asked Her Majesty’s Government:

When they will sign the European Convention on Action against Trafficking in Human Beings.

My Lords, the United Kingdom is currently considering whether to sign the Council of Europe Convention on Action against Trafficking in Human Beings. The Government are examining how the convention’s approach could best be harmonised with effective immigration controls.

My Lords, I am partially grateful to the Minister for her reply, but can she say how many people are estimated to have been trafficked into the United Kingdom over, say, the past five years? Secondly, this morning I received a note from the Foreign Office saying that 131 treaties had not been ratified by the United Kingdom. Of the 46 member states of the Council of Europe, 25 have ratified the convention on human trafficking. Why has the United Kingdom been unable to do so? Should we not take a very visible lead in all these humanitarian causes?

My Lords, I reassure the noble Lord that we do take a lead in these humanitarian causes. Although a number of countries have signed the convention, very few have ratified it. It is very difficult to say how many people are trafficked, because one has to differentiate between those who may assert that that has happened and those to whom it has happened. I shall certainly write to the noble Lord about cases where convictions have been established, because those are better numbers. I am not sure whether we have a definitive number for that, but I shall use my best endeavours to get the noble Lord the details that he seeks.

My Lords, my noble friend will know that the convention is not the only international instrument to control that cruel trade. In 2004, an optional protocol to the UN Convention on the Rights of the Child entered into force on protecting children from all forms of sexual exploitation. Is the UK still not in a position to ratify that? How much longer will the Home Office’s review of the articles of that instrument take?

My Lords, we are not in a position to ratify it now. Your Lordships will know that the United Kingdom has taken its treaty responsibilities very seriously indeed and will sign treaties only when we are absolutely committed to all their terms and to their delivery. I assure my noble friend that this issue is of the utmost importance to us.

My Lords, has the trafficking of children increased?

My Lords, it is not possible to say whether the trafficking of children has increased, but I assure the noble Baroness that, as a result of our attention to this issue, our ability to respond creatively and positively—through our action plan and the actions that we are taking—has certainly increased.

My Lords, the Home Office has published an estimate of 4,000 people who have been trafficked to the United Kingdom, and the figure was published also in a House of Commons Library note in September 2006. If that many people in the United Kingdom have been victims of trafficking, why are there so few prosecutions under either the Sexual Offences Act 2003 or the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004, which criminalised trafficking for sexual purposes and other purposes respectively? Is it because the police do not have to look to a key performance indicator that measures their performance on the detection and prosecution of these offences?

My Lords, I do not think that it is. One of the difficulties is that sufficient evidence must be found to substantiate someone’s claim that they have been trafficked and to justify a prosecution. One of the things that we have been able to do through the action plan is to help professionals better understand how trafficking occurs and to enable them to take more positive and effective action to prosecute it. The different models of operation that we have been able to run are proving successful.

My Lords, will the Minister say which countries are the worst offenders on trafficking and what action the Government are taking to encourage them to suppress it?

My Lords, it would be invidious for me to identify any particular country. However, our foreign policy means that we are engaging with all countries on this matter because all are either purveyors or receivers of trafficked people. It is an issue on which we must all engage. The UK action plan, which we are putting together, will enable us to respond to this terrible scourge in a much more targeted and, we hope, effective way.

My Lords, concerns have been expressed about the dangers of an increase in this evil trade when Bulgaria and Romania enter the EU on 1 January. Do the Government share those concerns and, if so, what action is being taken?

My Lords, I hear what my noble friend says about those concerns. I reassure the House that we have been working very successfully with our colleagues in Bulgaria and Romania on crime. One of the benefits of that close relationship is that we are better able to interdict this and other crimes across Europe.

My Lords, does the Minister agree that the Italian Government are much more experienced in this matter than we are, particularly in protecting those victims of trafficking who need a period of reflection when they are arrested? Will she confirm that the Italian Government have contributed to the UK’s action plan and that discussions are being held?

My Lords, we have looked at what other countries have done in this area so that we can learn how to respond better. The UK action plan on human trafficking includes action on many ways in which children are trafficked, not only for sexual exploitation but for exploitation of labour. This is a very broad-ranging plan, and we are considering the best information that we have to ensure that that action really bites on this evil and pernicious crime.

asked Her Majesty’s Government:

What discussions they have had with the retail industry about reducing the number of plastic bags offered free of charge to customers.

My Lords, Ministers from Defra and the Scottish Executive recently met UK retailers to discuss a draft voluntary code of practice on paper and plastic carrier bags. The Government and retailers have committed to work together to encourage the reuse and recycling of bags, and agreed targets for their reduction. It is hoped that as many retailers as possible will sign up to the code, resulting in a significant change in consumer behaviour.

My Lords, does my noble friend agree, as one of the most effective and experienced parliamentarians and Ministers in this Government, that in order for a Back-Bencher to influence policy one has to have an impeccable case and to be a bit of a nuisance? We are still using 8 billion plastic bags a year, and despite the efforts of the supermarkets they have not made much of a dent in that figure. I am sure that the noble Lord goes shopping frequently, as many of us do. Does he agree that plastic bags are pushed at one in supermarkets, even if one has one’s own bags? Do the Government agree that, if we cannot make progress voluntarily through this code, we will need a tax on plastic bags?

My Lords, my noble friend comes back to this issue a few months after he last raised it. He is absolutely right that making yourself a nuisance is the way to get things done. We hope that the majority of retailers will sign up to the proposed code and that we will have a statement before the end of the year. They have agreed to a target of a 25 per cent reduction by 2008 in the number of plastic bags given away and there is a possible target of a 50 per cent reduction by 2010. As my noble friend said, between 8 billion and 10 billion plastic bags are produced a year—134 per person—so a 50 per cent reduction would be very substantial.

My Lords, rather than impose more taxes and strictures on the poor old consumer, would it not be better to use the huge possibilities in the media to get over the message that, if we want to protect the environment, we should take our own shopping bags to the supermarket?

My Lords, I agree with the noble Baroness. Perhaps everyone should have a shopping bag for Christmas.

My Lords, is the Minister aware that some of us are very grateful for our free plastic bags, because we reuse them as bin liners and for a variety of other purposes, thereby saving ourselves from having to buy any?

My Lords, the noble Lady is quite right; plastic bags make up 0.3 per cent of domestic waste and between 0.1 per cent and 1 per cent of visible litter. They constitute a very small proportion of total litter, and most sensible people will reuse them for other purposes. To that extent, it is not all negative.

My Lords, what discussions has the Minister had with local authorities about the plastic bags that they have to issue so that we can all get rid of the huge quantity of unwanted marketing material that the Post Office forces through our doors?

My Lords, I have not had any such discussions; that is the direct answer to the question. Questions have been raised in this House about junk mail that comes via the Post Office through our doors. You can quite easily stop addressed junk mail and, as we all now know because of that nice postie somewhere who told his own customers, you can stop unaddressed junk mail coming through your door via the Royal Mail. There are two procedures to enable people to do that, and the details are available in answer to a PQ. I regret to say that I cannot remember which noble Lord asked it, but it is printed in either today’s or yesterday’s Hansard.

My Lords, does the Minister agree that just stopping the use of plastic bags is important and that cloth bags or baskets are a better option, as he suggested last time? However, the Government chose to implement the Food Industry Sustainability Strategy—which would have answered a lot of these problems, including those of packaging—only as a voluntary strategy although the industry was encouraging them to make it mandatory. Why did they resist that?

My Lords, possibly to try to get as much voluntary action as possible. The issue of packaging is almost the same as that of plastic bags. If they are made from fossil materials, they are a problem for the environment. It is possible to make such packaging and bags from non-fossil materials. We can grow the materials to make such products, and that actually helps the environment.

My Lords, one has to take away one’s supermarket goods in some form of container and there was a time when people could use the cardboard boxes in which goods were delivered to the supermarket. In his discussions with supermarkets, will the Minister urge them to make those cardboard boxes available? I believe that they have been withdrawn generally because they are said to be a fire risk.

My Lords, I will see that my colleague who deals with this matter with retailers takes that point on board. They do not use cardboard boxes any more. I have been told that paper bags as an alternative weigh more, cost more to transport and can be more damaging to the environment. There is no easy answer to this.

My Lords, is the Minister aware that one supermarket chain uses plastic bags that are printed with a message saying that they are biodegradable, how long they will take to biodegrade and for how long it is safe to use them before they begin to do so? Should that not be encouraged?

My Lords, that may be so, but other supermarkets have told me that people do not read what is on plastic bags, which is why they do not advertise on them. They have done tests on this to show that that is the case. There is also a problem with biodegradable plastic bags; this is not simple. If they are mixed with waste which includes non-biodegradable plastic and people then try to recycle, there is a problem with the recycled product.

My Lords, does the Minister accept that there are different weights of plastic bags? Obviously, the heavier ones can be reused much more often. An earlier question referred to supermarkets, but it would be enormously helpful if the discussions went right across the retail industry. We need to convert people who sell goods to stop advertising in a way that says, “No, we want to use our own bags. We don’t want to have your reusable ones”. My local butcher was a very good example of that: when I took my own bag, he said clearly, “I cannot possibly let my high-class meat go out in that bag”.

My Lords, there is no answer to that.

asked Her Majesty’s Government:

What steps they have taken to ensure that projected growth in the aviation industry, including airport expansion, remains compatible with their carbon emissions targets.

My Lords, we have made it clear that aviation needs to take its share of responsibility for tackling its environmental impacts. Our priority is pressing for the inclusion of aviation in the EU Emissions Trading Scheme from 2008 or as soon as possible thereafter. We will also continue to explore and discuss options for the use of other economic instruments.

My Lords, I thank my noble friend for that reply. Of course, we are very glad to know that the Government are addressing this issue. However, recent research from the Tyndall Centre and the Environmental Change Institute at Oxford shows that emissions from aviation as a proportion of carbon and other emissions entering the atmosphere are growing at an alarming rate. Is my noble friend aware that both organisations have put the halting of further growth in airport capacity at the top of their list of necessary measures to address this problem? Is he further aware that the Mayor of London was quoted yesterday in the Guardian as follows:

“We are now preparing amendments to the [2002 London] plan against any further runway capacity in the south-east”?

In the light of all this, is it not time for an urgent and radical review of the Government’s aviation policy?

My Lords, I am grateful to my noble friend for those comments. The Government certainly take the question of emissions seriously. However, the House will recognise that to be effective we need international action, which is why we are addressing ourselves to the European Union position first, in order that we have some leverage with the international position as a whole. My noble friend is right. She is also right that air travel has expanded in recent years and we seek to meet the legitimate demands of many of our people for travel. We obviously have to strike a balance between the desirability of air travel and the fact that emissions from air travel are increasing. We need to be able to control that factor.

My Lords, I am following on from the questions put by the noble Baroness, Lady McIntosh. I do not know whether anyone has seen it, but the front page of the Independent today is timely. It declares that enough is enough regarding the expansion of airports all over the United Kingdom. The Minister constantly refers to “international action”, but our plans for airport expansion here are much worse than in other countries. Surely we should rethink that expansion now. The level of emissionsis set to rise from 8.8 million tonnes in 2000 to18.8 million tonnes by 2020. The Government need to rethink their airport expansion plans now. It is not international action that is needed, but UK action.

My Lords, the noble Lord is ignoring the fact that merely reducing our capacity unilaterally would lead to our competitors potentially increasing their capacity. It must be recognised that the aviation industry in Britain is responsible for 200,000 jobs. It is a very significant contributor to the economy and therefore a balance has to be struck. Let me also say this. One in every two of our fellow citizens took at least one flight last year. Of course the environmental impact of these developments has to be taken into account and that is the purpose of both the Stern report this week and the action taken by the Government prior to that report. But let us make no bones about the fact that there is an important aspect regarding the economy and our people’s needs, which we also need to take into account.

My Lords, has my noble friend not studied the findings of the Oxford University centre to which my noble friend Lady McIntosh referred, in particular the conclusion that the vast majority of flights are taken by the better-off sections of the community, mainly existing travellers flying more often? The number of people from the lowest economic categories taking flights is tiny when compared with the number of those flying off to their second homes in continental Europe. This is not an issue where poor people will suffer if responsible action is taken on aviation charges and climate change.

No, my Lords, but 50 per cent of the population is quite a significant proportion, so we do have to bear that in mind. However, I recognise what my noble friend says and certainly long-distance flights are taken more often by the better-off sections of the community. But we have an industry and a role in aviation in which we are an important world leader. So while we recognise that adaptation is necessary—enforcement may well become necessary for certain aspects of the operation of airports in terms of greener strategies—we must balance the obvious needs of the community for certain levels of air travel with the growing problem of emissions which has been so clearly identified in the reports to which my noble friend referred.

My Lords, in light of the need for urgent action to which several noble Lords have drawn attention, could not the Government consider using carrots instead of sticks on people? Would it not be a good idea to reduce rail fares, lengthen railway platforms and invest in new rolling stock, all sorts of things which the private sector would finance? In London, before Ken Livingstone introduced any penalties with the congestion charge, he improved bus services, put in bus lanes and made the system ready. He first put everything in a line.

My Lords, I am delighted to see that Ken Livingstone is getting such a good press in the Chamber today, but the terms of trade regarding internal flights and the use of rail are changing over the forthcoming period for obvious reasons. We are seeing very significant investment in high-speed rail developments, one of the most impressive and important of which is at King’s Cross in preparation for the arrival of high-speed trains from Europe, and we shall see the greater use of high-speed trains as opposed to aircraft. This investment is going on at the present time and will be reflected gradually in the price for various journeys. The principle that we will follow is that the polluter will pay.

asked Her Majesty’s Government:

What plans they have to change the current council tax to local taxation based on localities or to an annual bill levied on a percentage of the value of each property.

My Lords, the Government have no such plans. We will consider any changes to the council tax system only in the light of the recommendations of Sir Michael Lyons’s independent inquiry into the functions, role and funding of local government, which is due to report to the Chancellor of the Exchequer and the Secretary of State for Communities and Local Government at the end of the year.

My Lords, I thank the Minister for that Answer. Are the Government working with Sir Michael Lyons on his proposals for changes to the local taxation system, despite him or in anticipation of what he is going to say?

My Lords, as we have worked through our own plans for local government reform we have been informed by Sir Michael’s interim report. But his report on funding local government is an independent report and we will take full account of it when it is published.

My Lords, is the Minister aware that any dramatic change in council tax, whether or not through banding, could adversely affect people—particularly older people—who have lived in a property for many years? The property may have gone up 100 times in value, yet is still a house to live in and is not worth any more to them. It could have a devastating effect on whole communities if such elderly people were forced to sell up and move in order to meet the charges.

My Lords, the point of the council tax system is that it is fair and is seen to be fair. Sir Michael Lyons is addressing the task of how to make it fairer in changed circumstances, and all those kinds of considerations will be taken into account.

My Lords, in view of that answer, can the Minister say a little more about why the Government have developed something called intelligent proximity analysis, which allows valuation officials to differentiate between thousands of neighbourhoods and adjust bills accordingly? Given the Government’s intention, announced last week in the White Paper, to clarify and make local government more transparent, does she agree that a system which takes into account 287 different variables would not do very much to assist local council tax payers in understanding their bills?

My Lords, I am glad of the opportunity to say how much I deplore the kind of mischief that is being made by campaigns which suggest that somehow the basis of council tax assessment is changing. The source of information to which I think the noble Baroness is referring is probably the one-off study used in anticipation of the revaluation which we postponed. As she will know, normally the valuation officer conducts the full valuation assessment. Evidence was taken from data sets which were found not to be useful in relation to the expertise of the valuation officer. That exercise has led to some newspapers speculating that somehow valuation will be based on the number of people wearing soft contact lenses in the area in which you live, which is complete rubbish. The valuation system has not changed since it was set up in 1993 by the Conservative Government. It aims to be fair. The only change is that we are using new technology and digitalisation to make it fairer and more accessible.

My Lords, if the Government have no intention of introducing local government tax based on capital values in England and Wales, why then are they forcing through next Tuesday provisions for local government taxation based on capital values in Northern Ireland? I think I am right in saying that the proposals are opposed by every party in Northern Ireland, with the possible exception of Sinn Fein, and come in advance of any possible decision by the Northern Ireland Assembly, which the Government are trying to revive later this month.

My Lords, it is absolutely true that the local taxation system in Northern Ireland is different. All the questions raised by the noble Lord will be ably dealt with by my noble friend when he opens the debate on Tuesday.

My Lords, when a new transport link gets built—such as Crossrail, which is in proximity to the site for the Olympics—and people who live in the vicinity find the values of their house doubling or trebling, as has already happened around Stratford, would it not be reasonable for the community to get some of that benefit rather than the windfall all falling on the lucky owner?

My Lords, as I said, council tax is based and always has been on the value of your home, which depends on where you live. That is hardly new. My noble friend makes a good point.

My Lords, does the Minister not agree that all the pointers that are now coming forward are that there will be a great shift in the taxation burden on to local taxation? Following a point made by my noble friend Lady Gardner, how will that shift in taxation be reflected in people’s income and ability to pay when the council tax is so much increased, as it looks as if it will be?

My Lords, I cannot possibly anticipate what Sir Michael Lyons is going to recommend. We have made it clear that the council tax should be retained; we are not in favour of local taxation, and I am not entirely sure who is these days. It is another case of having to wait and see what Sir Michael Lyons comes up with.

My Lords, given the present uncertainties, are the Government treating the entire nation as a focus group?

No, my Lords. In fact, I take the opportunity to say that valuation officers look only at properties that are new to the market or come forward at the point of sale. The idea that there is an army of valuation officers snooping away, taking photographs of people’s bedrooms and counting the number of rabbit hutches or gnomes in their gardens is absolutely absurd. I really wish that we could communicate this information more persuasively—and we look to the party opposite to help us to do that.

My Lords, a couple of weeks ago I announced the recess dates as far as I was able for the next Session. I am now able to announce provisional dates until next October. The dates will be in the Printed Paper Office, along with the dates for Friday sittings.

The Easter Recess starts when we rise on Thursday 29 March and goes on until Monday 16 April, when we return. For Whitsun, we have from Thursday 24 May until Monday 4 June. For the Summer Recess, we rise on Thursday 26 July and return on Monday 8 October. As the discerning listener will have noticed, there is no September sitting. The Commons decided yesterday not to have September sittings; I think that that was a splendid decision.

I know it is helpful to the House to give the dates of Friday sittings throughout the year, as far as we are able, but I cannot claim credit for coming up with the idea. I shall not read them out now because there are a lot of them, but it helps people to plan. The credit should go to the legendary former Liberal Democrat Chief Whip, the noble Lord, Lord Roper, who suggested that it was helpful to everyone to know in advance as far as possible, especially for those noble Lords who are introducing or hoping to introduce Private Members’ Bills and things of that sort, because they can then have some idea of how they might progress through the year.

I beg to move the Motion standing in my name on the Order Paper.

Moved, That the draft regulations laid before the House on 24 July be approved [35th Report from the Joint Committee] [Considered in Grand Committee on 30 October].—(Baroness Andrews.)

On Question, Motion agreed to.

My Lords, I beg to move the three Motions standing in my name on the Order Paper.

Moved, That the draft regulations and order laid before the House on 19 October be approved [36th Report from the Joint Committee] [Considered in Grand Committee on 30 October].—(Baroness Ashton of Upholland.)

On Question, Motions agreed to.

My Lords, I beg to move the two Motions standing in my name on the Order Paper.

Moved, That the draft orders laid before the House on 12 and 16 October be approved [35th and 36th Reports from the Joint Committee] [Considered in Grand Committee on 30 October].—(Lord Bassam of Brighton.)

On Question, Motions agreed to.

moved Amendment No. 2:

My Lords, I briefly add my support to the amendment moved by the noble Lord, Lord Goodhart. I will not rehearse the arguments we had on Report. My view is that we should be going even further than what is embodied in this amendment, but I take the point the noble Lord has made. As he says, there are one or two measures where, even if incidental provisions could be changed by order, it is important to protect the whole measure. I am therefore happy to support the amendment.

My Lords, I ought to address a point made on Report by the noble Lord, Lord Goodhart, about the Scotland Act, on which, as the noble Lord observed, I agreed to reflect. As he astutely judged, I am unlikely to promise that we shall change things, but one can always think about these things.

The noble Lord suggested that any amendment to the Scotland Act would be of constitutional significance. That is a large statement but one that has to be taken into account and thought about as it has many implications. He did so on the grounds that the Act was,

“in a sense, the possession of the Scottish Parliament”.—[Official Report, 26/10/06; col. 1309.]

I do not think that anyone would disagree fundamentally with that. I am pleased that the noble Lord recognised the not insignificant interest in the devolution Acts that Westminster has, not least because it is this sovereign Parliament that debated and passed the Acts and chose to devolve power to the then newly created legislatures.

I labour the point about sovereignty because devolution is based on the retention of a sovereign UK Parliament—a Parliament that continues to be able to legislate on any matter, reserved or devolved. We, of course, choose to exercise a self-denying ordinance in relation to devolved matters in Scotland through the Sewel convention. Indeed, the Bill before us contains provisions in Part 3 that require the consent of the Scottish Parliament, and that consent was overwhelmingly given on 5 October 2006.

But the sovereign UK Parliament retains the responsibility for reserved matters such as the constitution. The Scotland Act itself is a matter reserved to Westminster. Of course, we must respect the views of the Scottish Parliament. That is why we have listened not only to your Lordships’ concerns about the Bill but also to our colleagues in the Scottish Parliament. We brought forward the amendment debated and agreed on Report, which adds a new precondition—which the noble Lord welcomed—ruling out provisions which the Minister considers to be of constitutional significance. We firmly believe that this is the right way to address those concerns and reflects the fact that there is not a consensus on this issue.

The constitutional precondition allows for minor changes to enactments which contain provisions which are constitutionally significant—that would include the devolution Acts—but only ever for the purpose of better regulation, as the limits of the order-making powers make clear. The constitutional precondition rightly respects the sovereign nature of Westminster within our governance arrangements.

On Report, the noble Lord, Lord Goodhart, said that he could not support a list of constitutional statutes because it would need constant updating and, importantly, because,

“many statutes contain provisions that are constitutionally important alongside those that are not”.—[Official Report, 26/10/06; col. 1309.]

This is exactly what the Government’s amendment introducing the new constitutional precondition was intended to address. It is not easy to reconcile the noble Lord’s statement with the proposition that any change to the Scotland Act would be of constitutional significance.

It is worth adding that Clause 9 already restricts the order-making powers to reserved matters; that is, to matters for which only this Parliament is responsible. So these order-making powers cannot be used to make changes to legislation that has been passed by the Scottish Parliament. The only exception is that the Bill allows for incidental and consequential changes to be made to devolved matters, but only ever for a reserved purpose. This is consistent with the fact that the Scottish Parliament can and does make incidental or consequential changes to reserved matters for a devolved purpose without requiring procedure in, or the agreement of, the Westminster Parliament.

I highlight an important point that I think will provide the noble Lord with some of the comfort which he seeks. The Scotland Act recognises that over time changes may have to be made to the reservations and exceptions set out in Schedule 5. Section 30(2) of the Act therefore allows the schedule to be modified through an Order in Council. A draft order has to be approved by the Scottish Parliament and both Houses at Westminster before it is made. The initiative in proposing a Section 30(2) order can be taken by either Administration but both sides agree to both the principle and the detail before the order can be pursued. Since devolution, the Government are committed to that being the appropriate route to effect alterations to the Scottish Parliament’s legislative competence. The Legislative and Regulatory Reform Bill does not change that arrangement. Orders under the Bill should not be subject to procedure in the Scottish Parliament.

As I have already mentioned, the Bill restricts the order-making powers to reserved matters; that is, matter for which only this Parliament is responsible. It would not therefore be appropriate for orders to go before the Scottish Parliament for approval. That is particularly true when one considers that the Scottish Parliament can and does make incidental or consequential changes to reserved matters for a devolved purpose without requiring procedure in or the agreement of the Westminster Parliament. For those reasons, we stick to our original position. I invite the noble Lord to withdraw his amendment.

My Lords, I am disappointed with the answer from the Minister. Of course, I recognise that in law this Parliament is sovereign and that the Scotland Act is a reserved matter and can be changed by this Parliament. Nor am I suggesting that it is necessary for changes to the Scotland Act to receive the approval of the Scottish Parliament. I am suggesting that what is important is how this Parliament is to exercise its sovereignty. The Scotland Act is of such importance in determining the relationship between the two Parliaments and the two nations that it is necessary that any amendment of the Scotland Act should be treated as a matter of constitutional importance, however minor the proposed change. In those circumstances, it would be right to insist that any change to the Scotland Act, however minor in itself, should be made by primary legislation. That is essential in the case, which could happen, where Members of the Scottish Parliament, or the Scottish Executive, were not in favour of those changes.

However, I recognise that this is a very late stage in the procedure of the Bill. I imagine, now that we have paragraph (f) in Clause 3(2), that it is pretty unlikely that a problem such as the one that I envisage would happen. In those circumstances, it is not appropriate to press the amendment to a Division. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 14 [Draft order and explanatory document laid before Parliament]:

moved Amendment No. 3:

My Lords, we support the amendments of the noble Lord, Lord Goodhart, for the reasons that he has given.

My Lords, my noble friend Lord Bassam outlined the workings of the Human Rights Act on Report, so I do not propose to reiterate that which noble Lords who have already spoken know as well as I do, if not better. I am replying now because I have been engaged in conversation with the noble Lord, Lord Goodhart, in light of my responsibilities for human rights. My noble friend was kind enough to let me deal with these amendments, in order, I hope, to reassure both noble Lords appropriately of the position.

As I said, I am not going to repeat what has been indicated at previous stages, except to say that—as the noble Lord, Lord Goodhart, said—it is unlawful for a Minister of the Crown to make secondary legislation that is incompatible with the convention rights. As he indicated, his Amendment No. 3 would put a requirement into the Bill that orders made under it would have to be accompanied by a statement of compatibility with the convention rights. My noble friend Lord Bassam explained on Report that the Section 19 statement, which we already have, is in a sense a genuine alternative in respect of primary legislation, as Parliament can choose to legislate incompatibility. That alternative does not exist with secondary legislation, which it is simply unlawful for Ministers to make incompatible.

As the noble Lord said, the Government as a matter of convention accompany some secondary legislation with a statement confirming compatibility with the convention rights—specifically, where secondary legislation amends primary legislation, or where it is subject to affirmative or super-affirmative procedures. My honourable friend Jim Murphy gave an undertaking in Committee in another place that the Government would accompany all orders under this Bill with a statement confirming their compatibility, of the precise kind envisaged by the noble Lord, Lord Goodhart. I can confirm that undertaking today; it will be followed through.

However, as the noble Lord knows, I have no desire to put that into the Bill—not just because it confirms what we have already said would be the case about the compatibility of orders, but because I am worried about there appearing to be a genuine alternative in consequence. In other words, by putting this into the Bill we might suggest that there is an alternative where the order could be incompatible, just as with primary legislation. While I am sympathetic to the noble Lord’s wishes, I hope that he will understand that the commitment we have given should not lead—accidentally or otherwise—to a place where we might suggest something other than that which is already the case. I hope that he will accept the double reassurance, from my honourable friend in another place and me, that it will be the case. No doubt, he will hold us to account on that basis.

I am sympathetic to what lies behind Amendment No. 4, as the noble Lord would expect. However, I hope that he will feel eventually that it is unnecessary and could cause some difficulty and confusion, as his opening remarks indicated. Let us again be clear: a Minister could not seek to make an order that amended primary legislation in a manner incompatible with the convention rights—nor would such an order pass parliamentary scrutiny. Not only would that be unlawful under Section 6 of the Human Rights Act, as I have explained, but it would probably not meet the preconditions set out in Clause 3 of this Bill—which, from the human rights perspective, I have studied and discussed with my officials to ensure that we are absolutely clear on the meaning. Notably, within Clause 3(2)(e), there is the precondition that requires the Minister to be satisfied, before he can make the order, that provision in it will not prevent an individual,

“from continuing to exercise any right or freedom”,

that he,

“might reasonably expect to continue to exercise”.

Noble Lords will, I am sure, also look at Clause 3(2)(d), which says that,

“the provision does not remove … necessary protection”,

and subsection (2)(f), which says that,

“the provision is not of constitutional significance”.

We therefore believe that the preconditions set up around this Bill, which noble Lords have debated at length, are the key to why we do not wish to accept this amendment, despite our great sympathy with what is behind it. We believe that in putting forward any proposal the Minister would have to be mindful of those preconditions in the Bill. That would have an impact.

The effect of the amendment on legal certainty, as the noble Lord indicated, could present problems. As he would expect, although there is a position under what I have said on preconditions where an order being dealt with would be ultra vires—and able to be challenged in the courts—I am not minded to add any other “uncertainty” within this legislation. The difficulty is that we would then create different kinds of primary legislation—that already within an Act of Parliament and that inserted through the order.

I had to ask myself whether I was comfortable that the way in which we set up the Bill and the way in which we would be looking at secondary legislation meant that we had dealt with the underlying concern within the amendment. I believe that that is the case. The courts can strike down under ultra vires and, if legislation went through, it would amend primary legislation and would be dealt with in the way that primary legislation is dealt with. I am not minded to set up a different category of legislation.

Therefore, with the combination of the preconditions and what I have already said about the convention and the Human Rights Act, I hope that the noble Lord will feel that we have addressed his underlying concerns. I hope he will accept that I do not wish to create forms of uncertainty in determining legislation that I think are unnecessary in these circumstances, and that he will feel able to withdraw the amendment.

My Lords, I am happy to accept the noble Baroness's assurance on Amendment No. 3. I regard that as adequate and, although I still think that no harm would be caused by making that amendment to the Bill, I do not wish to press it any further.

I am less satisfied with the noble Baroness’s response to Amendment No. 4. The position as she outlined seems to produce an unnecessarily complicated situation. If it can be argued that something in the Bill that is incompatible with the Human Rights Act is also a breach of one of the statutory preconditions, it then follows that that order can be declared void by the court, with the result that the primary legislation will continue in force in the same way as it did before the order was made and the order will be totally ineffective. If, on the other hand, it is held that something in the order is in breach of the convention rights but is not in breach of one of the preconditions, then the consequences of judicial review would be entirely different because the court could not quash the order; it would simply have to declare its incompatibility and that would then lead to a different procedure. I regard that as confusing and unnecessary. I should have much preferred my amendment to be accepted.

I regret that the noble Baroness has not been able to accept Amendment No. 4. However, again, I recognise that at this late stage in the Bill it is undesirable to press what is, on any footing, a pretty technical amendment, so with some regret I shall not move Amendment No. 4. Meanwhile, I beg leave to withdraw Amendment No. 3.

Amendment, by leave, withdrawn.

[Amendment No. 4 not moved.]

Clause 21 [Principles]:

moved Amendment No. 5:

My Lords, I support the amendments. I raised similar points in Committee. For the reasons the noble Baroness has given, I was conscious of the regulators’ concern about the possibility of the challenge of litigation in pursuing particular functions—for example, when they are investigating an offence. That might cause considerable problems. I was also aware of the concern about making the code statutory.

I sought to raise these concerns in Committee; unfortunately, my drafting was either so clumsy—or possibly so subtle—that the noble Lord, Lord Bassam, was not quite sure what I was getting at and we did not get the response that might have been appropriate at that stage. The noble Baroness has tabled amendments which are clearer, better drafted and get at the point and, as she indicated, they demand a fairly full response from the Government. I fully support the case she has advanced.

My Lords, I support Amendment No. 5. The principles of better regulation—proportionality, accountability, consistency and transparency—are well targeted in terms of broad policy development. I apologise for not being here for the Committee stage of the Bill when I might have understood this better, but as I understand it, it proposes that they should apply at the level of the individual enforcement officer.

I declare an interest as a board member of the Food Standards Agency and deputy chair of the Meat Hygiene Service. In both organisations, the Bill would seriously hamper how our regulations are enforced. Regulators could not enforce against one individual or business to make an example but would have to enforce against every recalcitrant individual business. That is obviously impractical and would not help us to move towards better regulation.

We are less fussed about the code but would be very concerned if we lost the capacity for modifications to be laid before Parliament, as might well be suggested in the noble Baroness’s later amendments.

My Lords, before I reply to the substance of the amendments, I should like to thank my noble friend Lady Young for writing to me between the stages of the Bill and setting out very clearly the rationale behind her amendments. I am very grateful to my noble friend for taking the time to meet the Better Regulation Executive officials and exchange views, which we found very helpful. I hope that it was a productive meeting. I should also like to welcome my noble friend back into the fold of the House of Lords. We have missed her over these many months. I hope that we shall see more of her because of her very constructive approach to this and many other issues.

I will set out in some detail why the Government do not think that these amendments should form part of the Bill, although we recognise that they touch on very important issues and reflect back to issues raised at an earlier stage with such subtlety that I clearly missed the true import of the amendments of the noble Lord, Lord Norton of Louth.

Part 2 supports the Government’s aim of bringing about risk-based, consistent, proportionate and targeted regulation and is designed to instil a change in the behaviour of regulators. The Hampton review covered the work of 63 national regulators and 468 local authorities and found that while the UK’s regulatory reform regime is well respected internationally, fewer than half the regulators in scope use risk assessment to reduce enforcement activity on high-performing business, and even where risk assessment is used, regulators’ activity is often not closely linked to it.

Given the variety of functions regulators have and the variety of contexts in which they operate, inconsistency of approach is a real risk. That inconsistency causes difficulties for those who are regulated, in particular, the small business sector. That is what Philip Hampton’s report Reducing administrative burdens found and that is what we are trying to put right through changing Part 2 of the Bill.

Part 2 uses a two-pronged approach to achieve this: first, a code of practice for regulators; and, secondly, the principles of good regulation. I should like to respond first to the amendments to Clauses 22 and 23. Amendments Nos. 6 to 10 seek to secure that the code is non-statutory. However, I should like to point out to the House the consequences of adopting that approach. Amendment No. 10 would remove the Minister’s obligation to lay a copy of the draft code of practice before Parliament and also remove Parliament’s ability to scrutinise and approve the code of practice, taking away at one stroke the important protections provided in the Bill. Perhaps an unintended consequence of the amendment is that regulators would not have to have regard to a code of practice which Parliament itself had not had a chance properly to scrutinise, approve or think about.

Amendments Nos. 6 to 8 replace the references to “a code of practice” with “guidance”. In a sense that is cosmetic and would not have a profound legal effect. It is the effect of the guidance as set out in the Bill, rather than the title, which is important. The amendments as drafted do not remove the statutory duty on regulators to have regard to the code of practice.

The provision in the Bill to issue a statutory code of practice derives from the current power in the 2001 Act. The House will be aware that in its report on the Bill the Delegated Powers and Regulatory Reform Committee stated that the power and the degree of scrutiny in issuing the code of practice were “appropriate”.

The power to issue a statutory code under the 2001 Act has to date not been exercised. It was thought that a voluntary code—the enforcement concordat—might bring about the necessary changes in the behaviour of regulators. However, the evidence analysed by the Hampton review suggests that there are still serious problems with variation and consistency with the application of this code, and that businesses are uncertain of regulatory requirements.

The Government took that to heart when we consulted on the Bill. We asked whether the existing code of practice for regulators—the concordat—should apply on a statutory footing. Two responses were especially telling. The CBI that said it,

“strongly believes that the Concordat should be placed on a statutory basis since current arrangements for voluntary compliance with the Concordat have not been effective”.

Similarly, the Federation of Small Businesses said:

“If consistency of enforcement is to be achieved we see little alternative to a statutory requirement”.

For that reason, the Chancellor in the 2006 Budget announced that the Government intended to put on a statutory footing a code of practice for regulators and that that code would apply where a regulator determines its policies about the exercise of regulatory functions.

Part 2 includes a provision to consult those affected by a code of practice, a duty for a Minister to lay a draft of the code before Parliament and for subsequent approval by both Houses before the code can be issued by the Minister.

As I have already explained, Amendment No. 10 would remove the Minister’s obligation to lay a copy of the draft code of practice before Parliament, and Parliament’s ability to scrutinise and approve the code. I point out that the degree of scrutiny in the Bill for issuing a code of practice is more stringent than that contained in the 2001 Act. Issuing a code is subject to negative resolution under that Act; under the Bill, there will be an affirmative resolution.

We have already published a draft of the code, a copy of which is available in the Library of the House, and the Government are working closely with regulators—including the Environment Agency, as I am sure the noble Baroness will be aware—and those regulated. The Government want to get this right. We want to work closely with the regulators and those regulated to achieve the right balance. The second draft of the code will be published later in the autumn and we will of course ensure that a copy is placed in the Library of the House. For those reasons, I urge that the amendments to Clauses 22 and 23 be not moved.

Amendment No. 5 is intended to secure that the duty to have regard to the principles of good regulation in Clause 21(2) applies at the general level only, which is at the level where regulators determine their general policies or principles about how their regulatory functions, such as inspection or enforcement, should be exercised.

The noble Baroness’s rationale for that change is that because the Bill currently enables the duty to have regard to the principles to apply when regulators exercise individual level functions, such as inspecting a particular business, as well as to the exercise of general level regulatory functions, that might give rise to unintended consequences. I am well aware that legislation can sometimes have that effect but, in this instance, we disagree.

The noble Baroness’s concern, as set out in correspondence, is that the statutory duty to have regard to the principles will give grounds for regulated individuals to bring legal challenges against regulators—for example, by complaining that when inspecting the individual the regulator did not exercise its functions in a consistent or proportionate way and was therefore in breach of the duty. The fact that the duty to have regard to the principles can be applied to individual level functions does not mean that it will apply at the individual level in all cases, nor does it mean that that duty would, as a matter of course, give rise to vexatious litigation.

For the benefit of the House, it is worth noting that the principles of good regulation in Clause 21 are not unprecedented in statute and can also be found in the Communications Act 2003, where the duty to have regard to them applies to both the general and individual level functions of Ofcom. Ofcom has informed Better Regulation Executive officials that the duty on it to have regard to these five principles does not cause problems in terms of vexatious litigation being brought against it in individual cases.

My Lords, I thank the Minister for replying so fully to my amendments, and the noble Lord, Lord Norton of Louth, and the noble Baroness, Lady Harris, for their support for elements of them. I hope that the way in which my amendments were framed did not suggest that I was trying to reduce the scrutiny of this House to whatever is applied to a code or guidance. I still think that any guidance should be subject to consultation and scrutiny.

On Amendments Nos. 6 to 10, the enforcement concordat set up by the previous Act had barely come into existence when Philip Hampton produced his admirable report, so it was a little rash of the Government to say that it was not working and probably a bit premature to declare it defunct before it had properly come to breath. I look forward to seeing the second draft of the code and the listing order. The Government are clearly placing a great reliance on the listing order to provide a differential approach to different regulatory functions in different regulators. I do not share their confidence. I think that we will be spending quite a long time on that order in this House. Thereafter, I believe that the only way in which we will be able to judge this part of the Bill will be by assessing the proof of the pudding in the eating and deciding whether, after some of these arrangements have been in place for a short or medium amount of time, they are contributing to better regulation or to vexatious litigation.

As the Government show no signs of moving, despite the spontaneous uprising of support across the House for my amendment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 22 [Code of practice]:

[Amendments Nos. 6 to 8 not moved.]

Clause 23 [Code of practice: procedure]:

[Amendments Nos. 9 and 10 not moved.]

moved Amendment No. 11:

My Lords, I congratulate the noble Lord, Lord Kingsland, fulsomely on a very canny amendment that would make the transposition guide an add-on. However, I shall take noble Lords through the issue and explain why we cannot accept it.

As the noble Lord explained on Report, the purpose of his original amendment was to ensure that, in implementing Community obligations into domestic law, the Government did not go beyond the minimum required by the Community obligation. This would have created a legislative barrier to gold-plating European Community obligations when they are transposed into domestic law. On Report, the noble Lord stated that the requirements of the Cabinet Office guidance to the effective transposition of European directives into domestic law gave him pause for thought on the absolutism of his amendment. I suspect that Amendment No. 11 is a response to that.

As my noble friend Lord McKenzie explained on Report, the transposition guide makes it explicitly clear that, only in certain exceptional circumstances and where it is justified by a robust cost-benefit analysis and extensive consultation with stakeholders, should departments consider implementation that goes beyond the minimum required by a European directive. The transposition guide also makes it clear that any over-implementation must be made public. For example, to ensure transparency, all UK legislation laid before Parliament that gives effect to any European directive must be accompanied by a transposition note, which must contain an explicit statement on any over-implementation that has taken place during the transposition process.

The guide also makes clear that the Select Committee on the Merits of Statutory Instruments can report to this House on any statutory instrument that it considers to have inappropriately implemented a European directive, including where there has been unjustified over-implementation.

Although the requirements of the transposition guide are an essential part of ensuring that all legislation used to give effect to a European directive is thoroughly scrutinised and that any over-implementation is justified robustly, referring to the guide in the manner proposed in Amendment No. 11 would present problems. For example, as the transposition guide is guidance, it is written in terms appropriate to that status. It is not on the statute book and therefore is not written in statutory language; it therefore lacks the legal clarity and certainty required of legislation.

This lack of clarity and certainty would cause difficulty for domestic courts. As a result of Amendment No. 11, it would be possible, for example, to challenge the lawfulness of subordinate legislation implementing Community obligations on the basis that it did not conform to the guide. The court would, on occasion, need to inquire into whether any cost-benefit analysis justifying gold-plating was robust. That would create new areas of uncertainty and of legal challenge. Furthermore, as the transposition guidance is not on the statute book, it can be updated and amended without scrutiny by Parliament.

As Amendment No. 11 requires that subordinate legislation does not,

“impose or increase any burden on any person which does not conform with the Cabinet Office Transposition Guide”,

departments would be legally required to comply with any amendments to the guidance, in spite of the fact that they had not been approved by Parliament. A future Government could therefore create a legal requirement that all departments over-implement European Community obligations, simply by amending the transposition guide. While I cannot envisage any Government doing that, it underlines the effect of this amendment, which I am sure the noble Lord had not intended.

Given that the amendment would cause uncertainty for the courts and allow for legislative changes without the need for parliamentary scrutiny, we cannot support it, and although I congratulate the noble Lord on its cleverness, I urge him to withdraw it.

My Lords, I am extremely grateful to the Minister for his response and not surprised at what he said. He did, however, admit that the transposition guide lacked clarity and certainty. I find that rather worrying. On Report, he advanced the Cabinet Office transposition guide as the complete answer to the concerns I expressed about gold-plating.

My Lords, I said that the transposition guidance lacked the legal clarity and certainty required of legislation. I said not that it lacked clarity and certainty but that it did not have the sort of clarity and certainty that we require of legislation. There is a difference.

My Lords, I do not understand the distinction between clarity and certainty that has legal force and clarity and certainty that does not. You either have clarity and certainty or you do not. If a document is clear and certain, it seems just as likely to be binding in law as a clear and certain document that has been declared binding in law. If I may respectfully say to the Minister, he is making a distinction without a difference. He is not demonstrating the confidence in the transposition guide that he manifested so trenchantly on Report.

There may be good reasons for rejecting my amendment, but I do not think they have been advanced from the government Dispatch Box. However, we are at Third Reading, and attached as I am to the text of my amendment, like the noble Lord, Lord Goodhart, I will not press it.

I think that I am right in saying that this is the last amendment of Third Reading; therefore, events will be moving quickly to a close. I believe that the Minister will agree that this Bill has had a rather bumpy ride in another place and in your Lordships' House. It has generated more than the usual amount of controversy. Mercifully, in this instance, controversy has proved fruitful. The Government have responded to what may accurately be described as a storm of protest from many quarters. Above all, it is accepted that the attempt to blur the distinction between primary and secondary legislation was wholly misplaced. The removal of the Law Commission clause and the exclusion of amendments of constitutional importance have also improved the text immensely. It is a great shame that the Government have not been so receptive over maintaining the independence of the economic regulators. We can only hope that the memory of Mr Byers’s conduct towards Railtrack and the scrutiny of orders made under this Bill will suffice.

I hope that, this time, government words lead to action. We remain unconvinced that this Bill was ever necessary to reduce the burden of red tape and excessive regulation that suffocates British business. We still feel that the departments could do much more, by secondary not primary legislation. However, we have decided to give the Government the benefit of the doubt. I hope that we see real improvements. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

My Lords, I beg to move that this Bill do now pass. I thank the noble Lord and his Front-Bench team—we had four or even five members of the loyal Opposition performing at any given time. On reflection, while undoubtedly there was a time when the Bill generated controversy and hostility in another place, it was less the case here. That is because the Government were very careful in listening to the concerns of the regulators and regulated businesses, large and small. Their representations were very important to us.

The Bill is in better shape now than it was previously. We look forward to a period of support from both opposition parties for the implementation of the legislation. It will have significance and will enable us to do things that I think we would all support to make it easier for businesses to grow, flourish and develop. It will provide us with a flexible, workable tool to make necessary changes to smooth the passage of business, local government, charities and those who provide goods and services in the United Kingdom.

We have always maintained that this Bill is all about delivery, and the Better Regulation Executive and the Better Regulation Commission work well to advise and assist us in that.

I thank the noble Lord, Lord Kingsland, and, in particular, the noble Baroness, Lady Wilcox, for her contributions on the Bill, as well as the noble Lords, Lord Howard of Rising, Lord Henley and Lord Goodhart. I also thank the Bill team, who advised us very skilfully during the passage of the legislation.

Moved, That the Bill do now pass.—(Lord Bassam of Brighton.)

My Lords, before the Bill finally passes, I should like to raise one point for the record. Noble Lords who have taken an interest in this Bill will remember that when it arrived in your Lordships’ House it contained a clause relating to Law Commission Bills. Many of us disagreed with that and the clause was removed. Following that, the noble Baroness, Lady Ashton, put in some extremely hard work and she and her team, who are to be congratulated on what they have so far managed to do, came up with proposals for dealing with Law Commission Bills in a different way. They would not require primary legislation, although I believe that some alteration to standing orders of both Houses would be required.

I strongly approved of that and had hoped that it would be possible to have a final form of the proposed new procedure announced during the passage of this Bill either on Report or today. As I understand it, although the principle has been accepted all around, some details of the procedure have not yet been finalised with the result that it is not yet possible to make this announcement. However, I hope that very shortly it will be possible to announce new arrangements for Law Commission Bills. I think that we all accept that current procedures have made it impossible for a significant number of useful Bills to obtain parliamentary approval. I hope that the Minister will confirm that. It is certainly my understanding, and I was told by the noble Baroness, Lady Ashton, yesterday, that that is the position.

Finally, this Bill went to the House of Commons in a completely unacceptable form, which was not initially realised. A lot of credit for pointing out the very serious defects in the Bill rests on two of my honourable friends in the other place—Mr David Heath and Mr David Howarth—who campaigned strongly on this issue. As a result, the Government have recognised that there were very serious difficulties and have come up with a Bill which we now recognise, as does the noble Lord, Lord Kingsland, as being satisfactory and acceptable. I believe that there are now no amendments to the Bill which are not acceptable to the Government, so it will not return to us from the other place.

My Lords, the noble Lord, Lord Goodhart, has rightly paid tribute to the energy of the noble Baroness in pursuing an alternative solution to the one initially proposed by the Government. Because he is so modest, he has not mentioned his own role in developing the initial idea, to which I now want to pay tribute. I would also like to pay tribute to the work that the noble and learned Lord, Lord Lloyd, and others have done. It has been very much driven by your Lordships’ House, rather than the Government, which is entirely to be applauded.

My Lords, I join in that general congratulation. The initiative that was sparked by the debate on Clause 3 has been extremely valuable. I confirm that what the noble Lord, Lord Goodhart, has said is right. As we speak, the alternative procedures are being developed and deliberated on. I am confident that my noble friend Lady Ashton will give voice to the progress that has been made in due course. As the noble Lord, Lord Goodhart, said, it was intended originally to be able to say a few words about it during the passage of this Bill. Clearly, progress has slowed just a fraction, but I know that we all anxiously await the outcome of further thoughts and considerations.

On Question, Bill passed, and returned to the Commons with amendments.

My Lords, I beg to move that the Commons amendments be now considered.

Moved, That the Commons amendments be now considered.—(Lord Sainsbury of Turville.)

My Lords, when we first met in Grand Committee on this Bill on 30 January, after Second Reading on 11 January, it was the first of 13 Grand Committee sittings during which we discussed no fewer than 1,926 amendments, made a short 700 changes to the Bill and, along the way, caused the collapse of the traditional methodology used by the Public Bill Office for numbering amendments—another first for this Bill. I had no foreknowledge of the prescience of the remark that I made in that first Committee meeting. I said:

“A journey of a thousand miles begins with a single amendment”.—[Official Report, 30/1/06; col. GC 1.]

If that was the right quotation for then, the appropriate one for today must be:

“Once more unto the breach, dear friends”.

And what a breach it is: we have a Bill now with three volumes instead of two and 1,264 clauses instead of 885, and it still requires us to consider 1,029 amendments in a single sitting.

I readily accept that in part the increase, and some 600 of the amendments, are as a result of the Government taking on board our advice on consolidation when the Bill first passed through this House. I thank the Minister for that and for his helpful letter of 30 October explaining the background. I also thank the Bill team for making that final push to transfer so many more clauses from previous Companies Acts into this one. The huge number of amendments with which we now have to deal as a result of this consolidation may be making these later stages of the Bill rather more unwieldy than is usual. The name change may have confused some people; nevertheless, history will show that the effort was worth while.

As a final piece in the jigsaw, for which I am sure that this House will be grateful, perhaps the Minister could explain what will be left behind in the 1985, 1989 and 2004 Acts. What is planned to happen to those areas? When does he hope that we will finally complete the repeal of those three Acts?

So much for what the Bill consists of: the next question worrying industry, commerce and practitioners is when it will all happen. The Minister’s colleague in the other place, Margaret Hodge, sent us all a letter dated 16 August. She wrote:

“In both Houses, Committee members examining the Company Law Reform Bill … asked a number of questions about how the Bill will apply to existing companies. I intend to publish the enclosed paper this week, which sets out both our general approach to transitional issues and a possible timetable for commencement of the bill’s provisions … We have sought views on these issues by mid-September so that we are able to inform Parliament in October of the outcome at Report stage in the Commons.

I should emphasise that this will be the first opportunity for interested parties to comment on transitional issues. We shall consult further formally on the full range of transitional arrangements after Royal Assent. We shall do this well before commencement of the bill’s provisions. We hope it will be possible to commence the majority of the Bill’s provisions on1 October 2007”.

At some time today, it would be helpful to the House and the country if the noble Lord could update us on progress on that proposal. To be specific: first, what has been the general reaction to consultation? Secondly, since inevitably much of this is an enabling Bill, when does he expect to publish draft regulations? Thirdly, and most importantly, are the Government still sticking to their implementation target of1 October 2007?

Finally, and unfortunately, much as I would like to stand here and make a wholly positive speech, I regret that I have to say that despite the enormous number of constructive and very welcome amendments that we are considering today, there are some which quite frankly should not be there. After such a long consultation period with so many days in Committee both in this House and in another place, it is extraordinary that the Government have attempted at a very late stage to bounce through an amendment without proper scrutiny or debate. This would be regrettable but perhaps not serious if it was an issue on which there was a large measure of consensus, but that is not the case. The reporting on the supply chain in the business review is a controversial issue that has sparked huge controversy and debate in the media over the past couple of weeks.

My Lords, before we go on to the substance of the amendments, perhaps I may follow the remarks of the noble Lord, Lord Hodgson. While listening to him I was struck by the phrase, “Methinks he protests too much”. From his speech one would have assumed that we were going to be faced with 100 amendments from the Conservative Benches stating the reasons against the government amendments made in another place. I shall deal with the one matter of specific detail he referred to, which is Amendment No. 245. I had assumed from his remarks that the Conservative Party would have put down an amendment to Amendment No. 245 indicating that it did not wish that particular clause to be carried, but it has not done so. A quite specific amendment has been tabled and we will support it. But, having listened to the words of the noble Lord on it, I assume that the Tory party will simply oppose the government amendment when it comes to a vote.

That issue was an extremely difficult one, of course, and if the Government are not to be congratulated on putting it in at a late stage, they are to be congratulated on having dealt with an issue dear to the hearts of many of the NGOs which have extensively lobbied all political parties and the Government. A satisfactory compromise subject to the various amendments we are going to discuss will have been arrived at. However, in the light of the speech of the noble Lord, Lord Hodgson, I look forward to the Tory party presumably opposing the introduction of Amendment No. 245.

I shall make one general point in the presence of the right reverend Prelate: there is nothing better than a sinner who repenteth. One of the reasons why we have such a large number of amendments today is that the Government eventually did repent on the views we expressed at Second Reading that this should be a consolidation Bill. I think it was slightly churlish of the noble Lord, Lord Hodgson, not to thank the Minister for having forced that requirement through his colleagues, albeit at a very late stage.

My Lords, if the noble Lord listened to my remarks, he will remember that I said that I was extremely grateful not only to the Minister, but to the Bill team for the efforts which have been made in that regard.

My Lords, I look forward to reading the noble Lord’s remarks in Hansard. While listening to him speak I found myself worrying that we would be here until at least two o’clock in the morning listening to the endless opposition which, judging from his speech, the Tories are going to produce for the Bill.

On Question, Motion agreed to.

commons amendments

[The page and line references are to Bill 190 as first printed for the Commons.]

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1 to 4. I shall speak also to Amendments Nos. 40, 45, 46, 49, 50 to 55, 57 to 59, 67, 69, 71 to 73, 79, 81 to 83, 108, 119, 175, 176, 209 to 211, 213, 215, 216, 218, 530, 531, 643 to 645, 758, 833 to 837, 839, 844, 846, 862 to 865, 867 to 870, 873, 874, 877, 878, 881 to 883, 885, 886, 889 to 893, 898, 900, 946, 953, 955, 956, 958, 969, 993, and 1018 to 1022. Before turning to the amendments before us, it may be useful if I say a few words about the amendments we will consider today, particularly in the light of the remarks of the noble Lord, Lord Hodgson; it would be appropriate. Clearly we are considering a lot of amendments. They cover 319 pages, which is surely a record, and the amendments themselves are lengthier than the Financial Services and Markets Act 2000. On the other hand, it has to be said that this Bill is not least a consolidation measure and is probably the largest Bill that has ever come to Parliament.

It is important to remember the genesis of these amendments. The great bulk are due to the restatement exercise which was undertaken at the prompting of this House. It will mean that the Bill as amended will in effect be a complete code of company law. All the company law provisions of the 1985, 1989 and 2004 Acts have been brought into the Bill, other than the self-standing provisions on community enterprise companies and the provisions on investigations which go wider than companies. This I feel sure makes the Bill very much more useful to practitioners and that, after all, has been the common aim of both sides of the House. We are grateful to parliamentary counsel for the considerable work involved over the few months since the Bill left this House, and to the Law Society in particular for carefully checking that the restatement does not make unintended changes to the law. Our intention in this exercise has been to restate the old law in more modern terms, but not to change its substantive effect except for two reasons: to ensure consistency with other provisions in the Bill and to ensure that we comply with our EC obligations.

As we go through the amendments I will not try to list which ones are restatements as there are over 400 of them, but I can assure the House that parliamentary counsel will produce a full destination and derivations table so that practitioners can see exactly which these clauses are. Most of the remaining amendments we are considering today are indeed technical improvements suggested during the parliamentary passage through this House or another place, and many of them have come from professional bodies such as the Law Society and others, all of which were consulted in great detail before the Bill ever came to the House. It is not surprising that on further reflection and detailed scrutiny they have come up with further improvements, and I think it would have been utterly ridiculous for us to say to those professionals that where they raised points of detail which improved the Bill we would not accept them. On the contrary, we have taken a totally different approach because we think the value of this Bill lies in the fact that it provides a good framework for practitioners, lawyers, accountants and other professionals to conduct their business. We have therefore made it a matter of policy to give them the very greatest scrutiny and accept every amendment where it makes sense to do so. I am not in any way ashamed of having done that, nor do I think it is wrong. This is what this kind of Bill should be about.

There is a small handful of contentious issues on which I expect we will have a lively debate today, but let us be clear that what we are talking about is some 13 amendments, a couple of which are government amendments. If we conduct our business in a sensible way, that is not too great a burden for this House. If we do not go over endlessly the many technical points, we should be able to tackle this within a reasonable time. That is against the background that there is now consensus on the Bill, which is very important for the competitiveness of the UK.

My right honourable friend the Minister of State for Industry and the Regions said in another place that we would announce our timetable for implementation before the Bill completed its passage, and I am happy to take this opportunity to do so. We have, of course, discussed this important issue with business and others and recognise that we will need to allow some time after the necessary regulations are in place for the business community to gear up to using the new law. On this basis we intend to produce for consultation further details of how the Bill will be applied to existing companies by early next year. We will follow this with further consultation on other aspects.

However, we will implement the provisions on company communications to shareholders and others in January 2007. This will include provisions facilitating electronic communication. We are doing this because, more than any other measure in the Bill, it will bring many millions of pounds of savings to business. It is the aspect of the Bill which business is most keen to see brought forward. I appreciate that many groups will have their own priorities for implementation. Unfortunately, we cannot accommodate all of those, but we thought it right to make an exception in the case of electronic communications because it will bring significant and tangible benefits very quickly.

We will consult in February on our detailed implementation plans. Our intention is to commence all parts of the Bill by October 2008. We will continue to work with stakeholders in implementing the Bill. In particular, we will work with the business community to ensure widespread and effective communication of the Bill’s provisions so that all parties fully understand the new provisions and are in a position to take advantage of the benefits.

The noble Lord, Lord Hodgson, asked what was left behind in the 1985, 1989 and 2004 Acts. As I have explained, all the company law provisions of those Acts have been brought into the Bill, other than the self-standing provisions on community enterprise companies and the provisions on investigations which go wider than companies. The non-company-law parts of those Acts which will remain relate to some Scots law provisions, which are now devolved to and have been replaced by the Scottish Parliament; provisions about the Financial Reporting Council and the operation of that body and its subsidiaries, but not about how companies generally conduct themselves; and provisions about assisting overseas regulatory authorities in relation to the financial markets, the Financial Reporting Review Panel and insolvency, all of which relate more to financial services than to company law.

Finally, I stand by the words that I used at the beginning of the Grand Committee—which, as I remember it, were provoked by a rather angry letter from the noble Lord to the Times to which I thought we should give careful consideration. I hope that in this debate, in which we have to consider 1,029 amendments, the same spirit will prevail as in many of our Committee sittings. We have only a limited number of contentious amendments to get through.

The amendments in the first group are mainly technical. They have the effect of tidying up the drafting of the Bill, largely as a result of the restatement exercise. I therefore suggest that we do not spend a long time examining them. They make changes to the drafting where needed—for example, to amend references to the former Companies Act which are no longer needed as a result of restatement; to amend references to the name of the Bill, which is now the Companies Bill and not the Company Law Reform Bill; or to ensure the clarification of terms and a smoother reading of the Bill as a whole.

Moved, That the House do agree with the Commons in their Amendments Nos. 1 to 4.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 5.

At Report stage we replaced the requirement for subscribers’ names and addresses in the statement of capital and initial shareholdings with a power to prescribe in regulations made under the Bill the information that must be provided for the purpose of identifying the subscribers to the memorandum where a company is to have a share capital on formation. Amendment No. 5 simply carries forward this approach for the purpose of identifying the subscribers where it is proposed that a company will be formed as a company limited by guarantee.

At Report stage we removed the requirement for a statement of capital to be provided where an unlimited company that has not previously had a share capital re-registers as a company limited by shares. Such a requirement is unnecessary in these circumstances as the company will in any event have to include such a statement when it makes a return of allotments to the registrar under Clause 545 following re-registration.

However, some unlimited companies are formed with or acquire a share capital and, in such cases, there would be no need to make a return of allotments on re-registration as a limited company until such time as the company allotted new shares. We think this is a loophole and Amendment No. 78 therefore requires such companies to deliver a statement of capital to the registrar within 15 days of re-registering as limited. The company will, however, be exempt from this requirement if it has already provided this information; for example, in the statement of capital and initial shareholdings provided on formation or in a statement of capital contained in the company’s last annual return.

Amendment No. 8 contributes to a larger tidying-up exercise that we carried out in another place. As a result of the restatement exercise, there is now only one Companies Act, and clauses in the Bill which refer in general terms to the Companies Acts can now be made more precise.

Moved, That the House do agree with the Commons in their Amendment No. 5.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 6 and 7.

This group of amendments provides that private company and public company secretaries will be treated in exactly the same way under the Bill save in a number of specific respects. The main distinction is that there will not be a statutory requirement for a private company to have a secretary. In particular, these amendments provide that the authority of a private company secretary will be the same as that of a public company secretary. Accordingly, the appointment of a secretary to a private company must be notified to the registrar of companies and be recorded in the company’s register of secretaries.

There are a large number of consequential and related changes, in particular relating to the formalities of doing business. These are largelyin response to the helpful comments made in Committee, both here and in another place. In particular, we have amended Clause 44 so that for execution of documents by a company the alternative to affixing its seal is signature either by two persons who are either directors or secretaries of the company, or a single director if witnessed and attested.

We have taken a power to apply Clauses 43 to 53 to overseas companies. This power is based on that in Section 130(6) of the Companies Act 1989, which is being repealed.

Moved, That the House do agree with the Commons in their Amendments Nos. 6 and 7.—(Lord Sainsbury of Turville.)

My Lords, in response to the Minister’s appeal for a mood of harmony, let me say that we appreciate these amendments. We always felt it was counter-intuitive for it to be impossible for a private company to have a company secretary and for that person to have no powers. We are very grateful for what the Government have done here.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 8 and 9.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10.

This is a group of miscellaneous amendments relating to company constitutions. Perhaps the most noteworthy are Amendments Nos. 35 to 37. Amendment No. 37 was first moved by my noble friend Lord Wedderburn in Grand Committee. I am sorry to say that it was not until a later stage that we finally saw the wisdom of his suggestion.

Clause 34 describes the way in which the provisions of a company’s constitution bind the company and its members. My noble friend’s modest proposal was that this clause should say what it means, by making it clear that the provisions of a company’s constitution have effect as if there were covenants on the part of the company and each of its members to observe them. We are extremely grateful to my noble friend Lord Wedderburn and to those who pressed his cause in the other place for urging us to correct the Victorian drafting anomaly of not referring to the company in the context of the covenants. We are not changing the law here: we are just making it clear that it means what it has been recognised as meaning since at least 1915 and the celebrated Hickman case. So we are slightly ashamed of the fact that it took so long to make the adjustment but, given that this is something that needed correcting for more than 90 years, we do not think that a few months will make much difference.

Amendments Nos. 35 and 36 tidy up some loose ends in the same clause.

Amendments Nos. 12, 15, 25 to 27, 56, 77, 107, 200, 201 and 205 are designed to make the use of “alter” and “amend”, in relation to companies’ articles, consistent across the Bill. AmendmentsNos. 10, 11, 22, 23, 24, 28 to 34, 38, 39, 559 and 1011 tidy up references to companies’ constitutional documents and related cross-references between different bits of the Bill.

Moved, That the House do agree with the Commons in their Amendment No. 10.—(Lord Sainsbury of Turville.)

My Lords, the Minister will appreciate that his former noble friend Lord Wedderburn, who is not in the Chamber, will be most gratified to hear what he has just said.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 11 and 12.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 13 and 14.

The subject of entrenchment, which is the basis of this group of amendments, has rather unexpectedly stirred deep passions during the passage of this Bill. It may help if I begin by summarising how we got to where we are now.

The principle set out in Clause 22 is not in any sense something new. It is just that it stands out a little more clearly in the Bill than in the 1985 Act. Under the 1985 Act, a company can provide that certain provisions of its constitution either cannot be altered at all—what we call “absolute entrenchment”—or can be altered only if conditions more onerous than the passing of a special resolution are met, which we refer to as conditional entrenchment.

The Bill as introduced preserved the ability of companies to adopt absolute or conditional entrenchment for specified provisions of their articles. The only changes from the 1985 Act in the Bill as introduced as regards entrenchment were procedural. In future, in keeping with the reduced role of the memorandum, provision for entrenchment will need to be made in the articles rather than the memorandum. The Bill also provides for a special form of notification to the registrar when “provisions for entrenchment” are inserted into or removed from a company’s articles. The aim of this is to help to ensure the accuracy of the public register.

In our earlier debates, the noble Lord, Lord Hodgson, said that the Bill went too far as regards entrenchment. As a result, we moved a number of amendmentsin the other place. The most important change is Amendment No. 14, which removes “absolute entrenchment”. In future, companies will not be able to say that specified provisions of their articles can never be amended or repealed. However, they will be able to set conditions which are more onerous than the passing of a special resolution for amending or repealing them. We did this because it seemed to us that absolute entrenchment was not only very rarely used, but that it was sometimes used unwisely. Companies may find themselves trapped with rules that are inappropriate, but very hard to get rid of.

Amendment No. 17 makes it clear that, whatever the terms of a provision for entrenchment, it will always be capable of being removed or changed by the unanimous consent of the company’s members, or by order of a court or other competent authority. Amendments Nos. 18 to 21 provide new and clearer drafting of Clauses 23 and 24. In the process, they slightly reduce the administrative burdens on companies with provisions for entrenchment and take account, like Amendment No. 17, of the possible involvement of courts or other authorities.

Colleagues of the noble Lord, Lord Hodgson, and the noble Lords, Lords Sharman and Razzall, have variously attacked us both for removing absolute entrenchment and for retaining conditional entrenchment. In defending the changes we have made, let me begin by recalling one of the few points on which all sides in this debate can agree. The Bill may facilitate entrenchment, but it does not encourage it. The general rule is, and will remain, that a company’s articles are a kind of contract between the company and its members, which, unlike most contracts, can be changed, and have parties added to or removed from it, without the agreement of all concerned. All that is required is a special resolution.

Entrenchment is an exception to that general rule: it is not something we are recommending, but it is something that companies sometimes want. Most companies will not want to make provision for entrenchment, and those that do should think carefully and take professional advice about the possible consequences before they do so. We do not think, as the Conservatives appear to do, that entrenchment of any kind is too dangerous to be allowed. We do not agree with the Liberal Democrats that the usefulness of absolute entrenchment outweighs the problems that it can cause. So we have removed what seemed to be the most dangerous element of the scheme—absolute entrenchment—and retained conditional entrenchment, but emphasised the escape routes from it. We see that as a third way on entrenchment. It is interesting that even with an obscure subject we can have a third way. We think this strikes the right balance.

Moved, That the House do agree with the Commons in their Amendments Nos. 13 and 14.—(Lord Sainsbury of Turville.)

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 15 and 16.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 17.

Moved, That the House do agree with the Commons in their Amendment No. 170.—(Lord Sainsbury of Turville.)

had given notice of his intention to move, as an amendment to Amendment No. 17, Amendment No. 17A:

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 18 to 59.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 60 to 66.

This group of amendments improves the parts of the Bill relating to names of UK and overseas companies and names used by anyone in the course of business in the UK. The changes are small and do not involve any significant change in policy; rather, in the main, they pick up various infelicities that have been pointed out during the progress of the Bill. The only substantive change is one also sought in this House imposing a requirement that the decisions of the company names adjudicator be published. That is Amendment No. 61.

Moved, That that the House do agree with the Commons in their Amendments Nos. 60 to 66.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 67.

Moved, accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 68. I shall also speak to AmendmentsNos. 113 to 118, 120 to 155, 157, 159 to 170, 172 and 174. We now come to amendments to Part 10. This is clearly one of the most important parts of the Bill. The amendments to this part, agreed in another place, are relatively minor. I believe they also have cross-party support.

I will look briefly at the main amendments, in amendment order. Amendments Nos. 68, 113, 115 and 118 ensure that a shadow director is treated as a director regarding potential liability for various offences, but not regarding their particulars being on the public record. Amendments Nos. 114, 116 and 117 to Clauses 150 and 152 ensure that the provisions for the protected record of directors’ residential addresses are effective. Amendment No. 172 to Clause 226 provides powers to make regulations, providing greater protection for some directors’ home addresses.

Amendment No. 120 extends the provisions of Clause 167 to Northern Ireland. The effect of Clause 167 is to reverse the various relaxations to the strict no-conflict rule made by the Bill. Charitable companies will still be able to take advantage of the various relaxations, where their constitutions allow. That is the benefit of transparency. It will be clear from the charity’s constitution whether it is able to take advantage of a relaxation to the strict no-conflict rule.

Turning to the rules on substantial property transactions, Clause 176 implements a recommendation of the Law Commissions that has been widely welcomed, by allowing companies to enter into agreements that are conditional on the approval of the members of the company being obtained. Amendment No. 122 goes one step further by allowing the agreement to be conditional on approval from the members of its holding company as well, in those cases where the approval of the members of the holding company is required. The amendment responds to concerns that companies could be inconvenienced if they had to wait for member approvals before they could agree to a substantial property transaction.

The Bill makes a major deregulatory change to the regime applying to loans and other similar transactions by a company for its directors. At the moment these are prohibited unless certain exceptions apply. The Bill replaces that with a requirement for member approval. At the same time, the Bill was drafted to implement the recommendation of the Law Commissions that all the rules on loans, quasi-loans and credit transactions for directors should extend to all companies. For most private companies that would mean an increase in regulation, because at the moment many of the rules apply only to relevant companies. In broad terms, relevant companies are public companies and private companies that are on the same group as a public company. Although this recommendation was endorsed by the Company Law Review, we have carried out further informal discussions in light of the discussion in another place. There was clear support from stakeholders for the proposal that the requirement currently applying only to relevant companies should not be extended to all private companies. Under the amendments, the Bill would therefore no longer apply the rules on credit transactions or quasi-loans to private companies, unless they were associated with a public company, or apply the rules on loans, quasi-loans and credit transactions with persons connected to a director to private companies, unless they were associated with a public company.

Amendments Nos. 135 and 136 make it possible for a loan under the exceptions in Clauses 189 and 190 to be used by a director to fund their defence in proceedings relating not just to the company but for negligence relating to associated companies. This recognises that in a group situation it may be more convenient for the loan to be made by a different group in the company.

Companies legislation requires prior authorisation by the members for certain transactions; for example, loans or payments for loss of office between the company and a director. Section 66 of the Charities Act 1993 renders invalid prior authorisation by the members for transactions such as payments for loss of office unless the Charity Commissioners have given their prior written consent. That reflects concerns that in some cases the members of a charitable company are not independent of the directors, and that requiring their approval would not provide sufficient protection for the charity.

Chapter 4 of Part 10 makes various changes to the provisions on the requirements for prior shareholder authorisation. Amendment No. 157 inserts two new sections into the Charities Act 1993, in place of Section 66 of that Act, to reflect the changes made by the Bill.

I turn finally to the amendments relating to the indemnification of the director of a company acting as a trustee of an occupational pension scheme. The amendments address concerns raised in this House and in another place. The point was made that such directors perform a vital role, often for very little direct financial reward, and that directors’ and officers’ liability insurance policies currently available afford limited protection. We made clear that the Government attach great importance to the work of such directors and that we are aware it can sometimes be difficult to recruit high-quality directors for companies acting as a trustee of an occupational pension scheme. In view of that, and following consultation with key stakeholders, we tabled amendments to permit companies to indemnify the directors of associated companies acting as trustees of occupational pension schemes.

Moved, That the House do agree with the Commons in their Amendment No. 68.—(Lord Sainsbury of Turville.)

My Lords, I am grateful to the Minister for that full explanation of this group of amendments. Before we wave goodbye to Part 10, we on these Benches are concerned about whether we have managed to strike the right balance between risk and reward for directors, particularly non-executive directors, and whether overall there will not be a disincentive for men and women of quality to serve on boards. The Minister will be well aware of the concerns about the new provisions, especially those in Clause 158. At this stage, however, I can do nothing better than quote the noble Baroness, Lady Young of Old Scone, who said in the debate on the Legislative and Regulatory Reform Bill a few minutes ago that the proof of the pudding will be in the eating. I fear that the Government may have to accept some adverse consequences from these new provisions.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 69.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 70. I shall also speak to Amendments Nos. 315 to 512, 532 to 536, 560 to 612 and 646 to 671.

This group of amendments inserts a number of new clauses into the Bill. These restate various provisions, currently contained in Parts 4, 5 and 8 of the 1985 Act, which were brought into the Bill as part of the restatement exercise, and also replace and restate Clause 538 and Parts 18 and 19 in their entirety. The amendments in this group also insert new clauses into the Bill that contain powers to amend the restated provisions that are concerned with the maintenance of capital. I will come to that point shortly, but first I shall say something about the restatement exercise.

The restatement of the 1985 Act provisions was foreshadowed by various debates that we had in this House. As I said at the beginning of today’s debates, I reassure noble Lords that while the new clauses may, in some cases, look rather different in structure from those of the 1985 Act that they restate, our intention has been to make no substantive changes to the law, other than those that have been necessary in order to ensure compatibility with other provisions in the Bill and to ensure compatibility with EU law.

The Bill as introduced included various provisions on share capital, which have been subsumed into the new clauses. The restated clauses have been made consistent with them. The new clauses inserted by Amendments Nos. 432, 512 and 671 contain three new powers. Those powers would enable the Secretary of State, in regulations made under the Bill, to amend respectively the rules on share capital, on purchase by a company of its own shares and on distributions. Together, those aspects of company law are commonly referred to as the “capital maintenance rules”. There is some history to these proposals, and, as noble Lords will have seen, we now have the benefit of a report from the Select Committee on Delegated Powers and Regulatory Reform that comments on the proposals. The committee’s recommendations always command the very greatest respect in this House when we are considering important and difficult issues.

The House will recall that the Bill as it was originally introduced to the House contained a proposal for a general company law reform power. That proposal was dropped as a result of concern about the breadth of the power. We explained that there a small number of areas where changes were expected to be needed in the short to medium term, one of which was capital maintenance.

It is important to understand the background. The capital maintenance rules are there to ensure that the company retains its subscribed capital as a protection for present and future creditors, and in particular to control the extent to which a company can give returns to its shareholders. Of course, profitable companies must be able to pay dividends to their shareholders. Indeed, this is a significant reason why we hold shares. But there must be rules to ensure that a company cannot pay money to its shareholders in a way that may jeopardise the legitimate interests of the creditors. As the Delegated Powers and Regulatory Reform Committee said, the rules are a mix of principles and very considerable detail. Much of our companies legislation dates back to Victorian times and the provisions are set out very largely in primary legislation, unlike, for example, the related area of financial services legislation where most of it is in secondary legislation. Part of the reason for retaining this approach in the present Bill is that business said to us that it wanted all the provisions together in one place.

We have looked very carefully at the concerns of the committee and discussed these with others. We recognise that the powers would be very wide and that an exceptional case would be needed. The parts of the Bill that deal with share capital and with purchase of own shares are mostly concerned with preventing companies finding ways round the rules on dividends by passing value to their shareholders in other ways; for example, by buying back their own shares with company funds, or by unilaterally reducing their capital so that the test of whether their net assets are greater than their capital becomes easier to meet. It is very important to have these rules as otherwise companies in difficulty and in the hands of unscrupulous or imprudent directors and members could circumvent the dividends rule, enrich themselves and leave creditors worse off than they should have been. But essentially they are technical and are not of the same nature as the central rules on dividends.

Experience shows that they can give rise to serious problems for companies that want to carry out entirely innocent transactions in circumstances where creditors are not at risk. As business practice changes, so these rules need to be adapted. There is a strong case that we need secondary powers to be able to do so. It is important for business that we have the powers in Amendments Nos. 432 and 512. We may well need to be able to make changes to meet legitimate needs. There is, therefore, a strong case for the powers in Amendments Nos. 432 and 512, even though I fully recognise that they are exceptional.

Amendment No. 671 covers the area of distributions. The committee rightly cited Amendments Nos. 647 and 648 as being general rules of particular significance. The existing rules are based on the second Company Law Directive. These rules have existed in much the same form since 1981. There have been criticisms of them. Recently, with the introduction of international financial reporting standards, a number of companies have found that it was difficult for them to pay dividends under these rules, even though they were profitable under UK generally accepted accounting principles (UK GAAP). A number of people have expressed concern about these rules on dividends, but there is as yet no consensus on how these should be improved. We are following with interest companies’ experience with IFRS. One of the purposes of AmendmentNo. 671 was to enable us to amend rules if a generally acceptable improvement in the dividend rules was agreed. However, we recognise that significant aspects have not been debated. We are very mindful of the important considerations to which the Delegated Powers and Regulatory Reform Committee has drawn attention. Having considered the report of the committee, we have reached the view that it would be going too far and is not necessary to take a power to change the basic rules on dividends. We accept that if we decide to change these rules, we shall need to come back to Parliament with primary legislation unless other powers such as the European Communities Act are available. I have therefore indicated that I will recommend that we oppose Commons Amendment No. 671.

By asking the House to agree with Commons Amendments Nos. 432 and 512 but to disagree with Commons Amendment No. 671, we believe that we have found a way to meet the concerns of the Delegated Powers and Regulatory Reform Committee while enabling us to bring clarity to some important aspects of company law in a reasonable time frame.

A small number of the amendments in this group make technical changes to the Bill’s provisions on capital maintenance and share capital. I do not propose to say much about these, save to reiterate that these changes have been necessary to ensure compatibility with EU law and other provisions in the Bill. Other amendments in this group take forward commitments we gave in another place: in particular, they enable the minimum share capital requirement for public companies to be satisfied in euro as well as sterling and clarify that the prohibition on public companies and their subsidiaries providing financial assistance for a purchase of own shares does not apply to the foreign subsidiaries of such companies.

Before I sit down, I mention an issue raised by the Law Society, which may have been drawn to the attention of noble Lords. There is a concern that, following the abolition of the prohibition on private companies giving financial assistance for a purchase of own shares, a private company might not be able to enter into the range of transactions that are currently permitted—that is, if it has availed itself of the current exemption for private companies commonly known as the “whitewash” procedure. Noble Lords may wonder how the removal of the prohibition on giving financial assistance could be seen to be more restrictive than the current exemptions.

The issue is that some interested parties—the Law Society included—consider that the “whitewash” procedure provides a statutory code that supplants the common law rules on the maintenance of capital. That being the case, there is a further issue as to the extent to which, if at all, the repeal of these provisions would resurrect the common law. The extent to which the current exemptions supplanted the common law is far from clear, but in any event, in our view, the repeal of the “whitewash” procedure does not resurrect the common law. In short, if there is a problem with the common law—we are not aware that there is—this already exists. None the less, we intend to put this matter beyond doubt by making it clear, in a saving provision made under Clause 921, that the removal of the prohibition on private companies giving financial assistance for a purchase of own shares will not prevent private companies entering into transactions which they can lawfully enter into now—that is, under the “whitewash” procedure. We have discussed this approach with the Law Society and trust that this addresses its concerns.

Moved, That the House do agree with the Commons in their Amendment No. 70.—(Lord Sainsbury of Turville.)

My Lords, I am extremely grateful to the Minister for his reassurance on the status of the new clauses that the Government are introducing. The fact that no new legal developments are intended, except in so far as he explained, is a critical reassurance to practitioners and to the country at large. I am also grateful for the Minister’s remarks on a private company purchasing its own shares and on the fact that the abolition of the “whitewash” procedure will not resurrect the common law prohibitions, which has been a cause of much concern externally.

Generally, we share the Minister’s view—indeed, we argued it in Grand Committee on 15 March—that there is a strong argument for consolidation. On that date we discussed pre-emption and allotment—a part of company law frequently considered by practitioners. We argued that to have it straddling two or three Acts was not helpful. However, the Government have sought to address a wider range of topics with these amendments, as the Minister explained. As the Minister pointed out, if this consolidation were to take place, account would have to be taken of the fact that commercial practice develops rather faster than the measured pace of primary statute law.

At an earlier stage the Minister listed three areas where it was believed that some mechanism for updating through secondary legislation would be needed, of which, as he said, capital maintenance was one. We accept the force of these arguments. Therefore, in these areas, which are covered by Amendments Nos. 432 and 512, we are prepared to accept the introduction of an affirmative procedure statutory-instrument-based system for interim reform. We do so, despite the misgivings expressed in the Delegated Powers and Regulatory Reform Committee’s report because of the relatively technical, fast changing nature of this section of company law.

However, we share the view that the committee has a strong point with respect to the reform power in Amendment No. 671. That covers another area of the law—distributions—the implications of which, and the future policy principles for, have been much less discussed. Therefore, we are grateful to hear that the Government will not move Amendment No. 671.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 71 to 79.

Moved, accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 80.

Amendments Nos. 80, 109 to112, 158, 181 to184, 206, 207, 632 to 642 and 895 to 897 form a package of amendments requiring a company to make available for inspection various registers and records. This issue was raised in the context of the register of directors. Under the Companies Act, this must be made available for inspection at the company’s registered office.

The amendments recognise both that any increased flexibility as to places of inspection should apply to other registers and records to which there is a statutory right of inspection, and that there need to be safeguards against abuse. This package of amendments meets those concerns by providing a power for regulations to specify alternatives to a company’s registered office as the place where specified registers and records are to be made available for inspection. Amendments Nos. 86 to 93 combine provisions that have been in the Bill from the outset in relation to overseas branch registers with a restatement of relevant provisions from the 1985 Act. There is no change in substance. The other amendments in the group are minor and technical changes to improve the clarity and efficacy of the Bill.

Moved, That the House do agree with the Commons in their Amendment No. 80.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 81 to 96.

Moved, That the House do agree with the Commons in their Amendments Nos. 81 to 96.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 97 to 104. I am pleased to be able to return to the House with a new package of clauses in Part 9 of the Bill that enables indirect investors both to enjoy information rights and, via the registered member, to exercise voting and other governance rights.

As I made clear when we debated this part previously, the Government are firmly committed to promoting a long-term investment culture through the wide participation of shareholders and the responsible exercise of share ownership rights. That is one of the key themes consistent throughout the Companies Bill. It is right that everyone who invests in shares, whether directly in a company or through a nominee broker, should be able to enjoy and exercise much the same rights. If indirect investors—that is those holding shares through a nominee—wish to exercise shareholder governance rights, they should be able to do so. Our key concern has been that broader enfranchisement must be achieved in a way that is proportionate, offers flexibility and avoids imposing undue burdens on any parties involved, whether on issuers, investors or intermediaries.

That is why we resisted the amendments tabled by the noble Lord, Lord Hodgson, in Committee and on Report. As many business representatives will have told him, the amendments were burdensome, unworkable and created great uncertainties. However, we recognise that noble Lords reflected a view that we should go further in enfranchising indirect investors. I am pleased therefore that following a series of intense discussions in late spring and early summer with key interested parties, involving those both behind and against the original amendments, we were able to find consensus on a workable solution to strengthen the position of indirect investors in the Bill without imposing disproportionate burdens on business.

For the benefit of those who have not followed the debate on this part in the other place, let me just explain briefly how the new provisions will operate. Broadly, the new clauses provide that indirect investors can be nominated to receive company mailings. It is up to the registered member, typically a broker, to decide whether to nominate. The registered member will be able to appoint indirect investors as proxies under the provisions of Part 13 to exercise voting rights. Clauses at the end of the new Part 9 make it easier for registered members to exercise rights in different ways to reflect underlying holdings and allow indirect investors to participate in, for example, requests for resolutions at the AGM.

We think this is a balanced and fair package, which should lead to much greater involvement for the large proportion of small investors who hold shares through ISAs, PEPs or nominees. In short, the new Part 9 provisions are good news both for small investors and for quoted companies.

Moved, That the House do agree with the Commons in their Amendments Nos. 97 to 104.—(Lord Sainsbury of Turville.)

My Lords, I have two amendments in this group, Amendments Nos. 105A and 106A, and it may be helpful if I address them. The general topic of the rights of indirect investors has concerned us greatly, as the Minister explained. The position of ISAs and the increasing pressure for private shareholders to hold their shares through nominees because of the short settlement dates means that private shareholders have increasingly become disfranchised. APCIMS, the trade association for private clients, now suggests that 80 per cent of private client share dealing is done through nominees. That sort of disfranchisement is not good for the investor or the company, and it is probably not good for the country as a whole. We are very grateful to the Government for having listened to those concerns and for having come up with a proposal that is agreeable to all the parties involved. Clearly, it was an important development.

The amendments are in essence a tidying-up issue, because it is clear from the Bill that the clauses on information rights—Amendments Nos. 99 to 104—apply to traded companies only. We understand that at meetings of the stakeholder group that the Minister referred to, it was assumed that Amendments Nos. 105 and 106 were also being discussed with reference to the listed company environment. We are quite happy with the thrust of Amendment No. 105, as it would allow nominees to split their holding, for example, in a rights issue, when there was a choice between cash and shares to reflect the wishes of their underlying clients. We also support Amendment No. 106, as it would allow the indirect investor to get together with others to force the company to do the four things listed in subsection (1)(a) to (d) of the new clause introduced by Amendment No. 106 though three of those are relevant only to public or quoted companies anyway.

However, the way that the Bill is drafted makes Amendments Nos. 105 and 106 appear to apply to all companies. We are not arguing that this is necessarily wrong, but we would like a reassurance from the Government that their application to private companies has been thought through. For example, we wonder how Amendment No. 105 would work alongside the pre-emption clauses that private companies often have in their articles. The pre-emption clause may well state that where a member wants to sell his shares, the shares have to be offered to other members in proportion to their holdings, but that each member has to take either all or none of the shares offered to him. We wonder, as an example, whether Amendment No. 105 could be used by a member to take only a proportion of the shares offered, and whether that might have unintended consequences. Some clarification and reassurance from the Minister would be most helpful.

My Lords, I am grateful to the noble Lord, Lord Hodgson, for tabling his amendments, because they give us an opportunity to discuss Amendments Nos. 105 and 106 in more detail. The new clause introduced by AmendmentNo. 105 gives the member the right to split his holding and exercise rights attaching to shares in different ways. This is to accommodate members who hold shares on behalf of more than one person, each of whom may want to exercise rights attaching to those shares in a different way. For example, the member could, on behalf of those for whom he is holding shares, put 50 per cent of his shareholding towards a requisitioning resolution.

The new clause introduced by Amendment No. 106 deals with four situations where the shareholder threshold required to trigger a right is 100 shareholders holding £100 each on average of paid-up capital. The clause allows indirect investors to count towards the total provided certain conditions are met. The condition is intended to ensure that only genuine indirect investors are allowed to count towards the total, but the same shares cannot be used twice, and that an indirect investor can use the procedure only if his contractual arrangements with the member allow the former to give voting instructions. The noble Lord’s amendments would limit the types of company to which these two new clauses apply. This goes entirely against the principle of facilitating the exercise of shareholders’ rights on behalf of others. We understand the concern that some private companies may have shareholder agreements containing provisions that are not consistent with the provisions of Amendment No. 105, but the clause applies to statutory rights and the rights attached to shares by the terms of allotment or the articles. Rights under shareholders agreements should not be affected, because they would not be transferred with the shares as a matter of law.

It has also been represented to us that some private companies’ articles provide for pre-emption rights to operate on an all-or-nothing basis. When the company wants to issue new shares, it will offer the shares to existing members in proportion to their shareholding. The articles would stop a member taking just some of the shares. We agree that Amendment No. 105 would cut across articles like this where the member holds shares on behalf of more than one person. However, that is not sufficient ground for exempting private companies from the general requirement.

After fully reconsidering the policy in this area over the summer we want to go as far as we can towards recognising the rights of underlying shareholders. Unless the potential cost burdens are prohibitive, and we do not think that they are in this case, we do not see why a right that is available in relation to public companies should not be available in relation to private companies as well. After all, some companies that are taken as private are left with a number of nominee shareholders that hold shares on behalf of others. It is also possible, although rare, to have a private company that is quoted.

For that reason, we cannot agree to the noble Lord’s amendment, but I hope that he realises that we have considered this matter thoroughly and have given it the attention that he was looking for. I hope that he will not press his amendment.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 105.

Moved, That the House do agree with the Commons in their Amendment No. 105.—(Lord Sainsbury of Turville.)

had given notice of his intention to move, as an amendment to Amendment No. 105, Amendment No. 105A:

The noble Lord said: My Lords, I am extremely grateful for the Minister’s explanation and for the clear analysis of the situation. I shall not move Amendments Nos. 105A and 106A.

[Amendment No. 105A, as an amendment to Amendment No. 105, not moved.]

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 106.

Moved, That the House do agree with the Commons in their Amendment No. 106.—(Lord Sainsbury of Turville.)

[Amendment No. 106A, as an amendment to Amendment No. 106, not moved.]

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 107 to 155.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 156.

In moving the Motion, I shall speak also to Amendments Nos. 171, 173, 192 to 199, 202 to 204, 208, 214, 248 and 309. These amendments are designed to help improve the operation of the resolutions and meetings provisions in Part 13 and related provisions. Some of the amendments result from queries raised by the Opposition in another place, and we are grateful to the Law Society for the issues that it has raised. Other amendments arise from parliamentary counsel’s work to make the drafting of the Bill more consistent. I shall outline what these amendments achieve.

Amendment No. 192 to Clause 264, along with Amendments Nos. 156, 171, 173 214 and 309 to Clauses 208, 222, 230, 350 and 526, makes the drafting relating to requirements for a decision to be “by resolution” or “by ordinary resolution” consistent throughout the Bill. Where a resolution is required, but the type of resolution is not specified, the default will be an ordinary resolution unless the articles require a higher majority.

When a provision specifies that an ordinary resolution is required, the articles will not be able to specify a higher majority. That will apply in cases where, for example, we do not want the will of a simple majority to be frustrated by a blocking minority. This is especially important in the case of provisions, for example, to remove a director or an auditor.

Government Amendments Nos. 193 and 194 respond to concerns raised in another place about the admissibility of votes. The amendments replace Clause 270 with a new clause to preserve the right for a company to require objections to votes to be made in accordance with procedures in their articles. We took the point that the old clause was too ambitious, so we are just preserving the current law. If an objection is overruled, the decision will be final, except in cases of fraud and certain other kinds of misconduct detailed in the case law where a court may intervene.

The amendments are about, on the one hand, certainty for the company by enabling the chairman to settle matters relating to the admissibility of votes in accordance with the articles and, on the other, sufficient remedies for members to challenge a decision if it was not reached properly. I think that we have now achieved the right balance.

Government Amendment No. 195 to Clause 286 is a minor amendment to tidy up the drafting of provisions about member requests for general meetings, resolutions and so on. They make the drafting consistent throughout the Bill.

Government Amendment 196 to Clause 288 relates to a situation where a company fails to hold a general meeting in response to a member request. It makes sure that the cost of the meeting can be recouped from the directors, whether they are engaged directly or via a service company.

Government amendments to Clause 290 improve the drafting by clarifying how AGMs can be called on short notice. Government Amendments Nos. 199, 202 and 203 to Clauses 297, 321 and 325 add a cross-reference to ensure that companies are aware of their potential obligations under Part 9. Amendment No. 204 to Clause 333 corrects a drafting error.

Amendment No. 208 inserts a new clause to ensure clarity and consistency in the calculation of time periods in relation to meetings and resolutions. It responds to concerns raised in another place about whether, in calculating periods of notice, the date of the notice and the date of the meeting are supposed to be excluded. Amendment No. 248 to Clause 406 is a drafting improvement on a similar point.

Moved, That that the House do agree with the Commons in their Amendment No. 156.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 157 to 211.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 212.

The funding of political parties is important and rightly concerns noble Lords on both sides of the House. The company law interest in this area arises from the possibility that a director might put his personal interests or those of a political organisation ahead of the interests of the company. In other words, a director might have a conflict of interest when making a political donation or incurring political expenditure. These provisions, therefore, have an important but limited purpose. Company law would of course not be an appropriate vehicle for delivering wider policy objectives in relation to political funding.

Clause 353 provides that a trade union is not a political organisation for the purposes of Part 14. This means that funding from a company for a trade union, such as the provision of a meeting room or use of a company car, cannot be considered as a political donation requiring the authorisation of the company's shareholders.

However, concern was expressed in another place that this provision might allow companies to circumvent the Bill’s requirements for authorisation by making donations to the political fund of a trade union in the expectation that the trade union would make a donation to a political party. In response to those concerns we propose to replace Clause 353 with a new clause that would require shareholder authorisation of donations made to the political fund of a trade union, but not of other donations made to the union. This will prevent companies circumventing the controls of the Bill.

There is no danger of donations other than to a political fund being redirected to political parties, because the Trade Union and Labour Relations (Consolidation) Act 1992 prevents trade unions making payments to political parties, except through their political fund. That Act also prohibits trade unions from redirecting money received from third parties into the political fund unless the money is given as a contribution to the political fund. I should make clear that we are not aware of any companies making donations to trade unions as a means of circumventing requirements applicable to political donations in that way. This amendment will ensure that it is not even a possibility in the future.

Amendments Nos. 219 to 223 address an issue that was raised in another place. Under Clause 353, the directors of both a subsidiary company and its “relevant holding company” may be liable if an unauthorised donation is made by a subsidiary. Clause 354 recognises the possibility that neither the holding company nor the subsidiary itself may bring an action against the directors who are liable in respect of the unauthorised donation. It therefore allows shareholders to bring legal proceedings to enforce that liability. In such cases, we agree that both shareholders of the subsidiary and shareholders of the holding company should be able to bring proceedings. This is particularly important if the directors of the holding company are effectively the shareholders of the subsidiary; for example, if it is a wholly owned subsidiary.

The clause as currently drafted would allow only shareholders of the subsidiary to bring proceedings, even against directors of the holding company. As I explained, we do not think that this will work in practice. These amendments address the problem and give the right to bring these proceedings to shareholders both of the subsidiary and of the holding company. This will ensure that directors of holding companies can be held to account by their shareholders if they use subsidiaries that they control to make unauthorised donations.

Amendments Nos. 212 and 217 make minor drafting amendments to Clauses 348 and 352. These amendments are consequential on AmendmentNo. 918, which inserts a new clause providing definitions of “subsidiary” and “holding company”.

Amendments Nos. 226 and 227 provide greater clarity, and we are grateful to the Opposition for suggesting those changes.

Moved, That the House do agree with the Commons in their Amendment No. 212.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 213 to 227.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 228 to 244. I shall speak also to Amendments Nos. 247, 251 to 254, 258, 259, 261, 264, 266 to 272, 274 to 282, 285, 289 to 291, 293 to 295, 302 to 308, and 310 to 314. The 61 amendments in this group are mainly minor and technical improvements to the accounts and audit provisions of the Bill. I shall mention two of the more substantive changes that they make. If any noble Lord would like an explanation of the other amendments, I shall happily do my best to provide it.

The most substantive change made by this group is to the accounts and audit requirements for certain small financial service companies. Twenty-three of these amendments achieve this change: the two key ones are Amendment No. 231, which amends Clause 366, and Amendment No. 289, which amends Clause 462. These amendments are deregulatory in that they will allow more small financial companies not to have their accounts audited, and to take advantage of less onerous accounting and reporting requirements.

The noble Baroness, Lady Noakes, proposed an amendment in this area when we debated the Bill in Grand Committee. The Financial Services Authority has carried out a consultation and found strong support for deregulation. The Government are pleased to be making these amendments to reduce the reporting burden on small companies. Some 4,690 small companies—all those where the requirement to have an audit is not based on a European Union requirement—will be able to benefit, saving them some £15 million a year in total. In order to enable companies to benefit from these relaxations in accounting and auditing requirements as soon as possible, we have made regulations to make parallel amendments to the Companies Act 1985. These will allow companies to benefit from the exemptions for financial years ending on or after 31 December 2006.

I want to focus particularly on preliminary statements. Five of these amendments—Amendments Nos. 251 to 254 and 277—remove what would have been a new requirement for quoted companies to disclose on a website the preliminary statements that they are required to produce. Those amendments were prompted by a recent consultation by the Financial Services Authority on whether to change the regime for preliminary statements of annual results from a mandatory to a permissive one. We have concluded that the requirements on publication of preliminary statements are more properly a matter for securities law—just as what those statements must contain is—and those requirements should not be unnecessarily duplicated in company law.

FSA disclosure rules require an issuer to keep for one year on its websites all price-sensitive information published through a regulated information provider. In the FSA’s experience, it would be unusual for a company to come to the conclusion that there was no price-sensitive information contained in any future preliminary statements that it produced. Consequently, the FSA expects that companies will put their preliminary statements on their websites anyway.

As I have said, the remaining 33 amendments are more minor and technical, though I shall be happy to seek to explain them if that would be helpful.

Moved, That the House do agree with the Commons in their Amendments Nos. 228 to 244.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, before I call Amendment No. 245, I should indicate that the italic heading over Amendments Nos. 245C and 245D should refer to Amendment No. 245B and not be as printed.

moved, That this House do disagree with the Commons in their Amendment No. 245, but do propose Amendments Nos. 245A and 245B in lieu—

moved, as an amendment to Amendment No. 245B in lieu, Amendment No. 245C:

My Lords, I wish to speak to this amendment and to Amendment No. 245D in my name. The two are interrelated, as the noble Baroness has indicated. Noble Lords who have followed the debate through the pages of the financial press over the past two or three weeks will realise that considerable heat has been engendered, not so much on the issue but on the timing of the Government introducing this amendment at a late stage.

These issues are not new. For many months, a number of NGOs have argued for such an amendment. It is easy to complain about process when in reality people are against the substance. I am pleased to hear that, notwithstanding the extravagant remarks of the noble Lord, Lord Hodgson, in opening this debate, it appears that the Conservative Opposition have seen sense and will not oppose the issue that Commons Amendment No. 245 should be disagreed with—whether that is grandstanding for the benefit of his Back-Benchers, many of whom are no longer in their places, I do not know. In the presence of the right reverend Prelate, I am always pleased to see the sinner that hath repented.

What has been lost in this debate in the media is that the often lamented OFR contained similar provisions. When industry was preparing itself forthe introduction of the OFR, sadly denied them at the last minute by the instigation of the Chancellor of the Exchequer, I do not remember that there was much agitation about a similar provision. I believe that significant heat has been engendered into the process from people who really are against the substance, which does not include the Liberal Democrats because we support the principle being introduced by the Government.

In the course of the debate, a number of NGOs have felt that it would be appropriate for this element of the business review to be both subject to audit and subject to reporting standards. We on these Benches do not go that far but we accept the arguments that to impose an audit obligation would be potentially extremely expensive for companies and quite difficult to perform. However, we support the NGOs in believing that the Government—not only for the reasons indicated by the noble Baroness, Lady Noakes—ought to give some indication of what the standard reporting practice should be, which they have the power to do by regulation. The whole purpose of this is not only to obtain the disclosure of information itself, but also to provide a measure by which a number of ethical investors, or those who wish to invest within an ethical framework, can obtain comparisons between different companies. It would be difficult for those ethical comparisons to be made without some element of standard reporting practice which I feel can come only from the Government.

My Lords, I have three points to make in support of my noble friend Lady Noakes. First, I do not believe that it is right to let this moment slip by with the Minister purporting to give the impression to your Lordships that he is very happy to be in the position of bringing forward these amendments to this legislation. The DTI did not want these provisions put on the face of the Bill at all. I believe that the DTI has been bounced into this position—it was not its original intent. The DTI has shown legislative fatigue on this issue—

My Lords, as this Motion was proposed in the Commons by my colleague in the DTI, I hardly think it is correct to say that it was not supported by the DTI.

My Lords, I believe that the noble Lord's colleague in the House of Commons was very firmly bounced by NGOs and others into making these provisions. It was not something that the Government had toyed with bringing forward until the lobbying gained pace at a later stage. My point about legislative fatigue is the way in which the Government rolled over to the lobbying and that is why I think the DTI has shown a certain amount of mettle fatigue as well. That is doubtless why the Secretary of State for Trade and Industry, in his appearance in another place before the Select Committee on Trade and Industry on 24 October, stalwartly refused to give any undertaking at all that he thought that the department had a long-term life in front of it.

My second point is in strong support of what my noble friend said about the effect of these provisions on smaller companies with just one, two or three suppliers. I believe that this will be a very onerous burden. She has set the point out very clearly and I shall not attempt to be a little Lord Echo to what she has said so forcefully.

Thirdly, I believe that we should all be aware of legislative creep, of regulatory creep and of compliance creep in this legislation. My noble friend on the Front Bench said that big companies can handle the extra regulatory box-ticking through which they will have to go, but I predict that a whole new industry will emerge and companies will have to be very stalwart in resisting it in order to give gainful employment to professional services, firms and others, coming forward with seminars, breakfast meetings and new undertakings that they feel companies should fulfil. I think that some companies, innocent though they may sometimes be, will fall for this. We will see a great deal more regulation, self-imposed by companies, thanks to compliance creep urged forward by professional services firms.

I do not believe that the purposes of industry, business and commerce have been particularly well served in respect of these provisions by the CBI and, in particular, by the Institute of Directors. The words of Mr Templeman, the director-general of the Institute of Directors, which have already been quoted in your Lordships' House, will come back to haunt him in future years after having had a cup of tea with Mrs Hodge, who told him that everything was going to be all right. She does not have that effect on me, my Lords.

My Lords, I agree with what the noble Lord, Lord Razzall, had to say on this subject. We ought to focus on the substance or merits of the amendment rather than complaints made about the behaviour of the Minister in another place or elsewhere over cups of tea. If I may say so, I took the opening remarks of the noble Lord, Lord Hodgson, on this matter as an uncharacteristic expression of irritation.

The amendments tabled by the Government are entirely logical and consistent with the rest of Clause 399. The clause already provides, in a non-controversial sense, for the fact that the business review must contain,

“a fair review of the company’s business”

and

“a description of the principal risks and uncertainties facing the company”.

The review is required to provide a balanced and comprehensive analysis of various things and the main trends and factors likely to affect the future development, performance and position of the company’s business.

What is proposed here is entirely consistent with that logical structure; the idea that it would be possible or practical consistently with those provisions not to have the provisions that are being suggested strikes me as absurd. The matters it is now proposed should be incorporated are consistent with the philosophy that one finds elsewhere in that provision.

The proposal for protecting the position of the individual in proposed subsection (11) is again logical and consistent. The proposed paragraph (c) is designed to require the production of the information from the individual. Proposed subsection (11) will protect that individual in the circumstances there described. The point made by the noble Baroness, Lady Noakes, might already be covered by—or at least, in very large part—subsection (10) which is designed, albeit in different language, to protect the interests of the company rather than the individual.

My Lords—

My Lords, as the Minister will remember, there was considerable discussion of the role of companies in the developing world when the Bill went through your Lordships' House, and those issues were picked up in the Commons. I give a guarded welcome to the Government’s Amendment No. 245A, which acknowledges that there are issues relating to labour standards and environmental, social and human rights impacts down companies’ supply chains which need to be addressed. However, the amendment is still pretty weak; it does not go as far as the OFR, which the DTI had proposed and the industry had accepted but which the Chancellor then knocked out last year. As the Minister emphasised, under the amendment it will remain the directors’ judgment of what is relevant in the supply chain for them to report on. It will not require companies to list their suppliers. It also affects a limited number of suppliers, so it is a limited amendment.

On Amendment No. 245B, I would like to know more about the circumstances in which directors could withhold information. I would not want this to be a Trojan horse in the middle of the legislation.

I believe that Amendment No. 245C should be opposed. It is significantly weaker than the Government’s amendment and would undermine the provision of information to shareholders about risks down company supply chains. Meanwhile, the amendment of my noble friend Lord Razzall would ensure a much more independent framework for the Government’s proposals. It would mean, for example, that companies could be compared across years or between themselves; less would depend on the judgment of the directors and more on outside standards, which is vital. It should help companies see what they need to do, as the noble Baroness pointed out.

My Lords, I too support the Government’s amendment. I am glad that I let the noble Baroness, Lady Northover, speak before me because I affirm everything she said and everything she denied. I share her anxiety and hope that we shall have more debate on AmendmentNo. 245B to ensure that it is not a Trojan horse and does not weaken the main amendment. I share the noble Baroness’s considerable anxieties about the amendment of the noble Baroness, Lady Noakes.

In the comments of the noble Lord, Lord Patten, there was a sense that lobbying by NGOs was a less proper or worthy activity than lobbying by anybody else. That seems extraordinary. I am glad to be in part briefed by a range of NGOs, among them Traidcraft, which offers its views to the public, and has done for months, if not years, from its experience as a medium-sized company.

My Lords, either the right reverend Prelate misunderstood what I said or I did not express myself clearly. Of course NGOs have every right to lobby. The whole nature of what goes on in the Palace of Westminster is about lobbying—it is one great lobbying fair in many ways. I was regretting that some of those who should be representing the sensible voices of industry and commerce, such as the CBI and the Institute of Directors, have not been as effective as some of the NGOs in carrying out their lobbying. I regret the corporatist approach of the organisations to which I have referred, but lobbying is what we all do.

My Lords, I regret that I clearly misunderstood the noble Lord, although I said what I thought I had heard him say.

What we have here is essential. It is of great importance that business management and company decision-makers not only gather information to understand and improve the impacts of their operation in all the fields in which they work but that their thinking and decision-making, and the evidence on which they make their judgments, should be available to those whose proper responsibility it is to scrutinise those decisions in company reports and similar places.

The effect of the amendment should be—and this is my concern about Amendment No. 245B and still more about Amendment No. 245C—that shareholders and others will have access to the important information about impacts and risks down the supply chains of the companies they invest in. It is most important that this kind of reporting is not an option—not something that directors should have regard to but which is required of them.

Since supply chain management is essentially about relationships, it is important that the reporting in a business review demonstrates that companies hear and respond to their suppliers’ perspectives. It is especially important—granted it is my own sense—that a responsible company is one which really takes as much interest in, for instance, the health and safety questions that surround its operations in countries outside the legislative framework of this provision, as it is by law bound to do in relation to its operations of this company. I think, for instance, of the range of operations carried out by UK and international companies in conflict or post-conflict countries like the Democratic Republic of Congo.

It is of enormous importance that UK companies should be transparent and give their shareholders and others an opportunity to understand the character of their operations in such countries. That is especially important when—not just in my judgment but in the judgment of the All-Party Parliamentary Group on the Great Lakes Region and Genocide Prevention, of which I am a member, and of other organisations such as RAID—the Government are slow on the vital question of strengthening the activities of the UK contact point under the OECD guidelines. It is of great importance that the public interest, for instance, includes that kind of a public interest. That is why I am glad those words are in Amendment No. 245B. But I do not want them to be whittled away. So, as regards Amendment No. 245, it is most important that this provision should be in the Bill.

I am concerned, as was the noble Baroness, about the implications of Amendment No. 245B and some of the first line of Amendment No. 245A. I want to be assured that that is not—as the noble Baroness asked—a Trojan horse. I do not want that to be a weakening of the provision—and it is important that it should not be. I share the noble Baroness's concerns about Amendment No. 245C, which I also wish to oppose. I welcome Amendment No. 245D because it would give the opportunity to set out a proper framework within which this reporting should take place. I am grateful to the noble Lord, Lord Razzall, for tabling it.

In conclusion, it seemed to me that perhaps I or one of my colleagues ought to have a conversation with the noble Lord in order to add to his bank of biblical quotations because we have heard the same one twice today.

My Lords, I am favour of Amendment No. 245. I was another of those who was astonished at the outburst from the Conservative Front Bench at the beginning of the debate, which seemed to me to be quite out of proportion. I know that strong feelings have been aroused on both sides of the issue. My sympathies are with those NGOs in the Trade Justice Movement which deal directly with fair-trade sources in developing countries. They have done a lot of work on supply chain reporting. As much as anyone else, they know that it is quite reasonable for the Government to table this amendment now and for companies to make the minimal effort required to report on their contractual arrangements. I say “minimal” because this is, as the noble Baroness, Lady Northover, said, a far cry from the original version of the OFR regulations, which were welcomed by all except the Conservative Party and companies, but to which obviously the business community objected.

The Conservative Party is trying to bring itself up to date and get closer to non-governmental organisations in civil society and real people. It would be making a great mistake if it did not recognise the direction that many international companies—large and small—are taking towards ethical responsibility worldwide for their own economic as well as moral and public relations advantages. This amendment is only one detail in that process. Will the Minister confirm that there will be a full consultation on the reporting standards generally in two years’ time, as I think a Minister in another place has suggested, and that there will be a full review of those arrangements?

My Lords, I need to make a declaration of interest before I offer my support to the government amendment. I am a director of the London Stock Exchange, which is a signatory to the letter sent to the Minister by the CBI, the QCA and the London Stock Exchange.

It is wrong to underestimate the anxiety that this clause causes among the business community. The purpose of this Companies Bill is, as has been stated many times, to give better information to shareholders and to increase, but not damage, the competitiveness of UK companies. Suddenly being asked to disclose all your suppliers is something that gives natural anxiety to quoted companies, particularly to smaller quoted companies which may well be dependent on only one or two suppliers. I speak as somebody with a long career as a director of the smaller quoted company. Nor, as the noble Lord, Lord Razzall, suggested, were we all on side and clearly enthusiastic about the OFR. Most smaller quoted companies were viewing it with real doubt and anxiety, and rather thankfully stopped having to think about it at the point it was suddenly withdrawn. Although I do not think it was withdrawn through any lobbying of ours, we had merely been anxious as opposed to lobbying.

However, having got over our shock at the requirement, I think that we can all accept Amendment No. 245 and can pull ourselves together to provide suitable disclosures about our suppliers. In this context, I welcome the assurance given by the Minister in his opening speech that the new clause was intended to require the disclosure of information at a high level. It was not intended to require companies to produce long lists of the names of their suppliers, but to illustrate the principal risks and uncertainties facing the company. We can indeed be asked to do that and should be, provided we are not risking our suppliers or our businesses by disclosing more than is commercially sensible. But it is entirely right to disclose the principal risks which the company faces and the loss of a small number of suppliers may well be one of the commercial risks which we face.

Against that background, I am able to support the amendment. However, I think that those who advocate the interests of the NGOs forget that small companies also have difficulties and interests that must be taken into account.

My Lords, I have spent most of my professional life dealing with the front-line issues of the Third World and deprived parts of the global community, and it is good to see the Government, having listened to argument, move in response to it. The Government often get criticised for not listening to informed argument. On this occasion they have. I agree, I must say, with the Liberal Democrat Benches that it would have been good to see them move further, but they have moved positively and they should be commended for that.

I make just one observation. This is not just about social responsibility in the way in which we normally think about it. Having been involved in the front line with social issues in the Third World, I know that that has a great deal to do with world security. The amount of animosity and alienation that derives from irresponsible business behaviour should not be underestimated. It can have a very detrimental effect on global security and play into the hands of extremists. On those grounds, as well, what the Government have been able to do needs to be strongly supported. In the spirit of goodwill and support which the Government are enjoying from so many people, I urge my noble friend seriously to consider the Liberal amendment which, it seems to me, puts a bit more beef into the methodology that will be available to fulfil the purpose.

My Lords, I support the government amendments and oppose Amendment No. 245C. I must declare an interest. I am the vice-chair of the Ethical Trading Initiative, but today I am speaking in a personal capacity. I welcome the government amendments as an acknowledgement that there are issues of labour standards, environmental, social and human rights that impact down company supply chains. I listened with interest to those who have expressed concern about that. In their annual reports, most companies declare themselves committed to corporate social responsibility. I welcome that. Of course, they should be judged by the level of commitment that they apply in practice. It is interesting that some companies declare quite a surprising amount of detail about their supply chain. Somehow they manage to survive the competitive risk.

It is a well known fact that in the global environment in which companies operate today, many of them share the same suppliers. They may not publicly admit that, but they do. I commend those who have said that what the Government are doing is a worthwhile but modest step in the right direction. I do not share the foreboding of Cassandra, alias the noble Lord, Lord Patten, on the terrible effects that the provision may have. It is important to note that this is a modest amendment. All it does is require 1,300 quoted companies to do what responsible companies were doing in the 1990s. According to the Minister's statement on Report, it will remain the directors’ judgment what is relevant in the supply chain for them to report on and will not require companies to list their suppliers.

Some NGOs were calling for the Government to go a lot further. Like many others, I do not see anything wrong with that. I am struggling to get my head round a scenario where the Institute of Directors and the CBI are not being effective in their lobbying. Some of my trade union colleagues would say that they are far too effective. I leave the House to judge where the balance of evidence lies on that front. I cannot believe that they do not have the ear of the Government.

NGOs were calling for the Government to go a lot further in strengthening the rules in the Bill on companies’ social and environmental impact, including stronger reporting requirements—several noble Lords, including the right reverend Prelate, referred to that—and a positive duty on directors to minimise negative impacts. Personally, I do not see a problem with allowing directors to withhold information that might present individuals with a risk to their privacy, safety or security from threats by animal rights or other extremist organisations. That is not a theoretical threat or risk; we know that it exists and I welcome the Government for acknowledging that.

However, I would welcome clarification about the circumstances where directors could legitimately withhold information about suppliers and examples of where that would be seriously prejudicial to a person or contrary to the public interest. I would welcome the Minister expanding on that. He gave some clarification, but it is important that that does not become a get-out clause. In particular, I am concerned that the amendment will be open to abuse by directors who want to withhold information about supply issues that should be in the public domain, as other noble Lords have said. I should like reassurance from the Government that the drafting of the provision does not leave it open to abuse in that way.

Also, I believe that the amendment could be improved by introducing a “comply or explain” principle, as under the combined code on corporate governance: that is, requiring directors to make a statement in their business review indicating that information about suppliers has been withheld under that provision.

I oppose the amendment tabled by the noble Baroness, Lady Noakes. Despite her assurances, I believe that it would seriously weaken the government amendments. With those caveats, I welcome what the Government have done.

My Lords, I must apologise for not having been in the House when the debate began. I was so busy struggling with the Bill and its surrounding papers that I lost track of the time. Because of that, I will not speak at such length as I originally planned. I speak in support of Amendments Nos. 245A, B and D and welcome the Government’s introduction of the amendment.

The amendments must be read in the context of Clause 158, which deals with the duty to promote the success of the company. I underline Clause 158(1) (c), which states that one factor is the need to foster the company's business relationships with customers, suppliers and others and, perhaps even more important, Clause 158(1)(e), where it is the duty of the directors to consider the desirability of the company maintaining a reputation for high standards of business and conduct.

In the context of those requirements on directors, it is clear that the amendments partially give effect to those paragraphs. I have some difficulty understanding the opposition to the government amendment. What is proposed is very modest indeed. I do not understand what the big business lobby is afraid of. Are their supply problems so bad that the company's directors do not want even their own shareholders to find out about them? If so, surely it is only right and proper to ensure that there is sufficient transparency for investors, who demand improvements from the companies in which they are members.

It is well known that fine intentions are not sufficient. For that reason, it is important to pay careful attention and to support AmendmentNo. 245D, which ensures that the requirements of the Bill will have a much better chance of being implemented if companies are audited.

As I said, these are extremely modest steps forward and I support the government amendments.

My Lords, this has been a very interesting debate and I thank all noble Lords who have spoken. In view of the time and the large number—

My Lords, I believe that I have the right of reply at this point to both the noble Baroness's amendment and that of the noble Lord, Lord Razzall.

In reply to those two amendments, I say to the noble Baroness, Lady Noakes, that one person’s unseemly haste is another person’s foot-dragging correction of an error. When we responded to the many queries from business, we were constantly told that this was a good thing. We were never told that this was unseemly haste. It is in keeping with what we have done in this Bill constantly to listen to what people are saying and to respond. The noble Baroness has similar concerns to us about the practicality of this but, if the amendment were accepted, companies would be excused from disclosing any information that the directors viewed as seriously prejudicial to the interests of the company, to the reporting company, or to the other company or person, or contrary to the public interest. This is going far too far towards giving companies a let-out from reporting information that would otherwise be required. It says in effect that any bad news should not have to be reported. That is not an accounting principle that I understand. Some bad news will be prejudicial to the reporting company, and it should be. That is not the problem with which we are trying to deal; we are trying to deal with extremist groups who want to use relationships between companies as a way of attacking them. The amendment would be a Trojan horse, which is why we oppose it.

Our Amendment No. 245B is not a Trojan horse. It is clear what it is; it is about prejudice to the other company, and there is a public interest test which it is perfectly reasonable and practical to have. It is not unusual for directors to have to waive public interest. The only alternative would be some authority having to do that, which is not a route we want to go down.

As I explained earlier, we are conscious that information could be damaging to a reporting company if it was known that it was in a relationship with a company engaged in animal testing. In very many cases, that will not need to be disclosed as it will not be essential to the reporting company’s business, but if it were, the prejudice would be not only to the reporting company but to the company itself because it would lose the business if the reporting company had to withdraw. Alternatively, the threat might be that the other company would be boycotted if it continued a relationship. Again, that would prejudice the other company. In effect, it would force the other company to choose between the reporting company and its other companies.

For those reasons, we cannot agree to the noble Baroness’s amendment. If Conservative noble Lords think that it is right to oppose this rather modest clause—it is modest because we must be realistic—they should not start making speeches either about corporate responsibility or a duty to shareholders, because this is a very clear example of a proposal that is in the interests of shareholders as well as sensible corporate responsibility.

I am grateful to the noble Lord, Lord Razzall, for tabling his amendment. As I mentioned in my opening speech, several interest groups have lobbied throughout the course of the Bill for a strengthening of the various provisions relating to the business review. One theme has been standards with statutory backing. It has been very clear—this was emphasised again in the meetings which the Minister and I had earlier this week with representatives of the CBI and others—that business groups do not want statutory standards. We agreed that they would not necessarily be helpful to what we are trying to achieve. We want to encourage directors to think about the issues on which they are reporting; we do not want to encourage a box-ticking culture. We think that Clause 399 provides a framework for reporting with sufficient flexibility to enable the directors to determine what information it is necessary to include. This will vary from company to company, depending on their size, the complexity of the businesses and their particular circumstances. A requirement that any part of the business review must comply with statutory standards would take away the directors’ judgment about what information it is relevant to include. Companies would have to follow a statutory standard when reporting key relationships.

As we made clear, the Accounting Standards Board has said that it will update its existing reporting statement to cover the business review. This will provide helpful guidance to companies on the business review as a whole and will be useful to investors. The ASB’s existing reporting statement covers the reporting of key relationships, and I am sure that it will continue to do so. It is also for a company’s shareholders to hold the directors to account. If the shareholders want the review to be produced in accordance with particular guidance or standards, it is for them to challenge the directors.

My Lords, I apologise to the Minister for seeking to deny him a response to the debate. That was not my intent: as I am sure he will be aware, we are as keen to get to the end of our consideration of Commons amendments as he is.

I think I was saying that I was not going to take too much of the time of the House to respond to individual points made in the debate, but I want to make our position clear. We are not against socially responsible disclosures, and I would not want anyone to seek to paint my amendment in that way. I do not believe that the Government’s amendments will require very much disclosure on the part of the companies from whom most of the NGOs want disclosure. That is a consequence of the Government’s wording. I do believe, however, as I tried to set out, that harm may well be done to smaller quoted companies by having to disclose matters that might involve either violent protesters or commercial harm. That was the basis on which I judged it right to table an amendment to narrow those disclosures for those smaller companies that could be seriously affected by this.

The Financial Reporting Review Panel is there to police any disclosures. Although people talk about a Trojan horse approach and companies trying to evade proper disclosure, arrangements are already in place to ensure that it takes place. There is also a power to amend the disclosure requirements should it become necessary later. We do not think that our amendments are unreasonable. Although they offer important protection to a relatively small number of companies, they are ones that deserve protection.

moved, as an amendment to Amendment No. 254B in lieu, AmendmentNo. 245D:

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 246 to 254.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 255 to 257. I shall speak also to Amendments Nos. 260, 262, 273, 283, 284, 286 to 288, 292, 296 to 301, 916, 935 and 1017.

The first 19 of these amendments remove from the Bill the special rules on the audit of companies that are charities. The final two make similar changes to the Companies Act 1985. In future, the rules on the audit of charities will all be contained in charity law, whether the charity is a company or not. The Charities Bill was amended in another place on Wednesday evening to achieve the same result. We are making these changes to complete changes to the Bill begun on Report in May, on the basis of amendments put forward by the noble Lord, Lord Hodgson.

The result will be to complete the process that those amendments started of simplifying the law on scrutiny of the accounts of small charitable companies. These changes will reduce the complexity of this part of company law and make the rules on audit easier to understand for small charities.

The Office of the Third Sector carried out an informal consultation, which showed widespread support for the simplification. The changes to the existing Act will enable us to give effect to the simplification early next year, in co-ordination with changes to charity law. I hope the noble Lord will acknowledge that these are not only fine words but a veritable feast of buttered parsnips.

Moved, That the House do agree with the Commons in their Amendments Nos. 255 to 257.—(Lord McKenzie of Luton.)

My Lords, I am grateful to the Minister for that reassurance. Concern has been expressed, as he explained to the House, that since we made the changes in the Bill here, which were subsequently reversed, the Charities Bill has had a further airing and a power has been inserted in it. Amendment No. 80 to the Charities Bill inserts a new clause in that Bill before Clause 77.

We are not necessarily unhappy about these amendments because, as the Minister has pointed out, they take all the scrutiny of charity accounts into the charities regulations, which seems sensible. We need to be clear, though, that there is co-ordination between the DTI and the Cabinet Office, the department responsible for charities, on the timing of how this will all happen. I think I heard the Minister say it is all intended to be brought into effect early in the new year. Concern has been expressed that with the power being a power only in the Charities Bill, there may be some temptation, dare I say it, to backslide and say, “It’s all frightfully difficult. We’ll hold back and put it off for a bit longer”. That, obviously, is undesirable. If we do not co-ordinate the two Bills properly, charities will end up subject either to no regulation or to two sets of regulations simultaneously. That is also undesirable. I am seeking a reassurance this afternoon that the Government are on the case on that and that there is no intention to delay the implementation of the new regime for charity regulation.

My Lords, I am happy to give the assurance that the Government are on the case. The co-ordination is important, and I reiterate that the changes will enable us to effect the simplification early next year. That is our intention.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 258 to 262.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 263. Amendments Nos. 263, 265 and 757 are the net result of a series of amendments that have been tabled in both Houses concerning the provisions in Parts 15 and 24 relating to disclosure of information by the Financial Reporting Review Panel and the Takeover Panel.

It is fair to say that we had not anticipated that these disclosure provisions would attract the degree of debate that they have. They were closely based on existing precedents in financial services and company law. Nevertheless, the debate has been extremely valuable. It has served to remind us of the sensitivities and conflicting priorities involved in any regulatory disclosure provisions such as these.

We view positively the discussion we have had. It has caused us to reflect on the whole scope of the disclosure provisions related to the Financial Reporting Review Panel and the Takeover Panel and look at them afresh. We have discussed in substance with both the respective panels whether the framework of disclosure provisions strikes the right balance, recognising the need properly to protect confidential information while facilitating the exchange of such information between regulators and others in certain circumstances. Both they and we have concluded that the disclosure framework properly achieves that balance.

Moved, That the House do agree with the Commons in their Amendment No. 263.—(Lord Sainsbury of Turville.)

My Lords, I thank the Minister for the amendment that brings the Data Protection Act into play in respect of the Financial Reporting Review Panel. However, we are disappointed that the Government have chosen to overturn the other amendments that we made to improve—as we saw it—the controls on disclosure. Today is not the right day to have a wide-ranging debate on the advantages and disadvantages of information gateways. However, we have warned in this House and in another place of the dangers to companies of inappropriate disclosure. We hope that the Government will keep the use of these powers under review and will be prepared to act if such inappropriate disclosure takes place.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 264 to 314.

Moved accordingly and, on Question, Motion agreed to.

My Lords, this is the moment that I have been looking forward to. I beg to move that the House do agree with the Commons in their Amendments Nos. 315 to 512. I spoke to these amendments with Amendment No. 70.

Moved accordingly and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 513 to 529.

Amendments Nos. 513 to 519 combine provisions that have been in the Bill from the outset in relation to debentures with a restatement of relevant provisions from the 1985 Act. There is no change of substance.

It may be helpful if I explain why there is there no equivalent for the register of debenture holders of the requirement, in Clause 119, for the company to advise those accessing the register of the date to which it has been made up. The Bill follows previous Companies Acts in that it does not regulate the content of the register of debentures in the way, in particular, that it does not require the register to include dates of becoming or ceasing to be a debenture holder. Therefore, it would be anomalous for companies to be required to provide for the register of debenture holders the sort of information which they have to provide under Clause 119 in relation to the register of members.

Furthermore, the relationship between the company, the holders of debentures and the holders of interests under any related trust deed is generally regulated by documents which are not part of the company law architecture. It would be excessively regulatory, and possibly wholly inappropriate, to impose an obligation for registers of debenture holders similar to Clause 119 for registers of members.

Moved, That the House do agree with the Commons in their Amendments Nos. 513 to 529.—(Lord McKenzie of Luton.)

My Lords, I asked for this group of amendments to be degrouped. I was forewarned of issues that would need to be discussed. The Bill team very kindly drew my attention to a letter from Vera Baird, dated 26 July, which I had overlooked in the blizzard of paper that accompanies this legislation, which provided the necessary reassurance.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 530 to 536.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 537 to 558.

Part 21 is concerned with the certification and transfer of shares and other securities. I am pleased that there has been a broad measure of agreement on these clauses, which both restate existing statutory provision in respect of the certification and transfer of securities and extend the existing power under Section 207 of the Companies Act 1989 to require, as well as to permit, the paper-free holding and transfer of company shares.

I remind noble Lords of the background to this part. The Government have welcomed the work of industry groups, which are looking at options for greater use of paper-free holding and transfer of shares. Responses to the Company Law Reform White Paper of March 2005 showed strong support for this initiative, but it is also clear that more information is needed on the costs and benefits of making a more extensive use of a paper-free approach. The Government do not wish to rule out any option at this stage and therefore propose to extend the existing power relating to evidencing and transferring securities without a written instrument under Section 207 of the Companies Act 1989, so that it could be used to require, as well as to permit, the paper-free holding and transfer of company shares. If the power were used in this way, the Government would wish to ensure that the new arrangements for paperless holding and transfer of securities did not deprive individual shareholders of existing rights which may be important to them.

As the Economic Secretary to the Treasury made clear last month in replying to the recent consultation on this subject by the Institute of Chartered Secretaries and Administrators, a number of issues remain to be resolved before any decision can be reached as to how, or whether, the extended power should be used. I will place a copy of my honourable friend’s letter in the House Libraries. We are very grateful for the continuing work of the industry groups that are looking into the practical implications of greater use of paper-free holding and transfer of shares.

Amendments were tabled earlier with a view to clarifying the relationship between Section 207 of the Companies Act 1989 and the provisions in Part 21 that extend and make further provision in respect of the Section 207 power. We said that we would give serious thought to addressing those concerns by some form of “consolidating” amendment to Part 21. This is achieved through Amendments Nos. 537 to 558. We are satisfied that Section 207 can be repealed, and the new clauses introduced by these amendments brought into force, without in any way affecting existing regulations made under Section 207 and the systems that rely on them.

The new clauses introduced by AmendmentsNos. 537 to 551 restate provisions of Sections 183 to 189 of the 1985 Act relating to the certification and transfer of shares and other securities. The new clause introduced by Amendment No. 555 differs in two respects from the corresponding clause in the Bill as it left your Lordships’ House earlier this year. The clause now makes clear that, where regulations under the clause enable companies to adopt new-style paperless holding and transfer of shares arrangements, companies need not make it obligatory both to hold and to transfer their shares in this way: the new system could relate just to holding or just to transfer. This increases the potential flexibility of the regulation-making power, which is sensible while the precise shape of the proposed new arrangements remains somewhat unclear.

Secondly, the new clause uses the language of “exercising rights” rather than “giving instructions” in respect of the preservation of existing rights. It is important to ensure that the existing rights of those who are beneficial, but not legal, owners of shares are not disturbed by the new arrangements; and the new wording achieves that better. We are grateful to the Law Society for making comments that have inspired these changes, and to noble Lords opposite who championed similar amendments in Grand Committee.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 559 to 623.

Moved accordingly and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 624 to 631. These new clauses restate Part 15 of the 1985 Act in so far as these provisions apply in relation to Part 22 of this Bill. Part 22 enables public companies and, indirectly, members of the company to ascertain the underlying beneficial owners of shares. The company may apply to the court for an order under Clause 607 directing that the shares in question be subject to various restrictions under Part 15 of the Companies Act 1985, which include voiding any transfers of the shares and providing that voting rights are not exercisable in respect of the shares. The provisions of Part 15 are restated without substantive change in the new clauses. Part 15 will remain in the 1985 Act, because it applies also to Part 14 of that Act, which will remain in force. Nevertheless, we think that it would be helpful to restate that in these new clauses, so that the reader can find all the relevant provisions for Part 22 in one place.

We have consulted on these clauses and are grateful to the Law Society, in particular, for its comments and I beg to move.

Moved, That the House do agree with the Commons in their Amendments Nos. 624 to 631.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 632 to 670.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do disagree with the Commons in their Amendment No. 671. I have spoken to this amendment with Amendment No. 70.

Moved, That the House do disagree with the Commons in their Amendment No. 671.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 672 to 674.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 675 to 709. I shall speak also to Amendment No. 845.

These amendments restate provisions in the 1985 Act relating to the registration of company charges and provide three new regulation-making powers, meeting the commitment that I gave when we withdrew our proposals for a general reform power. The new clauses inserted by Amendments Nos. 675 to 707 restate Part XII of the 1985 Act, which provides a system for the registration of charges created by a company. As I have already explained in relation to other amendments that restate the 1985 Act, while there has been an element of restructuring, no substantive changes have been made other than to ensure compatibility with the Bill. In that respect, I draw noble Lords’ attention to one such change—our decision to remove defective provisions relating to overseas companies. Instead, we have provided a new power in Amendment No. 845 to address the problems created by those provisions. I shall return to that shortly.

The approach to restatement of the existing provisions means that the new provisions retain the imperfections of the existing system. AmendmentNo. 709 meets the commitment that I gave to the Grand Committee and provides power to amend this part by altering, adding or repealing provisions. I should emphasise that this is not a power to replace the current system. The purpose of the power is to make changes within the confines of the existing system. I note that the Delegated Powers and Regulatory Reform Committee considers that to be an appropriate delegation of power. We intend to use that power to address the many imperfections of the present system, particularly those noted by the Company Law Review in its final report.

In particular, we intend to use it to update the list of charges to which the provisions apply, to provide that a copy of the instrument, rather than the instrument itself, be delivered to the Registrar of Companies, and for other measures to improve the existing system to reduce the burdens on companies and on the Registrar of Companies. But we do not expect to use the power immediately. Rather, we intend to consult fully, building on the discussions that have been continuing for some time, and to take account of changes in the pipeline to enable electronic conveyancing in England and Wales and automated land transfer in Scotland.

The new clause inserted by Amendment No. 708 provides the power needed to ensure the operability of the new registration system for floating charges in Scotland. Without that provision, floating charges created under Scots law would have to be registered with the Registrar of Companies in addition to their registration on the new Scottish register of floating charges to be established under the Bankruptcy and Diligence etc. (Scotland) Bill. It is intended to use this power so that floating charges registered in the Scottish register of floating charges do not also have to be registered with the Registrar of Companies. This will be a deregulatory measure. However, the power will be used only if arrangements are in place, in particular those relating to information-sharing between the two registries, to ensure that third parties can still easily discover information about a company’s registrable charges.

Amendment No. 845 addresses the significant defects in the current system for the registration of charges as it applies to charges over the UK property of overseas companies. It provides a new regulation-making power to require those overseas companies that are registered with Companies House under Clause 700 to register charges over property in the United Kingdom when they grant specified charges over their UK property. Where the charge has been created before registration takes place, we intend to use the power in Clause 700 so that, when an overseas company registers its UK presence, it is required to file details of specified existing charge over its property in the UK.

Moved, That the House do agree with the Commons in their Amendments Nos. 675 to 709.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 710 to 756. These provisions concern reorganisations, arrangements and reconstructions within a company, and allow some types of merger or demerger to take place. They restate Part XIII of and Schedule 15B to the 1985 Act with only two changes of substance.

First, there are amendments concerning orders amending company constitutions that must be filed with the registrar. These are included for consistency with provisions concerning other such orders. Secondly, in the new clause introduced by Amendment No. 751 concerning the independent requirement of experts and valuers, we have taken a power to specify a disallowed connection for the purpose of determining whether a person meetsthe independence requirement. That is consistent with the approach that we have taken in Clauses 327 and 843. We have consulted on the draft clauses and are particularly grateful to the Law Society for its comments.

Moved, That the House do agree with the Commons in their Amendments Nos. 710 to 756.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, before calling the next amendment, I must advise the House that due entirely to my inability to read the Clerk’s handwriting, I misread the result of the vote on Amendment No. 245D. The results were, in fact, that the Contents were 48—as I read—but that the Not-Contents were 152, not 192 as I read out. I apologise to the House; it makes no difference to the result of the vote on that amendment.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 757 and 758.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 759 to 777. I speak also to Amendment No. 995. This group of amendments is a further part of the restatement exercise. Clause 675, Schedule 3, which it introduces, and the amendments that we are dealing with now are all concerned with what are known in jargon as squeeze-out and sell-out rights. Squeeze-out and sell-out are designed to address the problems of, and for, residual minority shareholders following a successful takeover bid. These concepts are not new; they have long been part of UK companies legislation. Provisions in respect of them are currently to be found in Part XIIIA of the Companies Act 1985.

This clause and Schedule 3 had two main purposes in seeking to amend Part XIIIA of the 1985 Act. The first was to bring existing squeeze-out and sell-out rights entirely into line with Articles 15 and 16 of the takeovers directive, which introduces EU-wide rules on these matters for the first time. Secondly, we wished to implement a number of recommendations from the Company Law Review relating to squeeze-out and sell-out.

The present amendments would restate Part XIIIA—on takeover offers—of the Companies Act 1985 in a clearer and simpler form. In doing so, the restated provisions would absorb those changes proposed to Part XIIIA now to be found at Clause 675 of and Schedule 3 to the Bill. I hope that these amendments will be supported.

Moved, That the House do agree with the Commons in their Amendments Nos. 759 to 777.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 778 to 784. This group also includes Amendments Nos. 894, 996 and 997.

The majority of these amendments form part of the overall restatement exercise. A number of them restate various provisions of the 1985 Act which in some way relate to offences or sanctions—for example, the provisions on fraudulent trading and unfair prejudice. No changes of substance have been made.

Amendments Nos. 996 and 997 remove a large number of paragraphs from Schedule 4. The paragraphs in question purport to make changes to offences provisions in the 1985 Act. However, as a result of the restatement exercise, the relevant provisions have now all been included within the Bill, with the necessary changes incorporated. The paragraphs are therefore now redundant.

Finally, Amendment No. 784 adds a new clause to the unfair prejudice provisions. If the court makes an order amending the company's articles, the new clause ensures that updated articles are registered and that a copy of the court order is supplied with any copies of the articles issued by the company, unless they already incorporate the amendments. This additional provision has been included to ensure consistency with Clauses 31 and 36 as they now stand and with the way in which they deal with resolutions and agreements which affect a company's articles.

Moved, That the House do agree with the Commons in their Amendments Nos. 778 to 784.—(Lord McKenzie of Luton.)

My Lords, I am grateful to the Minister for that explanation. I intervene briefly because fraudulent trading is an issue that particularly concerns directors of smaller companies. They are, by their very nature, more financially vulnerable. Such companies are a very important part of our growing economy, and the position of their directors needs to be clear at all times, not least because the offence carries a penalty of up to 10 years’ imprisonment if they get it wrong.

I think that the Minister said “no changes of substance”. I want to make it absolutely clear that a company director’s position has not shifted. I want to ensure that this is a restatement and that we are not clawing back or changing the balance in any way. This is an important aspect for the generality of directors of Britain’s companies as a whole.

My Lords, I can give the assurance that no changes of substance have been made. This is just a restatement of the 1985 Act provision.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 785 to 832.

These amendments essentially restate provisions of the current law. Noble Lords will remember that, at an earlier stage, we introduced into the Bill a new administrative procedure by which companies which have been erroneously struck off the register can be restored to life, so to speak. We also introduced new clauses to streamline the existing court procedures for restoration.

It is clearly illogical that the new provisions on restoration to the register should appear in the Bill but that the provisions on striking off from the register, to which they logically relate, should remain in the 1985 Act. These amendments therefore restate the relevant provisions of the 1985 Act, as amended by provisions introduced in this House, alongside the new provisions, so that the Bill will now set out the full regime governing both dissolution and restoration.

In undertaking the restatement, we have made no significant changes of policy but we have benefited from close scrutiny of the clauses by the Law Society and others. A number of drafting changes have been incorporated as a result.

Moved, That the House do agree with the Commons in their Amendments Nos. 785 to 832.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 833 to 846.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 847 to 861. This group also includes Amendments Nos. 866, 871, 872, 875, 879, 880, 884, 887 and 888.

Many of the amendments in this group are technical drafting changes—for example, correcting cross-references in the light of the restatement exercise—but a number of them make changes to the provisions on the delivery of documents to the registrar, and I want to say a few words about them.

Clause 725 already sets out very clearly what requirements a company must meet in order to have delivered a document properly under the Bill. But the Bill as it stands is not consistent in its treatment of a failure to comply with those requirements. For example, Clause 640 relates to the requirement for a company to submit an annual return. Clause 640(6) makes it clear that, for the annual return to be treated as delivered at all, it must have been properly delivered; in other words a company must have complied with all the requirements related to proper delivery set out in Clause 725.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 862 to 898.

Moved accordingly, and, on Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 899. I shall also speak to Amendments Nos. 901 to 910, 998 to 1010, 1012 and 1013. These are essentially drafting improvements to the way in which the company communications provisions in the Bill operate. Government Amendment No. 1013 is the main one to note. It removes Schedule 7, which was inconsistent with the Financial Services Authority's draft transparency rules to implement the transparency directive. Instead, Schedule 6 will apply to all companies, subject to any additional requirements imposed on traded companies by the transparency rules. This simplifies the communications schedules.

I understand that there was no time to debate these amendments in another place. I therefore record our thanks to the Opposition for Amendments Nos. 999 and 1004 to Schedules 5 and 6, to which the Government put their name. It is clear that the requirement is for the person to post a prepaid envelope to the company. It is irrelevant whether that person or someone else pays the postage as long as it is not the company having to pay on receipt.

Moved, That the House do agree with the Commons in their Amendment No. 899.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 900 to 910.

Moved accordingly, and, on Question, Motion agreed to.