was properly given by the Commission. They have now been transferred to the Members' vote, which is not the Commission's responsibility.

    The insurance for legal expenses will also fall to that vote, which is why the House as a whole, rather than the Commission, is being invited to approve it. It would be administratively odd to have two separate sources of authority for different sub-divisions of the same expenditure borne on the same vote, so the motion invites the House to put all sorts of expenditure on insurance on the same footing.

    Finally, let us be clear about the legal expenses insurance that we propose. It is extremely limited. It is only to assist hon. Members defending themselves against defamation suits. It will not help them to bring defamation proceedings. In effect, it is a shield, not a sword. It will not be over-generous. It simply provides a minimal protection against misguided or vexatious litigants. It is a small but significant measure, but I hope that it will enable us to continue to do our jobs properly and confidently. I commend the motions to the House.

    7.1 pm

    I support the motions. This is a House of Commons matter, on which Conservative Members will have a free vote, if there is one. I support the proposals and have added my name to the motions, along with the hon. Member for North Cornwall (Mr. Tyler).

    I begin by making three general points. First, as the Parliamentary Secretary said, we live in an increasingly litigious world in which more and more people sue each other. Whether the phenomenon has been imported from the United States, or whether it has come about because people are better educated and more assertive of their rights or because solicitors are more proactive is, in a sense, irrelevant. We are where we are.

    Secondly, professional people are increasingly in the firing line: teachers, doctors, accountants—as we heard in the earlier debate—solicitors, social workers and Members of Parliament. The Parliamentary Secretary described how my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) was involved, and I am sure that other hon. Members have had their own experiences.

    I had a case some 10 years ago, when a book was published by Canary Press entitled "Thatcherism goes to College", written by one Matthew Salusbury. Views allegedly held by one George K. Young were wrongly attributed to me, including holocaust denial. If one does not challenge such an assertion, it remains on the record; if one does challenge it, there is the risk of costs. Happily, in that case, the book was withdrawn, a handsome letter of apology was sent, and my costs were paid. That shows the risks that we all run of finding ourselves in the firing line through no fault of our own.

    Perhaps I misheard that example. Was there not a case in which my right hon. Friend was defamed, rather than allegedly defaming?

    My hon. Friend is right, but such a case would not have been covered.

    My third general point is that, to my knowledge, no Member of Parliament has been sued for the advice that we give in our advice bureaux. Of course we all do our best, not least by directing people to the right answers if we do not have them ourselves. None the less, we dispense advice on which people act, and it may not always be right. I find it amazing that so far, none of us has been sued by any of our constituents for what happens in our advice bureaux.

    Against that background, I find the proposals before the House justifiable, focused and cost effective. Defamation is damaging for anyone, but it is particularly damaging for a Member of Parliament who has to face re-election every four or five years, and our reputation is a major factor in the outcome.

    The costs of defending defamation can be high. They are not eligible under the office cost allowances, and an hon. Member may not have the resources available to defend himself. As the Parliamentary Secretary said, assistance is available only when the case arises from an hon. Member's duty, and it is available only for the defence of a case, not for the initiation of one. The House should keep the matter under review.

    I am grateful to my right hon. Friend for giving way, and warmly welcome the Parliamentary Secretary's remarks. Can my right hon. Friend tell the House about the sorts of protection that apply in other countries, and the extent of such protection?

    No, I cannot do that. One of the advantages of being in opposition is that one does not have to reply to a debate. There is someone who is very well briefed and in a far better position than I am. When he winds up the debate, I am sure that he will give my hon. Friend enormous detail of what happens in other cases.

    It is entirely justifiable to reimburse my hon. Friend the Member for Mid-Worcestershire with the expenses that he incurred, and it is entirely right to extend to other hon. Members prospectively the protection that we have extended to him. We should keep the matter under review. I hope that the motion meets the approval of the House.

    7.6 pm

    I warmly welcome the measure, which is long overdue. When I first came into the House 32 years ago, there were a great many more whistleblowers who used the House to expose the wrongdoings of bad landlords, child abuse and other social issues. They knew that this place would protect them. People would say, "If you say that outside, I'll issue a writ."

    All too often, people outside who were not acting in the public interest got away with all sorts of misdemeanours—not crimes, perhaps, but unfair sharp practices on the public—because although constituents went to their Member of Parliament about the matter, he could not find a peg to hang it on so that he could speak about it in the House, except perhaps through an early-day motion. In my opinion, that is one of the best means available in the House, providing a platform and a notice board on which to redress grievances.

    As everyone knows, I was a whistleblower many times. I was the first guy ever to say that Members of Parliament were available for hire, back in 1974, when I wrote it in "Labour Weekly" and repeated it on the "Jimmy Young" show. I was hauled up for contempt of the House and it looked as though I would be thrown out. I said that I would stand again as honest Joe and that I would win the by-election, and I would have done, because I could have proved what I had said.

    That is a very unhappy experience to go through. As the hon. Member for Mid-Worcestershire (Mr. Luff) knows, the trauma and the effect on one's family and constituents is devastating. Those are deterrents and we must be careful, but the House and its Members should undertake scrutiny. We should not rely on consumer affairs watchdogs on television, with the time limits and possible libel actions that they face, always having to get things approved by the lawyers.

    Members of Parliament should have the right to expose constituency rip-offs, consumers who are being abused and health service cases that should be brought to public attention, but everyone knows that a libel case would cost an hon. Member his house if he tried to defend it. Lawyers' costs can be £500,000 for a week in court. That is ridiculous. I am not saying that it is a deliberate gag on Members of Parliament, but any small business man who feels offended can slap a writ on a Member of Parliament, which will hang over him for two years. That is a severe deterrent to hon. Members doing their jobs.

    I have been threatened many times about articles that I have written in trade union magazines. I once wrote that a Press Association report about me was garbled, and the editor of the Press Association claimed that that was libellous. A company as big as the Press Association wanted to sue one Member of Parliament for using one word, because I had said that one of its reports was garbled. Where will it end?

    Over the years, hon. Members have backed off. There used to be many libel cases involving Members of Parliament, and hon. Members often sued newspapers. If the newspapers got it wrong and reported that one had abstained in a defence debate when, in fact, one had voted, they would pay up, because the report was defamatory to the hon. Member and his constituents. It was defamatory to suggest that a Member had never visited his constituency.

    All sorts of rules and regulations were laid down. A very good friend of mine, Arthur Davidson QC, the former Member of Parliament for Accrington, was also the Daily Express libel lawyer. Members on both sides of the House used to go to him and say, "Arthur, isn't this libellous?". He would reply, "No, it is just abuse: you have got to live with that". He was well aware of the fine line between the two, and we have always had to tread such a tightrope.

    The motion does not make it clear whether libel, in this context, would cover only what we have said outside the House, or what we have written as well. Obviously we should not defame our colleagues, even those on the opposite side; but if it is a matter of record and history, where do we stand?

    I have just been asked to write a book. I had to go into the Library and find out whether certain Members of Parliament were dead. Indeed, I had to ask the Pensions Office whether they were dead. That was not because I was writing anything that I thought was libellous, but because of considerations relating to my publisher. In such circumstances, one dare not take risks with history. I am not saying that we should all go away and start scribbling all sorts of abusive nonsense and lies, but there must be an outlet for honest appraisals of history, and descriptions of what happened behind the scenes.

    I once wrote a book about what happened in the Whips Office when we had a majority of one. Indeed, at one stage we had a minority of 10, and were carrying Members in on stretchers. I was told that I could not do it because, as a Whip, I was covered by the Official Secrets Act: I had sworn an oath that it was not possible to break, even years later. Recently, just after losing his seat, Gyles Brandreth wrote a book. Good luck to him, but I had to make my book into a play, as if it were fiction. I only changed the names; everything in the play had really happened.

    There must be some sort of control, but we are here to represent the public interest. Newspapers often plead—rightly, in my view—that if revealing something is in the public interest, and if it is revealed fairly, accurately and truthfully, it should be revealed. However, an investigative journalist of that kind, or someone who stands out as a maverick, may destroy his career, if he ever had one. Certainly, a politician will never be made a Minister if it is thought that he will reveal things: that is the last thing that is wanted. Such politicians remain Back Benchers, and I am very glad that that applies to some of my hon. Friends who have acted in this way many times. My hon. Friends the Members for Bolsover (Mr. Skinner) and for Workington (Mr. Campbell-Savours), among others, have rightly made a career out of exposing wrongdoings—perhaps not criminal wrongdoings, but certainly activities that were unfair, unjust and not in the public interest.

    I congratulate the Government on the motion. I hope that it will restore to Parliament some of the characteristics that it had 25 or 30 years ago, when I arrived here. In those days, people spoke out because they felt strongly that things were not right and should be exposed. I do not know whether the motion requires a Bill or merely constitutes a statement, but I hope that the Government would vigorously defend any Member who they thought had said or written something that was fair, true, accurate and in the public interest against a gagging writ, or against threats or pressure in the courts.

    7.13 pm

    On behalf of my Liberal Democrat colleagues, I support the motions. First, however, let me make a general point. We are here, rightly, to protect the interests of Members of Parliament, but I hope—I am looking at the Government Front Bench as I say this—that it will not be too long before we address the problem of protecting our staff in our constituency offices. That problem is urgent. Members on both sides of the House have expressed concern since my hon. Friend the Member for Cheltenham (Mr. Jones) was the victim of a tragic attack, and his colleague and friend was killed. There is a recognition that the security of staff in constituency offices is as important as the issue that we are debating now. As we are all receiving advice from the police about the measures that should be taken—and they are costly measures—I hope that the Government recognise that advice from them is required as well.

    I am pleased that the motions have been kept relatively simple, because we are in danger of developing a whole new bureaucracy. I was glad to hear from the Minister that the provision would be as simple as possible, and that the criteria would be as straightforward as possible. The last thing we want is for lawyers to do well out of this; rather, we want to protect the rightful interests of Members of Parliament and their constituents.

    Along with Members of the other place, I sat for some 18 months on the Joint Committee on Parliamentary Privilege. I learnt a huge amount about the privileges of Parliament. The first and most obvious point is that we are talking about the privilege not of a Member of Parliament, but of the institution of Parliament, enabling us to serve our constituents better. As the hon. Member for Bassetlaw (Mr. Ashton) said, our job in this place is not to protect our personal interests, but to ensure that, in representing our constituents' interests, we are free, fearless and able to represent those interests properly. We must ensure that, as parliamentarians, we are free from the external pressures that have already been described, so that we can do a proper job—as we would say in Cornwall—for our constituents, and for the wider public.

    I noted from my experience in Committee that there are differing degrees of privilege. There is absolute privilege, and there is qualified privilege. If this evening we make suggestions about the merits and motives of an outside body or individual, we will be covered by absolute privilege in this place, as we are in Committee. If in a letter to a Minister we make an allegation that is in theory actionable, there is a question mark over that. If the correspondence between us, as Members of Parliament, and Ministers is published to a third party, it is not covered in the same way. We must therefore be very careful.

    If we walk out of the Chamber and appear with Jeremy Paxman, making exactly the same point about an external person that is actionable outside this place, we will not be covered by privilege. What is recorded in this place, however—on paper, on tape or in a sound broadcast—is privileged: it is covered by the absolute privilege of Parliament.

    I am sure all Members would agree that the last thing we want to do, by means of the limited cover that we are introducing, is to encourage Members to be irresponsible. That is not the purpose of the exercise; the purpose of the exercise is to ensure that we are able fully to undertake our responsibilities without fear or favour. It is also true—I am sure that the hon. Member for Bassetlaw was right about this—that one of our jobs here is occasionally to blow the whistle. I have done it myself in the past, and have suffered the slings and arrows from the organisations that I have questioned.

    I do not think that we want to encourage Members themselves to be more litigious; that, too, is a trap that we must avoid. I was recently subject to what was, compared with the cases mentioned this evening, a relatively minor incident. In a column in Punch, I was said to have "cashed in" on outside interests, and to be "on the payroll" of an outside company. That is because I was a shareholder in a steam railway company—well, I was; I no longer am. Anyone who has ever had an interest in a steam railway will know that one can never make any money out of it. One puts in £50 to give a bit of encouragement. If every shareholder in any company was said to be "on the Payroll", for goodness sake, it would change their status completely and dramatically—let alone the question of "cashing in".

    In this case, I have consulted my legal friends, even distinguished members of my parliamentary party. I think that the charge could be much greater than anything I could get out of them. But, as Punch is owned by a certain gentleman who is famous for his brown envelopes, I am still waiting to see whether a brown envelope will arrive to pay me off for the way in which my reputation has been damaged by this slur. However, I do not think anyone reads Punch nowadays, so perhaps it is not so serious.

    The issue tonight is important, because it goes to the heart of our responsibilities to our constituents and the nation. We must be protected to do our job properly. I am delighted to support the motion, but, as I said at the outset, I hope that before too long the Minister will come back and give advice also on the important issue of protecting our staff.

    7.19 pm

    I declare an interest as a barrister who specialises in defamation law. I have an interest in the motions that we are considering that is perhaps greater than any other hon. Member's. First, I may benefit if I am sued for defamation as a Member of Parliament. Secondly, I may benefit as one of the few barristers in England and Wales whose practice specialises in defamation law. I also advised in the case of my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) on the instructions of his solicitors, before it was taken up by the national newspaper to which the Parliamentary Secretary referred. As one would expect, I was paid promptly by my hon. Friend. Despite the successful outcome for him, he has not been reimbursed by the unsuccessful claimant for my modest fees or for those of his solicitor.

    When the Defamation Act 1996 was progressing through the House, I was invited, in the cosy way of Government Whips, not to contribute to debates on the Floor of the House. I was also kept off the Standing Committee because it was said that I knew too much about the subject. People who knew anything about a specialised area of public policy were apparently not required to assist in the formation of law.

    I disagreed with some of the provisions of the 1996 Act and refused to support the amendment to the Bill of Rights to please Mr. Neil Hamilton. He wholly misunderstood the nature of the relationship between a Member of Parliament and the Bill of Rights. As the hon. Member for North Cornwall (Mr. Tyler) said, the Bill of Rights was passed to protect not individual Members of Parliament but our constituents, who rely on us to speak fearlessly for them in the House.

    Mr. Hamilton would have done better to leave the law of defamation well alone. As a general rule, that is advice that most people—Members of Parliament or otherwise—should consider carefully, whether they are potential claimants or defendants. Perhaps it is surprising to many hon. Members that the aggrieved party will often accept a proper apology and, if appropriate, a public apology instead of demanding damages and an injunction. However, some cases are not capable of settlement. When Members of Parliament are not claimants, but defendants, and thus involuntary parties to a defamation action that cannot be settled, they should have some financial protection.

    The Minister said that such protection would be minimal. However, minimal protection is no protection. When the scheme's details are worked out, I hope that something more than minimal protection will be provided. Although we do not want to tie the Minister down to details this evening, we should be grateful if he could present some general figures.

    As Members of Parliament, we should not be too proud to admit that we are wrong about something, whether in correspondence with a Minister, a local government official, or a chief constable, or in our speeches, press releases or letters to the national and local press. We are rightly protected by absolute privilege when we speak in the Chamber and elsewhere in the proceedings of the House. On other occasions, we may be protected by qualified privilege: if we are actuated by malice, we lose the protection. However, if we say something that we later discover to be untrue, we should not resort to that insurance fund too willingly, but reach a sensible solution outside litigation and without the assistance of lawyers and the public's money.

    In the short time available to me since the motions were tabled by the Leader of the House, my right hon. Friend the Member for North-West Hampshire (Sir G. Young) and the hon. Member for North Cornwall, I have not been able to research the position in other countries in detail. Doubtless my hon. Friend the Member for Buckingham (Mr. Bercow) will be desperately sad about that. However, I can briefly describe the position in Canada and France.

    Members of the Canadian House of Commons are entitled to participate in various insurance plans, which include the public service management insurance plan, health care plans, a dental care plan, group special risk insurance and flight insurance. In some cases, coverage is automatic; in others, it is optional. Extended coverage is available on application. The coverage of insurance plans in Canada is not as wide as the motions that we are considering.

    If a Member of the Canadian House of Commons incurs liability or legal costs in relation to the matters that we are considering, he or she may apply to the Board of Internal Economy—a wonderful name—for reimbursement. Applications are decided on a case-by-case basis. Some types of liability, such as a constituent injuring himself or herself—that may have some resonance for the hon. Member for North Cornwall—would probably be covered by the Canadian House of Commons if it occurred within the parliamentary precincts. If the injury occurs in a constituency office outside Ottawa, the Member would apply for reimbursement if he or she had not purchased insurance.

    In France, the National Assembly is covered by an insurance scheme for civil liability. It covers only the activities of the institution, not those of its members. The Assembly has signed a convention with a well-known insurance company to cover accidents that may occur to Deputies during an official trip. French Deputies are also covered by legislation on work accidents. By and large, there is a far wider definition of parliamentary privilege in other countries, and the activities of a Member of Parliament are more widely covered.

    There was speculation that the Scottish parliamentary corporate body had agreed to pay some or all the legal costs of Lord Watson of Invergowrie to defend himself against a challenge in the Court of Session about his conduct on his proposed anti-hunting Bill. However, the Scottish Parliament or the Scottish parliamentary corporate body has made no official statement.

    The hon. and learned Gentleman is a lawyer, and I am sure that he could give us excellent advice. I want to ask him a simple question. People have tried to sue me on three occasions in 20 years. On each occasion, I have refused to appoint a lawyer and nothing has happened; the attempts have fizzled out. I wonder whether hon. Members realise that we can do that; we can simply ignore such attempts. If the case is invalid, it seems to fall away.

    I congratulate the hon. Gentleman on his successful inactivity. I am not here to give general legal advice; that would be dangerous. However, it is not always safe for any defendant to do nothing, whether he is a Member of Parliament or not. One has to be extremely careful that the aggrieved complainant does not get judgment in default. In that case, damages may be assessed. If one does nothing about it, the plaintiff can execute judgment against the non-attending defendant. I shall leave the matter there before I am accused of advertising. That would never do.

    It has occurred to me in the past 17 years here that if one writes letters carefully, one is fairly safe. For example, one can use the old phrases, "I'm given to understand;" "Could you please comment?" Perhaps we should teach Members of Parliament to write letters so that they do not get sued.

    Doubtless the hon. Gentleman will be putting up his placard along the Library Corridor so that Members of Parliament who need his advice will be able to find him.

    I do not want to take up too much time because those who spoke before me were commendably brief. However, provision exists for the protection of elected councillors. It is unclear where exactly the provision can be found. However, section 111(1) of the Local Government Act 1972 states:

    a local authority shall have power to do any thing (whether or not involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.
    I know from personal experience that, under that section, local authorities have been able to fund the defence of libel actions brought by aggrieved members of the public against councillors.

    Another route that local authorities take is that which we propose—the use of an insurance fund.

    I am grateful to the Minister for his intervention because it enables me to ask him some questions directly. Given paragraph (1) of motion 9, will the insurance be provided by one policy to cover all Members of Parliament or may Members negotiate their own private policies and pay for them from either their office costs allowance or other parliamentary funds? What is the annual estimated cost of the insurance? He said that £10,000 per Member of cover would cost about £18,000 a year for the entire House. I do not want to sound like a bleeding heart, but, with the greatest respect, £10,000 of legal costs does not go far in the defence of a legal action. I say in my own defence that the charge to my much afflicted, but highly respected hon. Friend the Member for Mid—Worcestershire was a good deal less than that. I shall not mention the figure, but I do not mind if he does. However, it was but a fraction of £10,000, although costs build up.

    I do not wish to encroach on my hon. and learned Friend's time, but he refers to French and other jurisdictions in Europe where those Members of Parliament are covered whether they are in or outside the House of which they are Members. Is he convinced that the insurance will cover all situations?

    I am not convinced because I do not know the details of the insurance policy. When I do, I shall no doubt be able to answer that question with greater confidence.

    Will my hon. and learned Friend clarify something? I understood him to say that Members should contribute to the insurance policy from their office allowance, but did he mean to imply that Members should take out the insurance separately? He will know that insurance is not available for defamation or libel actions.

    On the last point, such insurance is available. On the first point, I neither said what my hon. Friend suggests I said, nor did I want anyone to draw such an inference. I asked the Minister to explain whether one insurance policy would cover the House and all its Members or whether we could negotiate our own private insurance policies and have the cost of the premium funded by the House in one way or another. He may be able to deal with that.

    What will be the financial limits under paragraph (2)(a), (b), (c), (d) and (e)? We are not dealing only with defamation, so what financial limits are proposed? Who will administer the relationship between the Member of Parliament and the insurance cover?

    When the Nolan committee first reported in 1996, it said in relation to board members of public bodies:
    The government should seek to ensure broad consistency and adequate protection in respect of the personal liability of all appointed or elected members, directors, trustees, or others responsible for bodies providing public services.
    It suggested that the Government should make proper funding arrangements for the protection of appointed directors or members of public bodies so that they would not be left out of pocket if sued in carrying out their public duties.

    I will, but I hope that my hon. Friend will notice that time is marching on.

    I am grateful to my hon. and learned Friend; giving way is a penance for his being an expert on the subject. Is it his understanding that the insurance proposal would cover a Back Bencher defending a defamation action brought against him or her by a Minister?

    I do not know that my hon. Friend, who is a highly intelligent Member, needs my explanation of the words of the motion; they are self-explanatory, but unclear in their detail. If he knows of such a case, no doubt he will have drawn it to the attention of someone outside the House so that he can be properly advised. I do not want to give him off-the-cuff advice at this juncture.

    Other bodies, such as housing associations and the national health service, provide for their members—whether lay directors or lay trust members—to be indemnified, but the position is not uniform and we are unable to fit the scheme proposed by the Leader of the House, my right hon. Friend the Member for North-West Hampshire and the hon. Member for North Cornwall into any particular category or box. If we are to have our own scheme—which I would applaud, for all the reasons advanced by the Minister, my right hon. Friend and the hon. Gentleman—it must be of sufficient capacity genuinely to protect Members of Parliament. As I said at the outset in response to the Minister's remarks, minimal protection is no protection at all.

    I urge the Minister, the Leader of the House and others to study the schemes made available by the national health service executive, the National Housing Federation and other public bodies, for example, to ensure that we provide a system that is just and not extravagant, but which none the less meets the obvious needs of Members. This is my final word: it is generally far better to say, "Sorry, I have got it wrong," than to involve lawyers.

    7.37 pm

    Although I support the motion, I thought carefully about speaking in the debate because I seek to distance myself from action against Members taken by the press. Hon. Members will be aware of my difficulties in relation to my court case: a picture of my children was consistently used in the newspapers. This is not a political issue; all Members would have sympathy with that. I accept that, as a Member or an individual, I have the right to take action against newspapers for what they may have said against me during and after my court case. However, to this day I do not accept that they had a right to use a picture of my children, who have no connection with my actions as an individual.

    The Press Complaints Commission let me down significantly. It said that, because a picture of my children had been used with my permission, it was acceptable for the photograph to be used in the newspapers. I do not accept that. It has been suggested that the motion should include Members' staff, but infringements of Members' privacy should be carefully considered, especially if minors are involved. My children were extremely distressed because their photograph was widely published in the national newspapers. I was unable to take action against any body for using the picture because of involved circumstances in which a local newspaper, which apparently held the copyright of the photograph, passed that photograph informally to a press agency. I would never have allowed a press agency to photograph my children, but the costs involved effectively prevented me from taking the case to court.

    I feel strongly—I hope that most Members on both sides of the House will agree—that there is no excuse for the media using photographs of children in relation to anything that we might do as Members of the House of Commons, regardless of whether we are right or wrong in what we say.

    7.40 pm

    I declare an interest in the Register of Members' Interests: various parts of the media have paid substantial legal costs in actions where I have been the plaintiff. On a number of occasions, they have paid substantial damages, too. May I say how much I agree with my hon. and learned Friend the Member for Harborough (Mr. Garnier)? If people have made a mistake, the best thing is to say so straight away in public, and to offer to say so to whomever the aggrieved person would like it to be said to.

    As it happens, recently a non-national newspaper published material that was seriously defamatory about me. I rang the editor and he sent me a letter that day saying, "Sorry, we have made a mistake." We met two days later on the first available working day. The matter was resolved with no expense, lawyers or lasting damage to me as the victim. It was an honest mistake, openly acknowledged and dealt with. If, as a Member of Parliament, I find myself as the defendant in a legal action, I hope that I will have the perception to understand if that is the case, and to say so and dispose of the matter.

    The motions are about different circumstances. I have two questions, which the Minister may or may not be able to answer now. First, I should like an assurance that similar cover is available to all Officers of the House. It may be those in the catering department, it may be the Parliamentary Commissioner for Standards, or it may be heaven knows who—if they find themselves saying something that is not protected by parliamentary privilege, will they have the same type of cover? Will they actually be told, "We will back you with reasonable legal expenses if it is not a case where you should admit that you got something wrong."?

    If a Member of Parliament has said something that is defamatory and is not defensible, will the insurance policy provide damages or will the Member be on his own for the damages? That is not clear from the motion. It may not be clear until the insurance policy is negotiated, and that is another issue that matters.

    I go beyond that and declare that I may have an interest in future. Suppose a constituent says to a Member of Parliament, "You, I claim, have discriminated against me on the ground of my disability", and tries to bring a case against that Member under the Disability Discrimination Act 1995, or any other provision, will the insurance policy cover that? That is a consideration to which I should like the House authorities and the leaders of the parties to pay some attention. There may be a range of issues that matter.

    If the Minister or the House is interested in my view, I think that Members of Parliament should pay for the insurance cover on the libel element, which I calculate to be roughly 55p a week per Member. That compares with the roughly £55 a week that each Member contributes to the parliamentary pension scheme—so in case our old friends from the press start saying that we are putting our snouts into the trough again, we should spell out that we are talking about 55p a week, at least on the defamation cover. The next time that parliamentary allowances or pay are adjusted, we should see whether we can carry that cost ourselves. It is within the small change of the deductions from our pay at the moment.

    The final point that seems worth making is not on item (e), which relates to a civil claim for defamation—

    There is a danger in what the hon. Gentleman says. Most of us are very careful in what we say and we do not seek to libel or to defame anyone, but from time to time we do have one or two mavericks who will shout their mouths off left, right and centre, and who would thus incur damages time and again for which the rest of us would have to pay.

    I do not want to be diverted too far, but my instant feeling in reacting to that is that we carry that type of penalty anyway with people who use absolute parliamentary privilege to defame people in the Chamber. Defamation, as I understand it, must have the element of saying something that is untrue and damaging. It becomes actionable only if it is not covered by privilege: either qualified or absolute privilege. The fact that there may be costs if people shoot their mouths off outside the Chamber is no greater a penalty on other Members than the consequences of people who come into the Chamber and do the same thing. The fact is that it is general pressure and understanding that limit what people do to excess. In my view, it does not eliminate it, but it limits it. The hon. Gentleman may have a different view.

    The last point deals with paragraph (2)(a), (b), (c) and (d):
    travel…personal accident…personal accident in respect of employees of Members…employers' liability and public liability.
    The Minister properly described that as switching from one budget head to another. I maintain that any cover, especially on travel or personal accident, should not in any sense be limited to parliamentary duties during someone's service in the House. It makes no difference to our dependants whether we fall out of the sky on a parliamentary flight or whether we fall over a stone on the road, hit our heads and are disabled by that. Therefore, I hope that the cover is related not to cause, but to the period of parliamentary service.

    7.46 pm

    I, too, support the motion and express my sympathy for my hon. Friend the Member for Mid-Worcestershire (Mr. Luff). I am pleased that he has got assistance—or, hopefully, will get assistance.

    I understand that a Member as defendant may have assistance, but I hope that the Minister will clarify the position of the Member as plaintiff. For example, a Member who wishes to take some action against someone who has defamed him can find himself the plaintiff. That might present different concepts and I should like the Minister to comment on that. It may be that the terms of the insurance that are proposed—it is a revolutionary step forward, so we may as well discuss the measures that it might cover—should be extended to a wider range of circumstances.

    I bring to the House's attention the sixth report of the Select Committee on Standards and Privileges, which was chaired by Lord Neill and which reviewed, among other things, decision making and the actions that have taken place with regard to our standards and privileges in the House. The issues are related. If a Member is asked to appear before the Committee and must make a defence against some allegation that a member of the public has made, that Member has to defend himself, particularly where it is a contentious issue. That Member may wish to take legal advice in order to defend himself.

    There have been a number of examples recently. I think that the hon. Member for Coventry, North-West (Mr. Robinson) was reported four or five times to that Committee and used the honourable Michael Beloff QC to produce a defence for him. Presumably, that cost him quite dearly. On a number of occasions, he was not censured by the Committee—he was the subject of two complaints, I believe—but the point remains that those legal expenses must be met.

    The Neill report, which I hope we will debate in the House in the not-too-distant future—it was issued in January and it is extremely salient and relative to the points that have come up in the debate—says:
    Given the politically-charged environment within which MPs work, it is likely that ill-founded complaints will be made from time to time to discredit the accused MP.
    We all know that. The report continues:
    It would be naive to think otherwise.
    To some extent, the forum of the Standards and Privileges Committee invites that. It is possible not only for people with genuine complaints, but crackpots and even people who are perhaps being motivated by others and used as straw men—briefed, perhaps, by hon. Members or possibly trade unions—to put points to the commissioner in their own name, which opens up the issue to public debate.

    Once a complaint has been made, a newspaper can report it. Once the commissioner decides to take up the complaint, it can be reported more widely. All that builds a certain amount of defamation of the Member's character and makes good copy. Although that may not be considered terribly important, it allows newspapers to air subjects that they may not have wanted to print for fear of being sued for libel. The process basically allows newspapers to report in great detail issues under privilege—those debated in the Chamber or in Committee.

    We all know that even if, at the end of the day, the complaint is dismissed, mud sticks. The story can go around and around. Every one of us knows of such cases. I should of course declare two interests. One is that I have on two occasions successfully sued for libel—once against a newspaper and once against a constituent. The second is that I have of course recently been subject to an inquiry by the Standards and Privileges Committee, on which I do not intend to dwell.

    Lord Neill's report states:
    If the Parliamentary Commissioner's recommendation is accepted but the Member wishes to contest that, which at the moment is not possible, they should receive "financial assistance".
    A paragraph on the appeals procedure in contested cases states:
    "An accused MP who receives an adverse ruling…should be entitled to financial assistance to pursue an appeal
    and that an
    MP should be able to appeal against the…decision—
    and for that would require financial assistance. I repeat that point time and again because it crops up time and again in the report. It is important that Members realise that these matters—certainly the financial consequences—do not relate only to the kind of circumstances experienced by my hon. Friend the Member for Mid-Worcestershire. His is not the only example of when extensive legal expenses might be incurred.

    It is very difficult for a Member to decide how to deal with such matters. It has been said in this House—I think by the hon. Member for Linlithgow (Mr. Dalyell) during the debate on the issue in which I was involved—that it is not just difficult to defend oneself in such circumstances, it is impossible. Members need legal advice because of the time involved, the fact that they may not be a lawyer and the danger of appearing to prevaricate in answering ad hoc questions and building up a case. While we have the opportunity, we should broaden the debate to include those circumstances.

    The point is particularly significant because, at present, one cannot appeal against the decisions of the Committee on Standards and Privileges—even though Lord Neill's report advocates that we should have that opportunity. As a result, Members must present a well-argued, cogent defence; in lawyer's language, "You can lawyer yourself." For that reason, I very much hope that the Minister, who I am sure is sympathetic to all this, will do his best to ensure that the matter is dealt with straightforwardly.

    This is not the time to rehearse various arguments, but does my hon. Friend agree that one ought to try to distinguish between establishing and providing facts, and drawing conclusions from them?

    I will give my hon. Friend the benefit of the doubt. I am suggesting that, given the pressures of the job and the amount of time that can be devoted to it, hon. Members need legal advice from the beginning of such a process. It is important that they should at least have the opportunity to discuss matters with some legal representative. As my hon. and learned Friend the Member for Harborough pointed out, because lawyers are subject to people importuning them for their services for nothing, they are inclined to say that they would have to charge a fee. He makes no bones about the fact that he was in such a position in advising my hon. Friend the Member for Mid—Worcestershire. I entirely accept that.

    I should like to emphasise two things. There are many ways in which a member of the public can defame or bring charges against a Member. They can do so boldly, directly through a newspaper or an outside lawyer, but, as a result of the system that we have rightly implemented to review the conduct of Members, they have a third route. That system could be used not just by direct litigants, if I may put it that way, but through straw men. Individuals or newspapers can bring a case that they dare not make directly in the public domain, which is then reported under the protection of the privilege that this House and its Committees offer.

    7.56 pm

    I strongly support the opening statement of the Parliamentary Secretary. The motions only provide a Member of Parliament with a measure of protection against being sued for libel: they would not protect him in the event of his being defamed. I was interested in the example given by my right hon. Friend the Member for North-West Hampshire (Sir G. Young), who described when he was defamed as an illustration of why the area generally needs to be considered—although my right hon. Friend's specific example would of course be excluded under the motions.

    Sooner or later, we shall have to consider some protection for Members who are defamed. If the Parliamentary Secretary, as a Minister of the Crown, is defamed as a consequence of his duties, he will consult the Law Officers. After consultation, the Law Officers will pick up the bill for enabling him to pursue a case to protect him. However, if an MP is defamed, he has no such protection and must take action off his or own bat.

    What my hon. Friend says is true, but it is not the whole truth. The whole truth is that any Minister who is contemplating or even threatening legal action for defamation must seek the agreement of the Law Officers and the Prime Minister, long before there is any question of paying legal costs.

    Clearly, there is a logical sequence of speaking to the Law Officers before any bill is picked up. As I said—I think it was clear enough—the first thing that a Minister should do is consult the Law Officers. If a Minister is defamed in the course of his duties, the Law Officers will so advise him. So I do not think that there is any difference between my hon. Friend and me on that point.

    The logical course of action for Members of Parliament would be to take out some legal expenses insurance against the risk of being libelled. The cost of that could be quite high, and cannot at the moment be set against the office costs allowance. I suggest to Members present that we must consider facilitating that in the long run, although we would clearly want to ensure that such use of the office costs allowance was restricted to appropriate cases. The fact that such cover would be only through libel insurance would enable the Fees Office to examine the insurance contract and ensure that it related only to defamation of a Member in the course of his duties.

    It would also be very important that such cover did not enable Members to bring frivolous cases every time anybody said anything they did not like. Limiting access to insurance will mean that that is addressed because before agreeing to go ahead with a case the insurer will want to examine whether it is frivolous and what are its chances of success. That will probably cut out silly cases, as it does for most other people who take out libel insurance. I notice that the Minister nods agreement at that point.

    I do not think that the Minister will support my proposal at present, because it goes much further than the motion. But I ask all hon. Members to think about the matter seriously. It is quite possible that many of us will be libelled at some time in our parliamentary life. We have very little protection from that; we have much less protection than Ministers and much less than many people who work for other institutions, which would help with the costs.

    I am about to conclude, because I do not want to detain the House further, so I hope the hon. Gentleman will excuse me if I do not give way.

    Most Members are not in a financial position to risk a hugely expensive case. We have heard from a libel lawyer tonight that £10,000 does not go very far. The matter will have to be examined in the long run. In an increasingly litigious environment, such as my right hon. Friend the Member for North-West Hampshire described, something will have to be done to enable Members to bring reasonable actions.

    8.1 pm

    With the leave of the House, I should like to respond to the debate.

    First, I warmly welcome the broad support across the House tonight. Although we are dealing with a motion primarily brought by the Government, this is a House matter. I am delighted that the right hon. Member for North—West Hampshire (Sir G. Young) and the hon. Member for North Cornwall (Mr. Tyler) put their names to the motion, because this is a non-partisan issue and it is important that we behave appropriately.

    A number of examples have been brought to our attention which clearly show the litigious nature of our society now.

    I agree with the Minister that we are living in a very litigious society. For that reason, will he and other hon. Members in due course consider the possibility of having insurance cover for certain other tortious matters, such as negligence?

    I shall come to that in a moment. I do not want to comment on individual cases. The hon. and learned Member for Harborough (Mr. Garnier) was tempted to be drawn into discussions of individual cases, which would not be appropriate tonight. If I do not cover every point raised in the debate, I shall write to hon. Members individually.

    I should like to reinforce one broad point made by my hon. Friend and neighbour the Member for Newark (Mrs. Jones). I refer to the difficulty that we all have in protecting our children and our families. This is a real issue for us all.

    The hon. Member for Torridge and West Devon (Mr. Burnett) and others, including the hon. Members for Billericay (Mrs. Gorman) and for Chichester (Mr. Tyrie), made points that would broaden the motion, in a sense to have it provide insurance not to protect Members but to bring proceedings. The hon. Member for Torridge and West Devon extended it by asking about cases of negligence. These are House matters, and we shall carefully examine the points made. There is a particular matter in relation to negligence. I am always very conscious at my own surgery about some of the advice I give. I think that we shall have to return to this in due course.

    I counsel very strongly against extending the motion to negligence. Hundreds, if not thousands, of cases would be brought against Members of Parliament if the public thought there was a bottomless pit of the public purse to save them.

    Some hon. Members, including my hon. Friend the Member for Workington (Mr. Campbell-Savours), give good advice and pursue matters extremely rigorously in the Chamber, and use all the techniques available to them, including the use of privilege on occasion. If my hon. Friend listened to my words carefully he would know that I said that we shall have to explore the matter. I gave no commitment; I said that it was an issue that we would have to look at.

    The hon. Member for Buckingham (Mr. Bercow) asked what the position was in other countries. There are many schemes. In broad terms, European Parliaments tend to give better protection than Commonwealth Parliaments, but I think that things will change over a period.

    I thought for a moment that my hon. Friend the Member for Bassetlaw (Mr. Ashton) was going to advertise his book, which is due out this autumn. I do not think that it is under the title "Honest Joe", although perhaps that is the subtext. My hon. Friend tempted me to say whether he would be protected. There is a good deal of case law around libel, and my hon. Friend's publishers will want to speak to him carefully. But I do not want to talk about individual cases.

    The hon. Member for North Cornwall made a very fair point, reminding us that we should revisit the office costs allowance, and in particular the arrangements for our staff. Discussions are going on through the usual channels about that. I hope that, over time, we shall be able to do better through the office costs allowance. The hon. Gentleman's comments have been noted.

    The hon. and learned Member for Harborough asked me four straight questions that fit in very much with the questions raised by the hon. Member for Worthing, West (Mr. Bottomley). First, the hon. and learned Gentleman asked whether there would be one policy or whether Members would be entitled to opt out of the scheme. We shall consider his point, but our intention at this stage is for there to be one policy. We feel that we shall obtain better value for money out of one policy covering all hon. Members.

    The hon. and learned Gentleman asked me not to take a restricted approach, but to be more generous. He rightly reminded me that for a premium of £18,000, hon. Members will receive cover of perhaps only £10,000. I am very mindful of the advice that he gave the House.

    We want not to be excessive but to ensure that we have a scheme that meets needs. Clearly, the hon. and learned Gentleman has a better knowledge than I have of legal costs, but I think that £10,000 would not take us very far in giving colleagues protection. What we seek from the House tonight is approval in principle so that we can get out into the market and negotiate these matters.

    The hon. and learned Gentleman also raised with me the broader issue of the other insurance policies, an issue which his hon. Friend the Member for Worthing, West picked up. The policies around travel and personal liability already exist. We are simply transferring them into a different boat. I do not know the details of the scheme; I do not know how far the policies are attached to duties as an MP and how far they are attached to wider activities. It is a very important point. The two are sometimes very difficult to distinguish. I shall write to colleagues about this, and it may be an issue about which the Fees Office will want to write to hon. Members.

    The hon. and learned Gentleman raised the Neill report, as did the hon. Member for Billericay. The hon. and learned Gentleman asked what protection Members would receive if as part of their parliamentary duties they acted on a quango or as directors. This is an important point. As the motion stands, the biggest part of their parliamentary duties would be covered, but there is some fuzziness about this, and we shall have to look at it. In a broader context, the issue of local councillors acting in quangos is being explored by the Department of the Environment, Transport and the Regions.

    The hon. Member for Worthing, West asked about the position of Officers of the House. Official civil servants working for a Department are covered, but I cannot confidently assure him that officials of the House are covered. There should be equity and, if that is not the case, we will take steps to ensure that Officers of the House are also covered. The hon. Gentleman also made the point that perhaps we should contribute to the costs ourselves and he was quick in his sums to come up with a figure of 55p a week. I have some experience of such matters and feel that collecting 55p a week might cost more than it would raise. However, the hon. Gentleman was right to say that Members should bear some responsibility. The hon. Gentleman also made the point that the cover should not be so excessive that no risk attached to the Member involved.

    Is not a better way to ensure that the Member feels some sense of responsibility to have the cost of the policy as a charge against individual office costs allowances, and not to have one general scheme? Different people will leave themselves vulnerable in different degrees to being sued. Those who are prudent and cautious will get cheaper insurance and those who are incautious will leave themselves vulnerable.

    That is one way forward, and the hon. and learned Member for Harborough explored a similar issue. My view is that we would make efficiency savings from having one policy, and that is the intention. If we agree the motion, it will give us the opportunity to revisit the issue. In any case, we will have to revisit the issue of the office costs allowance. What Members personally are responsible for and what could be bought collectively is a live issue across a range of subjects. For example, we could make big savings if everybody would sign up to the same computer systems, but that will probably not be possible.

    It is my advice to colleagues and public authorities that if they have got it wrong they should say sorry. The expression of regret and an apology can save much pain and litigation and we should be bolder and braver in that regard.

    The hon. Member for Billericay reminded me that it is some time since I read the Neill report. She also reminded me to check on the progress of that report through the House. It is right that we should have an opportunity to respond to the report and to discuss it. I am grateful to the hon. Lady for raising the issue tonight so that we can spur it on. The hon. Lady also made an important point about how our privilege rules are used as stalking horses to enable privileged information to reach the wider press. When we have a chance to respond to the Neill report, we will have to work on that point.

    We have had a useful debate. I am conscious that everybody wishes to proceed in generally the same direction. There are differences of emphasis, but we agree in principle that the Speaker and the Leader of the House can follow our discussions through and do the deal. I assure the House, as it says in the motion, that we will keep the issue under review. I hope that we will not have to use the provision frequently.

    Question put and agreed to.


    That, in the opinion of this House,—
  • (1) provision should be made for the insurance of Members of this House in relation to the performance of their duties as Members under arrangements (including financial limits to the cover provided) made from time to time with the approval of the Leader of this House and the Speaker;
  • (2) subject to the terms and conditions of any policy effected under the approved arrangements, the insurance for which provision is made under paragraph (1) of this Resolution may cover the following—
  • (a) travel;
  • (b) personal accident;
  • (c) personal accident in respect of employees of Members;
  • (d) employers' liability and public liability;
  • (e) the cost of defending a civil claim for defamation and of payment in respect of any award made by a court in such a claim, where the act complained of was not covered by parliamentary privilege but arose from a Member's duty as a Member; and
  • (3) arrangements made for insurance of the type mentioned under paragraph (2)(a) and (b) above may provide for the spouses of Members to be covered as well as Members themselves.
  • Legal Costs Incurred By The Hon Member For Mid Worcestershire


    That, in the opinion of this House, provision should be made to reimburse Mr. Peter Luff, honourable Member for Mid Worcestershire, for legal costs incurred in respect of his duties as a Member of this House in defence of an action for libel in the High Court of Justice (Queen's Bench Division) which was dismissed and the Plaintiff's statement of claim struck out by Order dated 16th April 1999.—[Mr. Tipping.]

    Post Offices (Lewes)

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

    8.15 pm

    We have started this debate rather early and I hope that that will allow me to make my points in full. However, I shall try not to detain the Minister longer than is absolutely necessary. I confess that I thought that we might be here until 3 am, but one can never tell what will happen with parliamentary business.

    I am pleased to have the opportunity to raise what is an important issue for my constituents. We have had several debates on post offices in the past 12 months, most of which have concentrated on the Government's plans for automated credit transfer and the consequences they might have. I wish to concentrate on other threats to post offices in my constituency which, I am sorry to say, come from the Post Office itself rather than from any Government plans or technological advances. I have given the Minister some notice of the issues that I wish to raise and I hope that has helped him in preparing a response. I wish to look after my constituents in raising the issue, not to make any party political points, and I hope that the Minister will take the debate in that spirit.

    I shall deal first with the issue of the Cliffe post office, although some constituents would claim that, as it is in the high street, it is not technically in the Cliffe area. However, most people know it as the Cliffe office. It used to be part of Menzies and then W.H. Smith. It was a busy office. Post Office figures confirm that that small office—it was a tiny unit within the W.H. Smith store—took the equivalent of 50 per cent. of the business of the main Crown office, which is further up the road. It was in the most important shopping centre in Lewes, whereas the main Crown office is some distance away from the shopping centre and somewhat inaccessible.

    The survival of the Cliffe office was important, but it has now closed—in my view, because of the failure of the Post Office to deal with problems that arose and to take proper steps to find a replacement office. I have gone through the train of events with the Post Office and W.H. Smith and I believe that my version of events is accurate, although the Minister may correct me later. W.H. Smith told me that when it took over from Menzies, it inherited only three or four units with a sub-post office on the premises. W.H. Smith does not want to have sub-post offices on its premises, so the company told the Post Office at an early stage that it did not wish to renew the arrangement.

    The company finally gave formal notice of its intentions to the Post Office late last year. I am reliably informed by the Post Office that the notification was not received. It had been sent to the London Post Office, which did not bother to tell the south-east region about it. As a consequence, vital days or even weeks were lost in the attempt to find an alternative arrangement for the Cliffe post office. Notice having been given, my constituents were concerned by the prospective loss of a vital post office. I wrote on 13 December to Richard Handover, the chief executive of W.H. Smith, to ask him for a stay of execution on the decision to have the post office removed from the premises. It was due to be removed by closing time on 20 February.

    I had a telephone conversation and some correspondence with Mr. Handover. I am pleased to say that, as a consequence, W.H. Smith agreed to delay the removal of the post office until 30 April. From my point of view, I had bought the Post Office more than two months longer to find alternative premises. Given the period of notice and the two months-plus that I had negotiated, I thought that that would be time enough for the Post Office to find alternative premises. As I have said, those premises have not been found. The Cliffe post office has closed and people are being seriously inconvenienced.

    My first question, on a general issue, is whether the Minister believes that the notice period that franchisees have to give the Post Office is adequate. Given all the commercial pressures that the Post Office must be under in finding alternative premises and finding people to run them, is a three-month period of notice adequate?

    I am not pretending that the matter was necessarily easy for the Post Office, but the sad fact is—this was confirmed by speaking to Kevin Ray from the south-east region only yesterday—we are no nearer finding premises in Lewes than we were when W.H. Smith first gave notice at the end of last year. That is a great pity.

    It seems that there are two prerequisites for rectifying an unfortunate situation. The first is the location of premises and the second is the identification of those who may wish to run them. In my view, neither of the two presents insuperable obstacles to the Post Office. In a letter to me of 6 January—that is going back some way—the Post Office, through Kevin Ray, said that it had five applicants. Apparently they were ready and willing to run a post office in the area of Lewes to which I am referring.

    Nor is there a shortage of properties. Indeed, the local community has been supportive in trying to help the Post Office find properties. It happens that my surgery is close to the post office. Through my window I can see "To Let" signs all the way down the street. There is no shortage of empty premises in the area. That is unusual, because Lewes is a vibrant centre. Yet we are told by the Post Office that it cannot find people or premises. That is unfortunate. It seems that both are in ample supply.

    I suggest that the hurdles have been set too high. I understand that the Post Office is demanding a relocation fee of £48,000 from whoever takes on the responsibility. It is demanding a licence fee of £12,000. It is estimated that it will take up to £10,000, once someone is in the new premises, to get the business up and running. The Post Office concedes that someone will have to put £70,000 up front to get hold of premises. In addition, there are the regional fees that are payable to the Post Office. If those are the moneys being demanded, it does not seem that many people will be prepared to take on the responsibility. Perhaps that is why, even though there are so many people interested in running a post office and there are empty premises, we are no further forward.

    My second question is whether the hurdles are too high. I believe that they are. I believe also that the Government are trying to avoid post office closures throughout the country, but do they accept that they will take place if we have difficulty replacing units which have been closed or which people had given up? There is the danger that we shall see a slow death of post offices that will be outside the Government's control. The Government should deal with the hurdles and explain why there is still no post office in what is known as the Cliffe area.

    The word Lewes comes from the Anglo-Saxon for hill, and the alternative premises are at the top of a steep hill. That is the situation of the Crown office. It has always been a busy office, as was the Cliffe office. However, it is now heaving at the doors. Queues extend beyond the door and it is clearly unable to cope, despite the best wishes and endeavours of the staff who work there. I pay tribute to them and to those who worked at the Cliffe office. Nothing that I say this evening should be taken as criticism of those at the front line of post office counters. However, my remarks are critical of Post Office management.

    People in Lewes have been told that they can go to two alternative offices. They can go up a steep hill to a place that is heaving at the door, with people queuing into the street, or they can go to a sub-post office a long way away, in Southover high street. Many of my constituents, like those of other hon. Members, are elderly or disabled. It is not a sensible proposition that they should access the Crown office, when all the other facilities that they want—supermarkets, chemists and bakers, for example—are where the Cliffe post office was. They would have to make a special trip to the Crown office, which for many would mean getting a taxi.

    Many of my constituents who are living on pensions and little else—they have no money to spare—would be forced into taking a taxi up the hill to the Crown office to get their pension. That is money that they could ill afford to spend. Effectively, that is a tax on being old or disabled. That is the result of a post office no longer being in the centre of the town, where people want it to be. It is a serious problem.

    I suggest that the way forward is for the Post Office to reduce the hurdles of entry for those who wish to take up premises. The Government and the Post Office must accept that there must be premises at the Cliffe end of town, and that they must facilitate them. If no one is interested because the asking price is far too high, the price must come down.

    I know that the Post Office is considering, controversially, relocating the Crown office to the bottom of the high street. Some might think that that would provide a solution. It might be, if the premises were large enough. However, the present premises are not big enough. We have to think not only about the population of Lewes. It is the county town and the headquarters of the county council, Sussex police, the health authority and the ambulance service. It is a main rail junction in the area. The white-collar work for the county is in East Sussex, which means that Lewes post offices are heavily used by the local population and by those who work in Lewes and who come into it every working day.

    We need two post offices. It may be argued that the Crown office should be at the bottom of the town and the sub-post office at the top, but we cannot continue with only one Crown office in the wrong place. I ask the Minister to accept that and to give me an undertaking that he will do what he can to rectify this serious problem.

    I shall move on to deal with another post office. Unfortunately, the incompetence of the Post Office is not linked only to Lewes. In some respects, the situation in Newhaven is even more slapstick than that in Lewes. Under the previous Government, it was suggested that Crown offices were not necessarily a good thing. Many were shutting and franchisees were being encouraged to take over Post Office facilities. That left Newhaven without a proper Crown office. I cannot blame the present Government for that. However, the Newhaven Crown office shut, to be transferred to a franchise operation in a different part of the town centre. That left an empty space in front of the sorting office, which had before been a shared building.

    I question whether that is a sensible arrangement. Presumably, taxpayers are still paying for the empty space—it has been empty for years—while they are paying also for the post office to be in someone else's premises. It is a rather odd arrangement.

    The main office was moved to the franchisee, but the business went bust at the end of the year—an inconvenient time—over the Christmas holidays. Within two or three days it was shut. My third question for the Minister concerns the financial checks that are made on the suitability of franchisees to ensure that such closures do not happen. Surely we should be able to prevent that happening, or we should put something in place to ensure that, if nothing else happens, at least the post office can continue to operate from the premises, pending another arrangement. However, there was no other arrangement.

    Newhaven now has its post office in a portakabin. I pay tribute to the Post Office, because that facility was put in place quite quickly. However, the only post office in Newhaven—the main port on the south coast in the area which I represent, the gateway to Europe as it used to be called, the main access to Dieppe, with a large population and thousands of people working there at Parker Pens, Cash Bases, Concord Lighting and other major employers—is a portakabin in a car park. That has been the position for months.

    It is ironic—it would be funny if it were not true—that the sorting office in which the post office had been located is sitting empty. Therefore, a building that was designed to be a post office is empty, while people are using a car-park portakabin as a post office.

    In winter, a portakabin is not without its problems. The generator regularly breaks down, so that, without notice, the post office has to be closed. Pensioners and other people struggle to get to the post office, only to find on the door a notice saying, "Closed until further notice because of generator failure". What are they supposed to do? They do not have private transport. They struggle to get to the sub-post office, but then they are told to go to a sub-post office that is located far away, at Denton Corner. We cannot expect people to do that. But that is what they are told to do.

    There is no proper disabled access to the portakabin. Many people in my constituency want to use the Newhaven post office, but they have trouble accessing the portakabin in which it is located.

    Additionally, conditions in the portakabin are terrible for post office staff. The temperature inside the portakabin alternates between hot and cold. The conditions are quite unsuitable for Post Office operations.

    I agree that a portakabin is better than nothing and that, in the very short term, it might be necessary to use one as a post office. However, it does not say much of us that we have got ourselves in such a situation. The problem is that the move to the portakabin happened last year, and that—as I have now been told by the Post Office—it will be used at least until August. In total, the portakabin will be used for nine or 10 months.

    The Post Office has said that it will get back in the sorting office as soon as possible, and it has promised units in the high street. On 8 March, Ian Frampton, the Post Office's assistant press officer for the south-east, faxed a message to Tom Pugh at The Leader newspaper in Sussex. It said:
    Post Office Counters is delighted to say that we are in the final stages of finalising a new site, in the central high street, for our Newhaven post office. However, in addition to finalising the deal, it will also take some three to four months to install counter facilities. We can assure your readers that our application to the district council—
    on temporary permission for the portakabin—
    is purely a safeguard while we make our final arrangements to move to the permanent site.
    Does not all that sound fine and dandy? The final arrangements are being made, and it will not be long before the situation is sorted out. However, I spoke to Kevin Ray, from the Post Office, and he told me that the plans are all off, and that the portakabin will be used for a while yet. On 4 March, he went to see Newhaven town council, reiterated that statement about the high street, and said that the situation would be sorted out by August at the very latest. He said that, after eight months of the portakabin business, we would have a new post office.

    Kevin Ray also promised to keep the town council up to date with developments, but he has not done so. On 19 May, Newhaven town council had to write again to him. The council said, "You haven't told us what is happening. You haven't kept us up to date. What's the position?" Yesterday, I rang Kevin Ray. He told me that there is now a problem with the roof of the building that they had hoped to used, and that the moving date has now been put back to 9 October, at the very earliest. Meanwhile, there is doubt about planning permission for the temporary building.

    Does the Post Office intend to attempt to renew temporary permission for the portakabin, which has already been in the carpark for six months? The permission to keep it there expires in June, and I should like to know whether it will be renewed. Lewes district councillors are not very happy at the thought of renewing permission to keep a portakabin in a carpark. They think not only that the portakabin is unsightly, but that that is not how the Post Office should be run. There is no guarantee that the application will be approved.

    In January, when the problem first arose, I said to the Post Office, "Let us put the post office back into the sorting office. It is sitting empty, and people are used to going there. It is purpose-built as a post office. Why don't you go back in there?" The Post Office said that it would consider it. Subsequently, I was given a ludicrous estimate of the costs of returning to the sorting office. I was told that it would cost almost £250,000, although it had been sitting empty since it was vacated. I do not know why it should cost so much. All the security and other arrangements have already been installed and, presumably, could be reactivated.

    Yesterday, the Post Office told me that perhaps it could go back into the sorting office, and that it may cost only £20,000. That is a miracle! The cost of the move has been transformed from £250,000 to £20,000.

    What about the waste of public money? If it is now possible to return to the sorting office for £20,000, why could not that money have been spent before the post office was closed, in December? Why has the Post Office wasted public money on getting a portakabin, only to plan on spending more money either on continuing to use the portakabin or on returning to the sorting office? It does not make financial sense.

    What is the cost to the taxpayer of having a sorting office that was designed as a post office sitting empty while the Post Office pays for a portakabin in a carpark? It is absolute madness. The Post Office did not need to pay for the portakabin, because a Post Office building was waiting to be used.

    There is only one alternative post office, at Denton Corner, which is a long way from Newhaven. The distance between them is not walkable, and the Denton Corner post office is accessible only by private car. The situation is hopeless. It is also ludicrous to suggest that, should the Newhaven portakabin have to close—because of generator failure, for example—people will be able to go to Denton Corner. People have been inconvenienced. I have had very many letters telling me that people have turned up at the portakabin to get their pension, but it has been closed. The situation really is most unsatisfactory.

    I am not sure that the financial and contract arrangements at Newhaven were satisfactory. If they had been, the problem would not have arisen. Subsequently, the Post Office has certainly not handled the situation very well. It is unacceptable that, according to the Post Office, in October 2000–10 months after the situation arose—people will still be using a portakabin. Does the Minister think that that is fair or right? What is he going to do about getting a proper post office for Newhaven before 9 October—assuming that the date does not slip again?

    I would not want unfairly to attribute blame in relation to the third issue that I should like to raise—the closure, on 31 May 2000, of a key sub-post office in my constituency. Although I do not think that the closure is the Post Office's fault, it is an important issue for my constituents.

    The sub-post office serves the Studd Farm estate, in Polegate, which is a long way from other post offices. The first we knew of the matter was communicated in a letter to me, dated 5 May, from the Post Office. I find that a little odd, because no one else was told about the closure. Neither the town councillors, district councillors nor county councillors were told about the closure. I am glad that I was told about the closure, but it is unfortunate that no one else was. It is also a little odd that we were given three weeks' notice of the closure, whereas my understanding of the contract is that it specifies that three months' notice of withdrawal should be given. In fact, it has already shut. The sub-postmistress has pulled down the shutters and closed the place. That is far less than three months' notice—it is not even three weeks' notice.

    I am aware of the difficulty for the postmistress and it would not be proper to dwell on that. I intend no criticism of her. The Minister will be aware of what I am talking about. However, a key part of Polegate is without a post office at no notice—although, in this case, it is through unforeseeable circumstances. That is causing immense difficulties for many people.

    The principal alternative is the main post office in Polegate high street. It has the capacity to handle the demand, but it is quite a way from the Studd Farm estate and, more to the point, to reach it people need to cross the A22, which is a busy trunk road. Many of the people who need the post office are frail pensioners who do not have access to private transport. Many of them are frightened of crossing that road, but they now have to do so to access a post office. Polegate also comes in the top 10 in the country for percentage of the population above retirement age. I hope that the Minister understands that there is a genuine issue of access to the post office for retired people.

    The problem has not been helped by the town council's decision to withdraw the community bus, although it was not aware of the post office closure at the time. That is a regrettable decision, but it has now been taken, which means that people cannot even get to the post office by public transport. The Post Office tells me that it intends to advertise the vacancy at Studd Farm and try to find somebody to run it, but if the financial requirements and entry fees are the same as for Lewes, nobody will be found and the post office will remain closed. I believe that the Government are committed to post offices. If they want to maintain post offices on estates, which are vital to many people, they must find a way round the Post Office's entry terms. The system does not work. That post office will not open if those entry terms are applied.

    Given the difficult circumstances, I have asked the Post Office for some breathing space and a temporary arrangement under which somebody from the Post Office came to run the post office element for two or three months—with the consent of the sub-postmistress and leaving the rest of the shop unaffected—while alternative arrangements were made. I understand that that has been done elsewhere. It would be helpful to my constituents in Polegate if the Minister leaned on the Post Office and asked it to look at that solution.

    Those are the three post offices that I wanted to mention—two closed and one functioning in a portakabin. I hope that the Minister will have sufficient information from the Post Office to give my constituents some good news. However, I would not be doing my duty if I did not also mention the more general problems of sub-post offices in my constituency.

    The Minister will be aware that earlier this year I delivered to 10 Downing street a petition of 6,500 signatures of constituents who were concerned about possible closures of local sub-post offices. I have looked at all the sub-post offices in my constituency and I cannot think of one whose closure would not cause significant inconvenience to those who depend on it. We have already lost a number from villages, which has caused massive inconvenience. The Minister will also be aware of the multi-million signature petition that was delivered to 10 Downing street. I continue to receive petition signatures from the Women's Institute in Ringmer, Newhaven and elsewhere.

    I shall not rehearse all the arguments, which have been dealt with at length in the House. I am conscious that I have already taken half an hour and I do not want to go on indefinitely. However, I wish to make one or two quick points. The Minister has said that automated credit transfer is inevitable. I agree that it probably is. Technology has its own pace. However, I am concerned that the Government have given themselves a short window of two or three years in which to bring in alternative measures to protect our post offices. My great fear is not that the Government do not have a heartfelt commitment—I believe that they do—but whether they can deliver alternative business to the post offices before ACT kicks in. That has not been answered.

    I am grateful to the Minister's office for letting me have a copy of the useful speech that he delivered in Eastbourne. The Government are clearly thinking of a number of useful ideas on how to take post offices forward, including universal banking, the establishment of sub-postmasters and mistresses as Government practitioners and the full exploitation of e-commerce opportunities. I particularly welcome the fact that the Government have said that they are prepared, under certain circumstances—I do not know what they are yet; perhaps the Minister will tell us—to pay a subsidy to keep post offices going. Those are all welcome steps and we should give credit where it is due. However, it is important to understand what the powers to pay subsidies are. I hope that the Minister will explain them.

    Are any of those powers available now to ensure that we can restore a post office service to Cliffe at Lewes and to Studd Farm at Polegate, and to ensure a permanent arrangement for Newhaven in place of the joke post office that we currently have? If the Minister can do that, as I hope, I shall be the first to congratulate him and to tell my constituents that the Government have helped me.

    8.44 pm

    The Parliamentary Under-Secretary of State for Trade and Industry
    (Mr. Alan Johnson)

    I congratulate the hon. Member for Lewes (Mr. Baker) on securing this debate on the future and provision of post offices in his constituency. I have listened carefully to what he has said and shall come on to his specific cases later.

    The future of the post office network has been debated many times in the House in recent weeks and months, most recently on 12 April, when two debates took place, coinciding with the lobby of Parliament on the same day and the presentation of a record-breaking petition to 10 Downing street containing more than 3 million signatures, a few thousand of which came from the hon. Gentleman's constituency. It expressed the concern of communities all over the country, whether rural or urban, about the future of the network.

    As the hon. Gentleman said, the focus of that concern is the migration to ACT. However, as we all know, the network has been in slow decline for many years. The impact has been disproportionately hard on the rural part of the network, which has shrunk by 25 per cent. in 20 years, despite commendable efforts by the Post Office to prevent it.

    I will say a word about the inferences made about Post Office management. I have dealt with Post Office management for many years. I am the first to offer criticism and say that they do not always get it right. However, the House should acknowledge the tremendous work that goes into maintaining a huge and ubiquitous network, sometimes in difficult circumstances. The Post Office's efforts, generally, are to be commended.

    I was pleased that the hon. Gentleman said that the move to ACT was inevitable. We announced the decision to move to ACT over a two-year period from 2003. The hon. Gentleman asked about the timetable. As I said to the National Federation of Sub-Postmasters' conference, in my 32 years' association with the Post Office, during which I have complained on many occasions that it is under-promoted and under-utilised, I have never known such a focus and such a searchlight on the business. There would be problems if that slackened; I do not think that moving the dates from 2003 would help the network at all. In fact, I think that the situation has had a positive effect in galvanising everybody—the Government, the Post Office and sub-postmasters and sub-postmistresses—into looking at how the network can be protected in future.

    Given that the previous Government's well-intentioned computerisation benefit payment card project went belly up and that the Select Committee on Trade and Industry said that the project was blighted from the start, the Government decided on a conventional procurement to complete that computerisation. That project is going well—post offices are being converted at a rate of 300 per week, and the programme of computerisation will be completed by spring 2001.

    It was a difficult decision to salvage Horizon and plan for the change to ACT. The soft option was to abandon the failed private finance initiative, do nothing, and see the decline of the network turn to crisis and crisis turn to collapse. It has been suggested that we are forcing the change through, but it is an inescapable fact that people are already voting with their feet. ACT take-up is increasing by 500,000 customers a year. The move to ACT will accelerate as a whole new generation used to cashless pay comes up to pensionable age.

    It cannot be sensible for the Government, nor can it be of any lasting benefit to the Post Office network, to ignore those trends. The solution that we have to reach now must concentrate on how we allow people to access their cash at post offices, as we are committed to doing, once it is transmitted to them via ACT.

    We must also focus on finding new areas of work for this under-utilised and under-promoted network. That is why the Prime Minister asked the performance and innovation unit to do a project on the future of the network. That project is nearing completion. From the work that has already been done, the Government have identified an emerging vision for a modernised network. That vision includes concentrating on areas such as financial services, in which the good work already done with banks such as the Co-operative, Lloyds TSB and, most recently, Barclays, can be extended so that people can access their bank account, whatever their bank account is, across a post office counter. I hope that other banks, with the incentive of the Horizon automation platform, will soon be attracted down that route.

    In the same vein, we welcome the Post Office's work in developing a universal bank. In his Budget speech, the Chancellor invited the banks to work with the Post Office to offer a basic banking service to all. A universal bank could help to address the problems of financial exclusion in partnership with the banks. It would greatly reduce the number of people who do not have bank accounts. It could also provide a post office-based solution for benefit recipients who continue to want to collect their pensions in cash, across a post office counter, weekly—if it is paid weekly at the moment—without any dilution by bank charges.

    The Post Office is well placed to play an expanded role in financial services and to take advantage of increased use of e-commerce. It needs to think creatively about how to take advantage of those opportunities. It could become the place in which many customers order and pay for goods over the internet or collect products. Those are important parts of the Government's emerging vision for the future of the Post Office.

    We also believe that the reach of post offices makes the network a major national asset. Millions of people already see post offices as places where they can do government business. There is potential for sub-postmasters and sub-postmistresses to become practitioners providing a range of services, particularly given that the Government are pledged to provide all services online by 2005. The network could be the ideal access point.

    We will have to work with sub-postmasters and sub-postmistresses to make that vision a reality. We want rapid movement, and I hope that, when the performance and innovation unit report is published—hopefully within the next couple of weeks—we can unite behind that vision and work to make it reality.

    The hon. Gentleman raised specific concerns about three post offices, at Cliffe in Lewes, at Newhaven and at Studd Farm. He has maintained close contact with post office network managers about his concerns, and he is plainly more au fait with the situation than I am. However, I shall try to address some of his important points.

    At Cliffe, the post office formerly operated in the W. H. Smith store closed at the end of April following the company's decision to resign from its sub-postmaster contract. Although the vacancy has been advertised since December and several firms in the area have been approached about it, Post Office Counters has been unsuccessful in finding a new partner to take over or re-establish a post office service in Cliffe. POC is continuing its efforts to restore the service. In the meantime, additional staff have been employed at Lewes Crown office, which is 700 m from the former Cliffe post office, and at Southover, which is 900 m away, to handle the business of customers who previously used Cliffe.

    The hon. Gentleman asked whether the three-month notice period was adequate, and I shall return to that point later. He said that there was no shortage of premises, and I shall take that point up with the Post Office, which, I am sure, will read the Hansard report of this debate. The hon. Gentleman also mentioned the £48,000 requirement. In my time both as a Minister and with the Post Office, I have never heard of that being a particular problem. In this case, in order to attract a client, the Post Office has offered to stage the payment over three years instead of demanding it up front.

    Once the Postal Services Bill is enacted, these issues will be important to the new regulator and the revamped and reinvigorated consumer body, which may be able to advise us on issues and procedures that have been with us for many years and which may need to be revisited. I do not say that the £48,000 requirement is either a negative or positive aspect of the problem, but it ought to be considered. The Post Office in the hon. Gentleman's area has offered to stage the payment.

    I was pleased to hear the hon. Gentleman make his point about not criticising front-line post office staff. In the cases that he raised, including the two offices near Cliffe, the staff are doing their jobs in difficult circumstances.

    At Newhaven, the Crown office was converted into an agency office in early 1997, and was relocated to the Mayfair Cards store. Unfortunately, the Mayfair Cards group went bankrupt in late 1997, when Post Office Counters took over the running of the post office. Until termination of the lease in December, it continued to operate on the same site. As a temporary measure until new premises could be secured, the post office operation has since been maintained in a mobile facility, and there have been problems. The generator broke down for three days, denying the service to the public, albeit only for three days.

    I understand that a new site has now been secured but that, because of the necessary structural and fitting-out work mentioned by the hon. Gentleman, it will not be ready until the autumn. Consequently, from August, the post office will temporarily move back to its original site—in the old Crown office, as the hon. Gentleman pointed out—until the new premises are ready. A permanent return to the original site has been ruled out because it is not large enough to accommodate an associated retail business with which the costs can be shared.

    If the Post Office has decided that it is possible to move the office back temporarily to the previous site, why could not that have been done when it left Mayfair Cards at the end of the year?

    I cannot answer that question, but I will ensure that the Post Office advises me on the matter; the hon. Gentleman's point is reasonable.

    At Studd Farm, the post office closed last week, following the resignation of the sub-postmistress on health grounds. It was hoped that the closure would take place at the end of May, but for reasons that I agree we cannot go into, it happened earlier than expected, due to circumstances beyond the postmistress's control.

    Although the vacancy has been advertised, as the sub-postmistress gave three months' notice of her resignation, unfortunately, no applicants have yet expressed an interest in buying the business. In the meantime, the two nearest alternative offices at Polegate, which is a little more than half a mile away, and at Wannock, which is about three quarters of a mile away, have the capacity to handle the business previously transacted at Studd Farm.

    The specific issues relating to the three offices that were raised in tonight's debate highlight the range of problems and circumstances that can arise in managing and maintaining a retail network of more than 18,000 post offices. The points raised by the hon. Gentleman are related to those matters.

    The hon. Gentleman questioned whether the period of three months' notice was adequate. If he thinks that three months is too low, what would have been the effect on the sub-postmistress at Studd Farm? She has been working out her three months' notice while waiting to retire on health grounds. The Post Office faces a huge range of circumstances. If three months is considered to be too short a period for companies such as W. H. Smith, how would one deal with the problem of a postmaster or postmistress who wants to retire through ill health or for some other reason? A longer period would be unreasonable for them.

    The hon. Gentleman made the point that the hurdles set for taking over a new business were too high. He also referred to the financial checks made on sub-postmasters. If there were more rigorous checks—as perhaps there should be—that would create another hurdle and delay the introduction of a new post office service.

    Those are complicated matters. The spotlight that the debate has directed at the network gives us all an opportunity to consider them. The hon. Gentleman has done his constituents a service by raising those points; I shall take them up further and in detail with Post Office management.

    In many ways, the problems highlighted by the hon. Gentleman epitomise the challenges faced by the network. The Government are committed to finding solutions that preserve an essential detail of our social fabric and that have our support, that of the sub-postmasters and sub-postmistresses and, most importantly, that of the communities that they serve. All hon. Members appreciate that, despite the problems described tonight, which are highlighted in many of our constituencies, the Post Office does a tremendous job. We want to keep a ubiquitous network and to ensure that a continuous service is provided to the public. We need to ensure that the review of the service solves as many problems as possible—including those raised in tonight's debate—without creating a new set of problems, as might occur if we take a shortsighted approach.

    Question put and agreed to.

    Adjourned accordingly at one minute to Nine o'clock.