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Lords Chamber

Volume 687: debated on Tuesday 12 December 2006

House of Lords

Tuesday, 12 December 2006.

The House met at half-past two: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Salisbury.

EU: Regulation

asked Her Majesty’s Government:

Whether they accept Commissioner Verheugen’s estimate that European Union regulation is costing €600 billion per annum to European Union member states’ economies.

My Lords, this figure is one of a number of recent estimates of the total administrative costs of EU and national legislation, but it is not used by the Government. The Government estimate that the total administrative burden on business, charities and the voluntary sector in England derived from EU legislation is approximately £6.3 billion, or €9.2 billion, per annum. This estimate excludes the costs of EU administrative burdens on financial services, which are not available in this format.

My Lords, I thank the Minister for that Answer. Whatever the exactitude of the figure that has been quoted by Commissioner Verheugen, is it not curious that against the Commission’s intention to reduce the administrative burden in Europe by 25 per cent in the medium term, his concerns about competitiveness in relation to the costs of regulation have met with such hostility? Do the Government consider there to be the right balance between the views of his camp, which, bearing in mind his position, is concerned with competitiveness, and the views of those who consider rules and regulations to be a cohesive factor socially and politically in Europe?

My Lords, I think the noble Viscount will recognise that the Government have worked extremely hard to ensure that Europe takes fair and proportionate regulation seriously. Indeed, we could argue that we have been at the forefront of ensuring that that is the case; but the noble Viscount is right that the balance has to be struck. We think that the balance is about right and that there are many benefits from EU regulation. Given that our economy is one of the most competitive in the world, I think those benefits are clear to all.

My Lords, is this not the follow-up to the Cecchini report, which demonstrated the cost of Europe not having swept away 25 sets of red tape to produce a single market capable of receiving all forms of business and industry? Does my noble friend not agree that the imperative is for all 25 countries of the European Union to establish that market to find jobs and prosperity for the people who live therein?

My Lords, I think we would all recognise that the European Union has brought many benefits and ensured that we have had a successful period of economic growth and prosperity in the United Kingdom. The noble Lord is exactly right to highlight that issue; but we must ensure that we get the balance of regulation right so that those benefits can continue into the future.

My Lords, what are the Government going to do about the problem identified by the Merits Committee of this House in its excellent report on secondary legislation? Even when people agree that European legislation is daft, it is almost impossible to change the secondary legislation because it requires unanimity to put it on to the agenda and to make a change.

My Lords, I thought that the Merits Committee report was very good and that our debate was extremely valuable. That point was well made and was echoed broadly across your Lordships’ House. Clearly, it is an issue to which we will return from time to time. However, I go back to the point that regulation brings many benefits. Our economy is prospering and is very successful. It is about getting the right balance in regulation.

My Lords, I thank the Minister for confirming that Commissioner Verheugen’s figures were putative extrapolations for the long term. The figures that the noble Lord quoted presumably exclude gold-plating by national member states of the European cost figures. Does he agree that, with the 25 per cent reduction that HMG propose in our red tape and bureaucratic costs on business, that, too, reflects on European costs indirectly? How much, for example, are some of the European Union direct costs one-off reflections of the finalisation of the complex single market stages? Does he further agree that our official estimates confirm that the cost of our membership is about £50 per head whereas the benefits in investment and other things are £300?

My Lords, the noble Lord is making a case for effective regulation, with which I entirely agree. We must ensure obviously that we do not have gold-plating. The Davidson report has been widely recognised as providing us with a valuable insight into the allegation that there is excessive gold-plating within the regulatory regime in the UK. I do not think that there is evidence of that, but of course we must be very wary and watchful and ensure that when those examples come forward they are dealt with properly.

My Lords, my noble friend has referred to the economic benefits to the UK from the European single market and the benefits that we have had from the regulations inspired by the European Union. What estimates have been made by the UK Government of those economic benefits and the benefits to public safety of EU regulation? If no estimate has been made, why not?

My Lords, estimates are made of the benefit to the UK economy. It is reckoned that some 3 million UK jobs are related to EU exports and that those jobs generate around £105 billion of British exports each year. There is a clear case and clear evidence that British businesses benefit greatly from our continued involvement in the EU.

My Lords, alongside gold-plating, does the Minister accept that one problem with EU regulation is that the Commission tends to maximise its opportunity to legislate within its competences rather than adopt a light touch? Given that, will he therefore assure us that when the constitution comes back on the agenda the Government will not accept an extension of competences by QMV?

My Lords, I accept that the issue of competences is very important, which is why I spoke earlier about getting the balance right. The noble Lord quite properly raises that issue. But we have to understand that we incorporate EU legislation into our regulatory regime and we have been applauded for the way in which we interpret it. The system is working well. Of course, we can always look for improvement, which is why we aspire to and seek to achieve the 25 per cent figure for reducing the burdens of red tape.

My Lords, by way of underlining Commissioner Verheugen’s point, are Her Majesty's Government aware that the Swiss federal Government have recently estimated that if Switzerland were to join the European Union, it would cost her nine times more—some 5 billion Swiss francs per annum—than her present free trade and other bilateral arrangements with Brussels? Surely, that picture must be the same for EU members, including the United Kingdom.

My Lords, I cannot believe that if we were to withdraw from the European Union, British business would want to go back to a system whereby some 60 million Customs clearance documents were needed every year to ensure that we could export our goods and services to the EU. Does the noble Lord really want to go back to such a system?

London: Emergency Services

asked Her Majesty’s Government:

Whether all the emergency services in London now have a radio system that operates below and above ground.

My Lords, the existing infrastructure enables communication above and below ground. In the event of a future emergency, before London Underground’s Project Connect system is fully operational at the end of 2007, additional cabling will be available to carry radio waves below ground. In addition, the new digital communications system, Airwave, is currently being rolled out across all emergency services and it will be fully compatible with Project Connect by 2008.

My Lords, on the surface that Answer might seem reassuring, but is it not true that Airwave is incompatible with the London Underground system and that the new system, Project Connect, will not roll out until, at the earliest, 2007? Are there not also technical problems with the train computers on the Central, Jubilee and Northern lines and does not the back-up system have a life span of only five hours, just when a crisis would reach its peak? All in all, it is going to take at least two and a half years to have a system up and working. Do not the citizens of London and our guests from overseas deserve something better than having once again to put up with the debris of Home Office incompetence?

My Lords, let me deal with those questions in turn. At the moment, Airwave is incompatible with Project Connect. As I have said, when Project Connect is completed at the end of 2007, Airwave will be extended and it will be fully compatible. If the noble Lord were to read the evidence put forward in response to the Barnes committee last week, he would find that London Underground made some strong statements about the dramatic progress that it has made in rolling out Project Connect, line by line, which is to its great credit. In addition, we will have a system in the interim whereby mobile phones have been offered to and are being used by critical command personnel in all the key emergency services. The evidence given to the committee shows how much progress has been made by the emergency services and how much more robust is the resilience of communications than on 7/7.

My Lords, on 7 July last year the City of London Police took a decision to disable part of the O2 network without consulting the commanders of other emergency services. If, as the Minister has said, some reliance is still to be placed on mobile phone technology, what steps have been taken to ensure that the network cannot be disabled unilaterally by one emergency service?

My Lords, a restriction was placed on the system on 7/7 but it is important to understand that no lives were endangered because of the communications systems in use on that day. As Andy Trotter put it the other day, the radios worked, the systems worked, and the emergency services made a magnificent response. We are reviewing the processes to ensure that the right people have ACCOLC-equipped phones, because there were problems with SIM cards. The Cabinet Office has also set up a review of telecommunications resilience. That review is in progress and we expect it to report fairly soon.

My Lords, some years ago I was involved in the reorganisation of the ambulance service—and, of course, an emergency, whether it is a national or personal one, is very often covered by the ambulance service. At that time, there was a major problem that ambulances travelling from one area to another had to keep changing frequencies to maintain radio connection. Can the Minister assure me that there is now a single national channel into which every ambulance can be tuned? Very often ambulances are redirected from one hospital to another if capacity runs out.

My Lords, the basic problem on 7/7 was that the feeder cables, which run underground and permit communication with, for example, the British Transport Police and the City of London Police, were not available to the ambulance service. Since then, the ambulance service has equipped itself with two mobile vans that can put down its own cables in the future. More important, key personnel in the ambulance services have been issued with 200 mobile phones to overcome these communication problems. These will be fully rolled out by the beginning of 2008. They have been given priority within the system to address these particular problems.

Employment Equality (Age) Regulations 2006

asked Her Majesty’s Government:

Whether they seek to encourage loyalty and dedication in the workplace; and, if so, whether they consider that the Employment Equality (Age) Regulations 2006 promote that objective.

Yes, my Lords, we encourage good workplace relations that will build loyalty and dedication. In outlawing unjustified age discrimination in employment and vocational training, the Employment Equality (Age) Regulations will help employers to attract, motivate and retain loyal and dedicated staff and make the best use of the skills and experience available to them.

My Lords, I think I thank the Minister for that reply. Do not the regulations make it at the very least a deterrent in practice for an employer to reward long, loyal service with such benefits as sabbaticals, incremental holidays or even gold watches? Are they not a classic example of the law of unintended consequences?

No, my Lords, I do not believe that to be the case. Fundamentally, the regulations outlaw age discrimination in employment and vocational training unless objectively justified. When it comes to benefits—for example, insured benefits—the regulations are specifically framed in such a way as not to discriminate against various groups, such as women. Where there is a limit of, for example, five years’ service, beyond which it would be unfair to discriminate against certain groups such as women who may take career breaks, employers have an exemption up to that point; if they wish to retain staff by offering other benefits and can objectively justify those benefits, they can offer them.

My Lords, does the Minister accept that this House is probably the best example of why age discrimination should not apply?

Yes, my Lords, I agree with the noble Lord. The part of the regulations that specifically refers to his point says:

“Our aim over time is to move to a position where there is no compulsory retirement unless it can be objectively justified by individual employers”.

Many of us would support that principle.

My Lords, I want to reflect on the experience of many elderly people in the Chamber. When I started work in the steel industry, blue-collar workers did not have a pension scheme but white-collar workers did. When I started, people well into their 70s were working in the steel industry. As a young man, I thought it was awful. Under public ownership, we—mainly on these Benches, I suggest—achieved our goal of retirement at 65, sick pay, holiday pay and reduced hours of work. With the proposed steps, are we making progress?

My Lords, we are absolutely making progress—that is what the regulations are about. People can now work up to the age of 65, beyond which point employers will have a duty to consult them before making them redundant. People’s pensions and entitlements have also improved over the years.

My Lords, given the almost complete lack of publicity given to these regulations by the Government, is the Minister satisfied that anything like enough of our citizens in employment have any idea of their rights to ask for extended working?

My Lords, employers have been told that they must prepare for these regulations; it will be their duty to ensure that their schemes meet the requirements. It is the duty of employers, the Government and all of us to ensure that people are aware of their rights.

My Lords, clearly the wording of these matters is very important. Where justification is important, can the Minister say when something is justified and when it is not? If he cannot tell me now, will he write to me?

My Lords, it is up to the employer to objectively justify entitlements. They can outline the position of objective justification, but it is up to them to justify the benefits as being in keeping with the regulations. As long as the benefits match the statutory schemes and benefits, they are within the regulations. If the benefits go beyond the regulations, the employers might have to objectively justify those entitlements and show that they are not discriminatory.

My Lords, some of us might have difficulty understanding these complicated rules and regulations—I certainly do. Does the Minister think that the workforce will understand them?

My Lords, I would hope so. That is why we have organisations such as trade unions, which do a very good job for their members, and I hope they continue to do so.

My Lords, is it not a fact that, every time new anti-discriminatory legislation has been introduced, we have had the same queries and criticisms of its effect, which have proved unfounded? Has not justification featured in previous legislation and been clearly defined in the courts and tribunals?

Yes, my Lords. I do not wish to open any old wounds, but did we not have the same discussion about the minimum wage when it was introduced? A lot of people criticised it then. On the legal point, the European Court of Justice will be considering the whole issue. My right honourable friend the Secretary of State for Trade and Industry supports the referral to the ECJ, which is proposed by Age Concern, and that will clarify the law.

My Lords, we on these Benches support the elimination of discrimination on any grounds other than merit, but the objective justification to which the Minister has referred is extremely complicated, as he himself allowed us to understand. It is so rigorous that an unintended consequence of these regulations is that employers are experiencing dramatic increases in costs, such as insured benefits, which are likely to reduce employment opportunities after 65 as smaller employers are unable to afford the increased costs. Why did the Government not foresee and plan for this, and what will they do to resolve these problems?

My Lords, there has been an awful lot of consultation and guidance on these issues. The regulations and guidance were consulted on, and the Government have taken comments from employers’ organisations, age lobby groups, trade unions and employment lawyers. The DTI and ACAS have worked extremely closely to ensure that the guidance is useful for all. I can inform your Lordships’ House that information is available on websites such as the DTI Directgov Business Link and the Employers Forum on Age. If Members are interested, they can use the interactive tool to help individuals to understand the new retirement procedure. I commend it to the House.

Anti-social Behaviour: C&AG Report

asked Her Majesty’s Government:

Which recommendations of the report by the Comptroller and Auditor-General, Tackling Anti-Social Behaviour, published on 7 December, they intend to implement.

My Lords, it is less than one week since the National Audit Office’s report was published, and we are still studying its findings, conclusions and recommendations. There is likely to be a Public Accounts Committee hearing in the new year and then a formal response, which of course I cannot anticipate.

My Lords, I thank the Minister for her reply. I am sure that we can all agree that in certain communities a number of people suffer a wretched, miserable existence due to the activities of a few. To counteract this, in 2003 the Government brought in anti-social behaviour orders. Three years’ work has gone into that, so plenty of data are available. ASBOs have come in for condemnation from some quarters, but the National Audit Office in its report on 7 December recommends specific measures. Has the time not come for a detailed appraisal of the whole operation, which should be published? That would be preferable to racing ahead with new initiatives.

My Lords, a number of reports have been published on anti-social behaviour orders and their application, and noble Lords will have had the advantage of debating them. It is important to recognise that this new report identifies that anti-social behaviour orders have been very successful. Sixty-five per cent of people desisted from anti-social behaviour after one intervention, 86 per cent desisted after two interventions, and as many as 93 per cent desisted after the third intervention. There have been a number of reports and they are telling us that we are doing well and that, although we need to go further, this is a success.

My Lords, does my noble friend agree that anti-social behaviour orders have been the best method yet of stopping in their tracks people who have not been amenable to reason, persuasion, instruction or discipline, but that if they are not to be devalued they must be used sparingly and invariably be enforced?

My Lords, I respectfully agree with my noble friend and say further that anti-social behaviour orders are only one tool. We also have the benefit of the acceptable behaviour contracts, which, if used as part of the overall protocol, are very successful indeed in interrupting patterns of offending behaviour.

My Lords, has the Minister had the opportunity to read the report of the Runnymede Trust on racial equality and anti-social behaviour orders? One recommendation is that local authorities, to meet their obligation under the Race Relations (Amendment) Act 2000, should undertake ethnic monitoring. Why has that not been done and has the department issued any instruction on that subject?

My Lords, the issue of ethnic monitoring has been considered. The Together website talks about standing together and the action that we are going to take. The noble Lord knows that we continue to keep disproportionality under review. I shall ensure that we highlight this matter for my honourable friend the Minister responsible for that part of the portfolio.

My Lords, the Youth Justice Board recognises that anti-social behaviour orders can work extremely well, but what is the Minister’s response to the board’s urging that youth offending teams must always be involved whenever an ASBO is considered for a child or young person? How does she respond, too, to the research published in November that revealed that, in seven out of 10 areas examined, YOTs had little or no involvement in the imposition of an ASBO, and that many young people in the survey did not understand the restrictions placed on them and were therefore at risk of breach?

My Lords, the Anti-Social Behaviour Unit is now working extremely closely with the Youth Justice Board to ensure that there is clear interaction between the YOTs and the unit’s activity. That appears to be working well and there is a good working relationship.

My Lords, is the Minister aware that I spent a long evening going many miles with a friend who deals with ASBOs? I went as her chaperone, and what really shocked me was that, if I had not been there, she would have been sent out on her own—as she normally is—until late, sometimes not getting home until after midnight.

My Lords, I commend the noble Baroness and her friend for doing invaluable work. The dedication of those who undertake this work is having material success; we are changing behaviour and, as a result, giving great relief to communities. So I commend the work done by the noble Baroness and her friend—but it is right that we are taking every step to ensure that people who undertake that work do so safely.

My Lords, in view of the undoubted fact that combating anti-social behaviour is dependent in large part on a uniformed police presence on the streets, can the Minister comment on reports circulating in the broadsheet press that funding for police community support officers is likely to be cut substantially in the next 12 months?

My Lords, community support officers have done a very valuable job. We are working closely with ACPO to make sure that the right numbers are available in the right places. This is a joint action plan, which has been agreed across the board. We hope that we shall have sufficient numbers where they are needed.

My Lords, the Minister talks about the success that the Government have enjoyed, but has she not read the report’s comment that 55 per cent of ASBOs are breached and that they fail to reach 20 per cent of people, whom I have to call thugs, who are making people’s lives a misery? Will she give a commitment today at least to give better support to witnesses of anti-social behaviour, who, as the report points out, feel particularly intimidated when they have to attend breach proceedings in court? What will the Government do to address that problem?

My Lords, one should not see breach as failure. One is looking at ongoing behaviour over a long period. Breach enables us to intervene and change behaviour, and by the third intervention 93 per cent of people are back on track. We now have better support packages for victims and witness protection has been very successful. We are rightly continuing to look at those issues. I am very pleased by the success of the work that we are undertaking.


My Lords, I have two business announcements, both of which are subject to the leave of the House. First, a Statement on personal accounts will be repeated later today by my noble friend Lord Hunt of Kings Heath after the Second Reading of the Concessionary Bus Travel Bill. Secondly, immediately after the Statement, an Answer given in the other place to an urgent Question on Iraq will be repeated by my noble friend Lord Triesman.

Consolidated Fund Bill

Brought from the Commons, certified by the Speaker as a money Bill, and read a first time.

Concessionary Bus Travel Bill [HL]

My Lords, I beg to move that this Bill be now read a second time.

Buses are the most widely used mode of public transport in this country. Over two-thirds of all public transport journeys are made on them. The number of bus journeys is at a 10-year high, around 5 billion in the UK in 2005.

Our buses now boast their best ever environmental performance. They are more accessible for disabled passengers than ever before and there has been good progress on improving the quality of the buses on our roads. The average age has come down by more than 20 per cent over the past 10 years.

The flexibility of bus networks means that they can provide a genuine alternative to the car, helping to tackle congestion, improve social inclusion and contribute to meeting our goals on climate change. The Government recognise that buses are particularly important for some of the most vulnerable people in our society. They often provide a vital lifeline to services such as shops, leisure facilities and hospitals and are an important connection to the community. That is why, in 2001, the Government acted to ensure half-price bus travel in England for all older and disabled people within their local authority area, and why, earlier this year, we provided an additional £350 million per annum to make such travel completely free.

These measures have already reduced transport-related social exclusion and have helped to enhance well-being in our communities, but we want to go further. We want pensioners and disabled people to be able to go further too, not just travel within local authority areas. We recognise that the places to which people need to travel are no respecters of sometimes arbitrary local authority boundaries. The Bill means that, for the first time, around 11 million older and disabled people will be able to use off-peak local buses free of charge anywhere in England. That will give them the freedom to travel across district or county boundaries to nearby shops, to access healthcare or to visit friends and relatives. They will have free travel when visiting any part of England, from Cumbria to Kent and from Cornwall to Cambridgeshire.

Those important changes require a change in the law. We will ensure clarity and consistency in how the new national concession is implemented across England. The Bill will guarantee, in legislation, free local bus travel anywhere in England from 9.30 am to 11 pm on weekdays and all day on bank holidays and at the weekend. We will do that by amending the Transport Act 2000 and, for Greater London, by amending the Greater London Authority Act 1999. The Government will provide up to £250 million of new money each year to pay for this extended national bus concession.

A national scheme will require some changes to current arrangements. A bus driver in Devon needs to be able to easily recognise a pass issued in Durham; we need a national standard. The Bill therefore includes a power to standardise the appearance of passes. We will continue to encourage councils to take account of local circumstances. Where local authorities wish to go even further than the new national statutory entitlement, they will be able to do so. Section 93 of the Transport Act 1985 gives local authorities the discretion to provide concessions at additional times or on different modes. The Bill will not change that. It means that local authorities up and down the country can continue to offer concessions on other modes or travel token schemes. In London, the Freedom Pass system will not change. Whatever works best for local authorities and their residents will be in place.

What about scheduled coach travel? I assure the House that the Bill will not affect the existing half-fare concessionary scheme, which we introduced in May 2003. Government funding of £15 million every year means that millions of older and disabled people will go on benefiting when making longer journeys by coach. We are listening to stakeholders, and we are discussing the measures in the Bill with local authorities, bus operators and bus users. We recognise the importance of ensuring that bus operators receive fair payment for carrying concessionary passengers. In the same way as now, reimbursement will be offered on a “no better, no worse off” basis, so no operator should be disadvantaged by the new measures. An operator can appeal if he believes that reimbursement has been set at the wrong level.

We also need to ensure that councils get a fair deal. At present, the Government provide around £800 million a year to local authorities via the formula grant system. Local authorities then reimburse bus operators for carrying concessionary passengers. We are committed to working with local authorities and bus operators to ensure that the mechanisms for funding and reimbursement are fit for purpose. The concessionary fares landscape varies across England. In some areas, the travel concession authorities responsible for providing reimbursement are district councils; in other areas, it is unitary county councils or passenger transport executives. Overall, there are 291 separate travel concession authorities, and separate arrangements apply in London. This can mean that some bus operators need to negotiate with many authorities each year. It means a wide variation in schemes and reimbursement regimes across the country, and it means that even where countywide schemes are set up, there is no guarantee that they will last.

The Bill provides the power to simplify the system in the future. There is provision to transfer reimbursement and other administrative functions, such as issuing permits, from district councils to county councils, or to transfer those functions to the Secretary of State. If such steps were taken, district councils could also be asked to co-operate at the county level on the administration of discretionary Section 93 schemes.

We expect that moving reimbursement and administration to higher-tier authorities or to the Secretary of State could improve efficiency and save money. A recent National Audit Office report estimated that annual savings could be as much as £12 million, but I can assure the House that any such change would be subject to extensive consultation and there would be full and proper parliamentary scrutiny of any draft secondary legislation, which would be introduced by affirmative resolution.

My Lords, my noble friend will be aware that there is already a nationwide concessionary scheme in Scotland. I have my card here, as has my noble friend Lord Hogg. His is issued in Aberdeen and mine in Ayrshire but they look exactly the same. They allow us to travel around Scotland. This Bill introduces a similar system for England. Will the schemes be reciprocal? Will Scots pensioners be able to travel in England and English pensioners in Scotland?

My Lords, I was coming to that. Of course we intend that to be the case. My noble friend will recognise that cross-border schemes already operate; for example, people from Carlisle can cross the border into Scotland and take advantage of their pass. We intend to make the scheme nationwide; this is a Bill for England but the scheme will be consistent with Scottish and Welsh legislation, and it takes in Northern Ireland.

My Lords, I welcome what the Minister has said. We would have expected nothing less from this Minister and this Government.

My Lords, I am more than grateful to my noble friend and await the fire-bolt still to come after that helpful intervention.

The Government’s first priority is to implement a successful all-England scheme, but the Bill enables us, when we have done that, to put in place with the co-operation of the devolved Administrations a scheme whereby eligible people have the right to free bus travel anywhere in the United Kingdom.

The Government would consult fully the devolved Administrations to obtain their agreement before pursuing any UK-wide scheme. I know that there might be some anxiety in the Scottish Administration, and in Wales and Northern Ireland, about the implications of the English scheme. We have already thought carefully about the legal arrangements. The Bill enshrines in legislation the ability for Welsh, Scottish and Northern Irish passes to be recognised in England, and for English, Scottish and Northern Irish passes to be recognised in Wales. The Bill also ensures that bus operators can be fairly reimbursed for journeys by any eligible UK resident travelling anywhere in the UK.

Nothing in the Bill needs to affect existing cross-border arrangements set up by local authorities. I mentioned the Carlisle scheme that allows concessionary travel across the border into Scotland; likewise, a scheme for Shropshire enables concessionary journeys into Wales. Authorities in Scotland, Wales and Northern Ireland have the discretion to make short cross-border arrangements under existing legislation.

It makes sense to adopt a flexible concessionary fares framework. We want the Government to be able to respond to changing circumstances in the most appropriate way to maximise benefits for users. That is why the Bill includes powers to extend the times when concessionary travel is available or to provide it on alternative modes such as trams or community transport, should the resources for such national extensions become available. We have retained the power to include new categories of concessionary travellers in the future, such as students or carers for disabled people.

In conclusion, this Bill will guarantee for the first time that no older or disabled person in England is prevented from travelling by cost alone. It brings real social inclusion benefits for our communities. It is another important step forward in transport provision. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)

My Lords, we welcome the Bill, although we feel that the money has been spent in a rather careless way and that it could perhaps have been spent better. However, as regards the objects of the Bill, we agree with the Minister. The problems spring from the haste with which the arrangements were implemented after an announcement by the Chancellor before the last election, and they also spring from political ends rather than from those that meet practical objectives and efficiency in implementation. But increased bus use, which has certainly taken place within limited resources, is an aim that we all share.

Money has been—I use these words advisedly—sprayed around through the random mechanism of the rate support grant. It is, I submit, something of a blunderbuss approach to the issue, rather than one that we would ascribe to the surgeon who is trying to pinpoint the cause of the trouble. In summing up, my noble friend will highlight some of the problems that arise for local authorities, some of which have gained and some of which have lost from the way in which the money has been spent. The result is that some money—but not enough in every case—has gone to those that, with lots of bus services and lots of pensioners, are in greatest need and other money has gone to those with very few bus services and many fewer potential beneficiaries. This is what I call bad outcome No. 1—the money has been spent carelessly.

In the areas with passenger transport authorities, to which the Minister made reference, the money has gone to their constituent district councils, which may or may not pass the money on to the authority charged with the job of securing bus services. This is what I call bad outcome No. 2—the money has not flowed to the people who need it. This is an indirect route for paying subsidy: it pays little regard to actual bus use and is full of leakage.

Bad outcome No. 3 is that the maximum bureaucracy has been created with, as the Minister said, every district council negotiating separately with each of their bus operators about the reimbursement that they should receive as a result of participating in the scheme. This is at a time when local authorities, of which I am a member, are obliged to reduce staff and bureaucracy. That system is inefficient and creates bad feeling among district councils on the one hand and bus operators on the other, when those two groups should co-operate in providing the highway space and other facilities necessary to provide a good bus service.

Bad outcome No. 4 is the appeals mechanism, to which the Minister made reference. The timescale is limited to 28 days. An operator must appeal within that time, but that is before he has carried any passengers and before he knows how many passengers he will be carrying or what costs or losses he may face.

My Lords, the noble Lord’s doom-laden speech is depressing us here on the Back Benches. Does he not agree that the scheme in Scotland, which was introduced by a Liberal Democrat Transport Minister, is very similar to what is being introduced here?

My Lords, if the noble Lord will be a little patient, I shall come on to Scotland, but first I think that it is pertinent to focus on the problems that need to be addressed if we are to go forward with a new scheme.

The appeals system, to which the Minister referred, means that people have to appeal very early. The law, as it is written now, says that if after 28 days one finds something wrong, it is too late as one cannot appeal after 28 days. That means that the appeal is not evidence-based, which is a defect.

There are other bad outcomes, but there is also the overwhelming good outcome that more people are using buses. I noticed in my district council area that the number is up about 45 per cent. Many more people are using buses, despite the defects to which I have referred and despite what the noble Lord opposite said. We want an even better outcome that gives further scope to grow the market and to redirect subsidy to increase the market further.

The Treasury has long been concerned—why we should worry about the Treasury's concern I am not sure—that subsidies paid to bus users should be more accurately targeted, particularly what used to be called the fuel duty rebate and is now called the bus service operators grant, which reimburses operators for the fuel that they burn rather than the number of passengers whom they carry. The many studies into the subject have always concluded that fuel duty rebate is very easy to pay and there is no simple system to replace it. Through successive transport Acts, we have continued the process of badly aimed subsidies, to which the Minister referred, as no better toolkit was available. The opportunity to change that is now presented to us by the mechanism of the Bill. The smart card is the intelligent tool; it will gather information of journeys made.

Perhaps I may pay tribute to my friends north of the Border, who seem rather anxious that we should include them in this discussion. The Scottish citizens’ pass is a smart card that enables the number of passengers using the buses to be counted. I can assure noble Lords that it will do that in time. The passenger now gives the pass to the bus driver, but he or she will touch it on a reader and it will record the journey made.

My Lords, I assure the noble Lord that that is not the case. That is certainly the case in London, but in Scotland it is an ordinary card and the bus driver has to record the fact that someone has made that particular journey.

My Lords, the noble Lord is quite right. That is the situation at the moment. Soon there will be smart-card readers. Once the card is enabled, like the Oyster card in London, one will not have to engage the driver at all. It is not there yet but that is on the way. As well as in Scotland, smart cards are being introduced in Blackpool, in the north-west, in Lancashire, in Cumbria, in south Yorkshire and in Oxford and, of course, we have the Oyster card in London.

We should move quickly to an ITSO-compliant smart card, nationally available and compatible throughout Great Britain. There will be some risks. The Minister made great play of the fact that there will be much consultation on this, but the scheme is supposed to be introduced in April 2008, so there is limited time for consultation. Decision time, which is not well beloved of Ministers, is very close. They will have to decide whether to go forward with a smart card rather than spending lots of time consulting on it. There are risks and costs, but the rewards are substantial. First, there is much reduced scope for fraud by both the user and the operator. There is currently nothing to prevent an unscrupulous operator from pressing the button several times for non-existent passengers. Secondly, there will be a much better system of reimbursement for operators, targeted to where people actually use buses.

If we have a national scheme, the money can go to where people are using buses. For example, lots of people come to Blackpool in the summer, but the Blackpool Corporation currently gets no money from them. Bus operators in honeypot areas—be they Edinburgh, Blackpool, London or wherever—should get some reward for what they provide. We could have one set of centrally negotiated national reimbursement rates and consider a growth factor where operating costs have demonstrably increased. In some cases, there are so many extra people using the buses that more have to run. Providing more buses is expensive.

Where they exist, passenger transport authorities should be the conduit for the money. Otherwise, district councils, which are not transport authorities, should not be involved in smart cards, the cash flow or negotiations with operators. Where those district councils are highway authorities, they should concentrate on the issues of the free flow of buses in their area. Bus drivers, who have a difficult enough job anyway, should not be involved except to see that a valid smart card is presented to the card reader on the bus. That could well speed up boarding times and shorten journey times.

I understand that my proposal moves risk to government, although much of the work involved can be outsourced to some other organisation. If a local authority wishes to extend their scheme’s scope, they should be able to do so, as the Minister said. I suggest that that should be at their expense, however.

Although there are risks, their evaluation will quickly become evidence-based because there is a record of every journey. That opens the way to revising, if anybody wants to, the system of bus service operators grant. Smart cards depend on each bus having a card reader, like the buses in London. Fitting those will have a cost, but smart cards should be regarded as the golden key, bringing rationality to a sprawling and rather shambolic system of bus-user subsidy and appealing to the Secretary of State.

As the Minister said, the Bill is enabling legislation; real meat will appear in the regulations. I hope that real discussions will take place with all involved, mapping a quick way forward. I wish the Bill every success and hope that the Minister will take account of what I have said.

My Lords, I imagine most of us in this House will welcome the Bill. It implements the Government’s commitment that everyone aged 60 and over, and disabled people, should enjoy free off-peak travel on all local buses anywhere in England from April 2008, replacing the current scheme which restricts free travel to a single local authority area. It continues the process begun in 2001 with the introduction of half-price travel for disabled people, which was extended into the present scheme in 2006. From 2008, as we have heard, free travel will be extended to local, off-peak bus travel across local authority boundaries provided the bus stops at least every 15 miles. I have a friend who lives more or less at the point where Leicestershire, Nottinghamshire and Derbyshire meet. He finds it virtually impossible to go any distance before crossing a local authority boundary, so the Bill will be beneficial to him.

The Bill is a welcome enhancement of the scheme for elderly and disabled people, but more still needs to be done to ensure that it fully meets the mobility needs of disabled people. I was pleased to hear the Minister say that one of the objectives of the Bill is to combat social exclusion. Disabled people are among the most socially excluded people in the country, and I hope that it may be possible to make some further improvements to the Bill to combat the social exclusion of disabled people. That is the aspect of the Bill that I shall talk about today.

It would be good if the Minister could consider five things as the Bill goes through the House: first, free travel at peak times in the morning; secondly, free travel on other modes of transport; thirdly, free travel for a companion where the person’s impairment means that he cannot access transport on his own; fourthly, concessions to apply to community transport services such as dial-a-ride; and, fifthly, a definition of disability that makes clear that the Bill covers all disabled people whose impairments affect their ability to use public transport, including those with mental health problems.

We would all be glad to have free travel at peak times in the morning, but there are good reasons for introducing it preferentially for disabled people. First, it is often necessary for disabled people to use public transport even for short journeys rather than walk. I do it myself and did so this morning. I will take a bus just one stop, where someone else would walk, in order to give myself the choice of a greater number of buses. Secondly, for persons with restricted mobility, the pedestrian environment is often inaccessible or unsafe. Thirdly, disabled people are typically less well off. According to the report, Disability in Great Britain, the incomes of disabled adults are 20 to 30 per cent below those of non-disabled people, even when disability benefits are taken into account. Fourthly, that has a lot to do with their lack of employment opportunities.

The recent annual report of the New Policy Institute, which is funded by the Joseph Rowntree Foundation, reported that disabled people are twice as likely to be unemployed as non-disabled people and pointed to the lack of access to paid work as the main reason for poverty among disabled people. Recent research on a sample of 1,000 blind and partially sighted people showed an employment rate of only 34 per cent and research by the RNIB—in which, as its chairman, I obviously have an interest—suggests that blind and partially sighted people who are employed are more likely to be in lower paid jobs. It is sometimes thought that disabled people in employment may obtain assistance with the cost of travelling to and from work through the Access to Work scheme run by the Department for Work and Pensions, but that form of financial support is available only to disabled people who are unable to use public transport. For all these reasons, free bus travel at people’s normal travel to work time would support the Government’s welfare to work agenda for disabled people.

Restricting concessionary travel during morning peak periods has a number of untoward consequences. As the Government have improved the minimum concessionary fare scheme for older and disabled people, some local authorities have degraded schemes that offered more than the statutory minimum. For example, schemes that provided free morning peak travel for blind people but not for other disabled people or older people have come under pressure. As the proud possessor of a London Freedom Pass, which entitles me to free travel at all times, I must declare an interest here, but that also enables me to tell the House what an excellent scheme it is and to commend it to the House. When the issue arose in London, the Association of London Government, now renamed London Councils, wanted to level down so that all disabled people, the blind included, benefited from the restricted concession only. Following representations from disabled people, the scheme was levelled up and free travel was extended to all disabled people in the morning peak as well as at other times.

There have been no time restrictions on using the Freedom Pass in the morning peak in London since April 2003, and that has not caused any particular difficulties, despite the huge pressure on public transport in the morning peak in the capital. But blind people elsewhere, as in Warwickshire, have not always been so lucky.

Needless to say, organisations representing disabled people would prefer to see the London solution adopted, with schemes that previously offered free morning peak travel only to blind people being extended to disabled people generally. That is what the Scottish scheme offers, as we heard from the noble Lord, Lord Foulkes, which means that the scheme for England contained in the Bill, if it is not improved, will provide yet another unfavourable comparison with what is available in Scotland. At the very least, reciprocal arrangements with Scotland, Wales and Northern Ireland should be established. I was very pleased to hear the Minister's assurance that that will be done.

It should be clearly understood that in arguing for morning peak schemes for blind people to be retained and extended to other disabled people, my motives are entirely altruistic and not ones of self-preservation. I simply want the good fortune which I am lucky enough to enjoy extended to more of my fellow men. It might be thought that this was an oasis of privilege enjoyed by blind people that ought to go. It runs somewhat counter to the generally disadvantaged position of blind people, which I talked about in my maiden speech, but I would call it a case of compensatory advantage, rather than one of privilege.

As we have heard from the Minister, the Bill will not prevent local authorities from continuing to offer concessions which are more generous than the statutory minimum, but that approach effectively offers a postcode lottery. The Warwickshire example shows that local authorities cannot be relied on to provide or to continue to provide free morning peak travel where it has previously been available to all or some disabled people, so that needs to be part of the statutory minimum scheme.

The other points that I mentioned at the beginning of my speech can be dealt with somewhat more briefly. First, I mentioned concessions on other modes of transport. In some areas, concessionary fare passes can be used for taxis, community transport and other door-to-door transport. That is particularly important in rural areas and it would be good if the Bill could do something to make such provision more generally available.

Secondly, I mentioned travelling with a companion. Not all disabled people are able to access mainstream public transport on their own. Concessions should be available to allow a companion to travel free of charge where that is necessary to enable the disabled person to access public transport. That is already provided for under the Welsh scheme and there is no good reason why the English scheme should be inferior. It is invidious that distinctions of that sort should operate in different parts of the country. In some cases, disabled people will not be able to access mainstream public transport even with assistance, and concessionary fares should therefore also be available on community transport and similar door-to-door services.

Thirdly, there is a good case for having a definition of disability in the Bill but there are concerns about proposed new subsection (4) in Clause 1, which requires the issuing of concessionary fares to those who appear to be disabled. That leaves too much room for subjective and potentially discriminatory discretion. New subsection (6) goes on to state:

“The Secretary of State may issue guidance”,

to which local authorities “must have regard”. It would be very helpful if “may” could be changed to “shall”.

Very clear guidance was issued following the introduction of the minimum half-price concessionary fare for disabled people under the Transport Act 2000. However, in addition to that guidance, Section 151(4) of the Act specified that disabled people with a broad range of impairments were covered. Between the guidance and the primary legislation, most impairments—with the exception of those with mental health problems—were explicitly covered. It is to be hoped that, for the avoidance of doubt, a similar approach can be adopted with this legislation and a definition agreed that includes all disabled people whose impairments affect their ability to use public transport, including those with mental health problems.

In conclusion, I repeat my welcome for the Bill and say that it is very useful; it makes a clear improvement in concessionary travel arrangements for bus passengers. However, I should be grateful if the Minister would consider my various points about extending the scheme somewhat further to benefit disabled people in the interests of combating the social exclusion that they so generally experience.

My Lords, I, too, welcome the Bill and this opportunity to comment on it. I also welcome the approach to the whole issue that was outlined by the Minister when he introduced the Bill.

My interest in concessionary bus travel led me, when I was a Member of the other place, to introduce a Bill, in the autumn of 2003, that was very much along the lines of this Bill. At that time, my Bill attracted much Back-Bench support and demonstrated a strong level of dissatisfaction with the situation at that time: concessionary bus travel arrangements were very patchy across the country and could genuinely be described as involving a postcode lottery. Having introduced the Bill, I had a meeting with the Chancellor of the Exchequer, at which he undertook to look at the matter carefully. Some time afterwards, I was delighted, along with others, when he announced appropriate measures in his 2004 Budget.

What is being proposed was always an affordable and sensible measure with obvious nationwide benefits. Indeed, survey after survey of older people, particularly those on low incomes, has identified transport—its cost, affordability and availability—as an important issue for that section of the population. It had an obvious link with their quality of life.

The Minister mentioned the cost involved, which he put at something like £350 million. That compares very favourably with many other transport commitments that the Government have entered into. I remember when I introduced my Bill that the Government announced a costing of, I believe, an extra £340 million for London Transport in connection with the preparation of the bid for the Olympics—at that stage, we had not been fortunate enough to have won the bid. It struck me then that that was a very good example of how affordable this measure was; it would have such obvious nationwide benefits.

The principal step forward was taken by the Chancellor of the Exchequer in the 2004 Budget. Nonetheless, the Bill is important in several respects, not least in the key change of removing the artificial barriers that local authority boundaries impose on the beneficiaries of concessionary travel. Important, too, is the change to allow for reciprocal arrangements across the UK—the subject of the exchange between the Minister and my noble friend Lord Foulkes. I therefore very much welcome the Bill as a whole, but in speaking today I shall focus particularly on the application of the Bill’s provisions to my own part of the country, the north-east, and in particular to the Tyne and Wear metro system that serves the Tyne and Wear conurbation.

Originally, as the Minister will know, the Tyne and Wear metro system was designed as an integrated transport system in the late 1970s. Unfortunately, not long after it was set up, two separate blows affected it very badly. The first was the abolition of the metropolitan county, which was the co-ordinating authority for the metro system. The second was bus deregulation a few years later. I recall a valiant effort at the time in your Lordships’ House to exempt the Tyne and Wear system from the effects of bus deregulation, but unfortunately that effort was ultimately unsuccessful.

I do not mention bus deregulation and the Tyne and Wear system primarily from an ideological perspective, although ideological arguments raged about bus deregulation when it was brought in. The opposition to it in my area, particularly these days, has been based very much on the fact that it adversely affected what had been designed as an integrated bus and rail system. There was obvious congestion, which greatly concerned business in particular in our region because competing buses were crossing the River Tyne at the various river crossing points, greatly adding to the congestion across Tyne and Wear as a whole. This is still a problem today, although, given the approaches that the Government have been outlining recently, we can see improvements and can look forward to more improvements in the years to come.

Ironically at the time of bus deregulation, the GLC and London were exempt. I contend that the London solution would have helped Tyne and Wear all along. Interestingly, the noble Lord, Lord Low of Dalston, mentioned the comparisons between London and the rest of the country, and I very much agreed with his points about that. Indeed, absolute parity with London in financial support and the regulatory regime would still be the best way forward for my part of the country.

When the Chancellor’s measures first came into effect in the north-east, sadly the immediate impact was not as positive as many of us who had been urging the concessionary travel arrangements to be brought in had hoped. The reason, as I am sure the Minister will know, is that the measures applied to buses but not to trains in the metro system. Given that the whole system was integrated, it obviously made sense for concessionary travel to apply to all passengers on the metro system, whether travelling by bus or train, but instead a financial penalty was incurred, which made the situation very difficult. The good news about concessionary travel was more than offset by the negative news about cuts in other services—particularly the deterioration in the teen discount travel arrangements, the axing of 11 of the subsidised routes of the Tyne and Wear system, and increases in child fares—in order to finance the concessionary travel scheme. All these measures were, of course, accompanied by very unfavourable publicity.

I am glad to say that the Government did listen to representations from local Members of Parliament, local businesses and local authorities in the area, and came partly to their rescue and allowed the concessionary travel scheme to go ahead. It is certainly true that the situation in Tyne and Wear has improved. Nexus, the Tyne and Wear operator, has brought in a gold card, which costs £8 a year and entitles holders to free travel within the system. Because of government help, some services that were cut are being restored. The Government have also helped greatly through the outcome of the Eddington report and the measures that they want to bring in for better rationalisation and organisation of the transport system in such a distinct travel-to-work area as Tyne and Wear.

However, there are ongoing concerns and I echo some of the comments made by previous speakers. I would like to see the hours of concessionary travel in London available elsewhere. The noble Lord, Lord Bradshaw, referred to the rate support grant and how the measures are financed. This relates to population levels, but it does not relate to public transport usage levels in areas such as Tyne and Wear, which has a lower level of car ownership. We want to promote people using public transport rather than discouraging them from doing so, which has financial implications. The future investment plans of the Tyne and Wear system also ought to be looked at favourably by the Government in order to ensure that the future of a somewhat ageing system will be assured.

Because of the timeliness of this Bill, I urge the Government to look at the Tyne and Wear situation carefully and support it in a way that does not just bring it closer to parity with the London transport regime, but also helps to promote the original integrated transport concept in that area, which I believe is as valid today as it was when it was introduced.

In conclusion, I strongly welcome the Bill, but I would like renewed assurances from my noble friend that it will be part of a transport policy for areas like mine which will promote a well organised and resourced public transport system and will do so in a way that helps and not hinders the wider economic, environmental and social objectives which the Government have so rightly set themselves.

My Lords, this debate has been well informed, and perhaps subsequent speakers will be further informed after I have finished speaking. I am unable to display a Scottish bus pass yet, but I suspect that I will be able to declare that interest in 2009, if I am spared.

In preparing for this debate one fundamental question arose which I looked at from a Scottish angle. I wonder whether the Minister could clarify the extent of local bus services, as he started to do earlier. I hope to understand how far a local bus service might allow a card holder to travel. Am I right to presume that a free long-distance journey will have to be taken by a sequence of local services rather than by one express bus? Will English card holders be able to access local bus services anywhere in England and not just in their local areas? During the Minister’s speech I began to get the idea that that was the case. I can see that for longer journeys in England the railway will be less deserted by bus pass holders than may happen in Scotland because, I gather, long-distance bus travel in England will remain at half-price rather than be free. At least in Scotland the temptation not to go by train, even with a senior railcard, when one can have a free bus journey, will continue to be very attractive. In Scotland, a different scheme has allowed many card holders to make substantial journeys unfettered by a start time in the morning, during the week or by the type of bus service to be accessed.

It is perfectly okay for different Governments to have different schemes. I am pleased that the Government in Scotland have announced that a concessionary fare scheme for 16 to 18 year-olds will start in January 2007, giving young people one-third off single bus fares and a free young person’s railcard that will give them one-third off rail fares. Volunteers under 25 will be included in the scheme. I am pleased and gratified as someone interested in remote areas policy that all 16 to 18 year-olds living on an island will be allowed two free trips to the mainland each year. That is proof that Scottish solutions are enhanced when we have a First Minister who grew up on an island and a transport Minister who not only is a Liberal Democrat but represents an islands group. After listening to the analysis of my noble friend Lord Bradshaw regarding the 291 local authorities involved in the scheme, I conclude there must be a certain merit in terms of relative simplicity in having only 32 unitary authorities in Scotland.

My second and final point concerns the interesting provision in Clause 10 for possible reciprocal arrangements. I hope the Minister can say whether the idea is for the four schemes to be extended into each of the respective home countries and, if it is, according to which set of rules it will be done. For example, will Scottish card holders trying to access bus services in England have to accept the 09.30 am start and the use of local buses only, or could the Government in Scotland negotiate an extension of the unrestricted Scottish scheme across England, and vice versa? I hope that Clause 10 will be implemented but I recognise that there will be confusion if reciprocal schemes are different from the card holder’s home conditions.

I conclude by asking whether Scottish 16 to 18 year-olds will be included in reciprocal schemes under Clause 10 now that, from next year, they will be getting used to the idea of concessionary fares.

My Lords, like other noble Lords, I broadly welcome the Bill. By providing nationally the benefits of the travel concessions introduced in April 2006, the Bill will enable many of the vulnerable groups in society to have better mobility and encourage them to shift to a more sustainable form of public transport. The existing schemes have been very successful. In Scotland there has been a 95 per cent take up and in our area it is about 90 per cent. However, I am grateful that the Minister’s friends on the Back Benches have left because I have some concerns about the Bill which I hope we can address in a serious way. I fear that, unless we do so, we will not be able to sustain the benefits in the Bill.

I start by declaring two interests. Although I am entitled to receive a senior citizen’s card, I am one of the 5 per cent of those who have not claimed their card. As noble Lords will be aware, I am also the leader of a local authority. I have taken the opportunity to consult a number of my transport colleagues and PTEs.

Like the noble Lord, Lord Bradshaw, my first concern is about funding. The Minister confirmed in his speech that up to £250 million will be available to fund the scheme. On what basis was the calculation made? Or was it simply a matter of putting up a finger and making a good guess at what it might cost? Given the success of existing schemes and rapidly rising off-peak fares, in particular—I think that until this summer off-peak fares in my area were increasing by roughly 12 per cent annually—the cost could be significantly more.

The more critical issue is how we distribute the money around the country. As my noble friend Lady Quin said, the distribution of funding for the current scheme was particularly harsh to the Tyne and Wear area, which did not receive enough money. That reflects the vast complexity of the system of distributing money which makes England more difficult to deal with than Scotland. We still rely on the formula of my noble friend Lord Barnett, devised more than 30 years ago as a temporary, stop-gap measure, which determines the way in which money travels around the country. So some of the money in the pot for schemes in England ended up in Scotland, a little ended up in Wales and some went to the Isles of Scilly which, although in England, do not have any buses, so I am not sure why they need any money to fund travel concessions on buses. The Government need to reflect on the fact that the current funding does not reflect the high usage of buses in urban areas that my noble friend mentioned.

I am not too concerned about the problem mentioned by the noble Lord, Lord Bradshaw, about the system in metropolitan areas. PTEs are not precepting but levy authorities, so the money goes to the metropolitan and district councils which have to fund the PTE through a levy. Once the levy has been agreed, that is the sum that must be paid, so it is not such a problem.

The distribution of funding for the proposed scheme will be even more difficult than under the current scheme. Additional patronage on buses will not be evenly spread across the country. Urban centres and tourist areas will receive a greater increase in bus usage than other areas. We need to find a way of covering special events. In 2008, Liverpool will be the European Capital of Culture; that will inevitably generate exceptional visitor numbers, many of whom will qualify for the scheme. We must make sure that there is enough money to cover that. We have to find a more sophisticated way of distributing the money around the country than the current formula allows.

My second concern is about bus operators. Our experience is not as sanguine as some. As my noble friend mentioned, it is partly down to deregulation. It is the 20th anniversary of deregulation—an example of 20 years of failure. In our areas, bus fares have gone up considerably more than the rate of inflation and bus patronage has not increased, it has gone down. In London, the exact opposite is true because they retain the right of regulation. In Wales there is a perverse incentive for bus operators to raise off-peak fares so that they can claim more money in the reimbursement. We face the constant problem that where bus operators regard a bus route as non-commercial, they may withdraw the service or try and persuade the PTA or other authority to fund it. Ultimately, pensioners may have free fares but much less frequent bus services.

On reimbursement, we must make sure that bus operators are no worse off under the scheme than they would otherwise have been. Under the current scheme, 44 appeals against the form of reimbursement have taken place in five or six PTEs. Depending on the results, significant amounts of public money could be at risk in those areas. We need to develop a workable model for reimbursement which will work across the country.

I was somewhat surprised to see Clause 9, given that the local government White Paper is in favour of devolution. The clause will enable the Government to take over and run a system which is currently run pretty effectively by local authorities. I wonder how many people other than civil servants believe that a system of travel concessions that people have to access locally can be run better by the Department for Transport in Whitehall than it can locally. I just do not believe it, and it is against the principle the Government are announcing in other measures.

I support all that was said by the noble Lord, Lord Bradshaw, about the need for smart cards, which are the way forward. This is where the Government should play a role. They should make sure that all the bus operators and transport authorities get together to produce a smart card that works everywhere and has the most up-to-date technology. We need to do it quickly, though, because if we leave it too late we will not be able to do it in time for the Bill.

I was pleased that when my noble friend introduced the Bill he announced that there were ongoing discussions with all sides to ensure the improvements in the Bill could be achieved. I welcome that, but again there are constraints, partly because of the Bill, but also because we are into the planning stage for April 2008, and unless we know exactly what the system is, it will not be implemented. It is a good scheme; let us hope we can work to improve it and ensure that it will be possible to give pensioners the benefits we all want to see.

My Lords, I join in the general welcome offered to the Bill. I assure the Minister and the rest of the House that comments from me and my noble friend Lord Bradshaw are very much in the spirit of wanting to see a Bill that is fit for purpose and that will achieve the objectives we all seek.

The first legislation I dealt with when I came to the House in 2000 was the Transport Act, to which I tabled amendments to bring in a national concessionary fares scheme. I need not explain all the reasons why I thought that would be desirable because the Minister has just outlined them very well. There is only small satisfaction in saying “I told you so”. I really would have preferred that these provisions had been brought in originally; then we would not be changing the legislation now. I mention that mainly to express my preference that some of the concerns raised during the passage of this Bill be taken on board, so that we do not end up coming back in a few years’ time to put right things that are already identified as problematic.

I am a member of the Commission for Integrated Transport. Around two years ago, under the chairmanship of Professor David Begg, we had a look at concessionary fares. While supporting a national scheme, the commission did not come out in favour of free fares for the elderly. We were heavily lobbied by pensioners, especially by Professor Begg’s mother, who gave him a fairly severe handbagging for not supporting free transport. However, we were making the point that if the pot of money available was limited, perhaps some of it would be better spent on extending the groups to whom half fares would be available; for example, carers for disabled people and, particularly, children in full-time education. The Government did not support the commission’s view and have gone forward with free travel, but I welcome the fact that it may be possible to extend the provisions of the scheme to those other groups, because that is important.

The changes to the concessionary fares regime in recent years have led to a number of problems which have not yet been fully worked through and addressed, and which need to be considered carefully before we progress any further with the current proposals. The main issue for local authorities is that, while it is always possible for central Government to argue that they have funded a scheme totally, often the outcome has not been positive for individual authorities. That is always the result where funding has been based on variable inputs, such as population, demographics or economic indicators, rather than the outputs, as in this case; that is to say, how many trips are actually made. My noble friend Lord Bradshaw highlighted the need to think about a scheme that measures outputs rather than the rate support grant formula.

We heard from the noble Baroness, Lady Quin, and the noble Lord, Lord Smith of Leigh, about the problems faced by PTAs, particularly in Tyne and Wear, where Nexus has been forced to cut some services, to abolish the teen fare scheme and raise the child concessionary fare. That is an example of the law of unintended consequences. I am sure that the Government did not intend the outcome of, in some areas, children from poor families subsidising pensioners who are better off than they are.

The shortfall in Bath and north-east Somerset this year is estimated to be around £680,000 because the grant distribution scheme has not recognised the level of bus use in Bath, which is much higher than the national average. In this case, Bath is actually being penalised for having had bus-friendly policies. The same issue was raised by Devon County Council, which has seen an increase from 4.6 million to 9 million concessionary passenger journeys, costing an extra £2 million a year.

Some issues need to be taken into account as we move forward. First, higher costs have accrued because more people are demanding passes. I gather that take-up in Scotland is now 95 per cent—it appears to be 100 per cent among noble Lords from Scotland in this House. In Exeter, for example, 78 per cent of eligible residents now have passes. That is highly desirable, but it shows why we need realistic estimates of take-up. There has been a hugely increased demand for services, much higher in Scotland and Wales than predicted, and, as I mentioned, equally so in English authorities.

There is no doubt that bus fares are rising above the RPI. That is partly because of high industry costs, which my noble friend Lord Bradshaw has raised in your Lordships’ House on a number of occasions. However, there is another concern. As the number of fare-paying passengers decreases compared with the number paying concessionary fares, there is a potential disincentive for operators to keep fares down. Normal market mechanisms are being distorted. As fares increase, the public purse bears the burden for concessionary fares and fare-paying passengers bear the burden for others. The operators themselves have expressed concern about that. In this week’s Transit magazine, a respected bus operator asked,

“what other business has had the all-important economic lever of its pricing policy so undermined?”.

There is evidence of an increasing number of appeals by operators against the reimbursement levels. As the noble Lord, Lord Smith of Leigh, mentioned, many of those are still outstanding, which adds to the uncertainty about future costs. My noble friend Lord Bradshaw is absolutely right in saying that we need to consider whether a less bureaucratic scheme could be introduced.

These are major issues for local authorities, which face severe financial pressures, especially in social care budgets. If they are to face shortfalls in public transport provision, they will have to cut other budgets or, as is more likely, cut the public transport budget or increase the council tax. Given that it is envisaged that this scheme will be up and running by April 2008, this is a fairly ambitious timetable, and there is very little detail available about the administrative structures that will be used. There are previous examples of when government have faced problems due to rushed legislation and regulation.

Set-up costs have been estimated at anything between £35 million and £75 million, depending on how the scheme is set up. How will those costs be met, and by whom? Will the passes be able to be procured nationally, which would save costs and ensure consistency and interoperability, so that they can be recognised right across the country? I add my support to my noble friend Lord Bradshaw and the noble Lord, Lord Smith of Leigh, in saying that, as the passes are developed, they must be capable of moving on to smart card technology.

I am very interested to hear what the Minister has to say about cross-border operations. The matter of travel between England, Scotland and Wales is very significant along border areas. I am interested in what exactly he means by saying that the Government will judge whether the English scheme is successful before extending it. What sort of criteria does he have in mind when judging success? Will his department bear in mind that, if making these passes useful across borders is the ultimate outcome, the scheme needs to be set up to ensure that that can happen from the outset?

The noble Lord must accept that hackles have been raised and suspicions aroused by the clause, which includes the possibility of changing the level at which these decisions are made, particularly at a time when local government structures are being so carefully looked at. It seems extraordinary to make the argument for cost saving by making a national scheme and then not include such provision in the Bill. If that had been done, we could argue either for or against it and we would know where we were. It seems rather odd that the noble Lord made the case for the measure in his opening speech, did not include it in the Bill but kept the relevant power.

Like other noble Lords, including the noble Lord, Lord Low, I welcome the possibility for widening the scope of the scheme, for example to include community transport schemes. In rural areas such as the one where I live such schemes are far more important than bus services. Community transport schemes are the only way forward in deeply rural areas, where there are very few bus services. In areas where there is a light-rail system or schemes such as the Croydon Tramlink, it is vital for integration that the concessionary scheme should include both of those.

I look forward to Committee, when many of these issues will no doubt be aired further.

My Lords, I am pleased to have the opportunity to speak on this small yet significant Bill and I am happy to say that we support its aims and objectives. However, we have a number of reservations, not least regarding its funding and implementation, as several noble Lords have said. Therefore, many of my comments will echo those made by others. Like them, I have a number of questions relating to how the Bill will operate in practice. However, I hope and trust that these concerns can be swiftly sorted out so that we can all support the Bill as it makes its way through the House.

As the Bill is to be effectively run and administered by local government—I, too, have strong reservations about the Secretary of State running it—I declare an interest as leader of Essex County Council. We all recognise that the ability to travel is particularly important for pensioners and disabled people as it gives them the opportunity to engage with local communities, combating isolation and helping them to lead full, independent lives. We applaud the efforts that the Government have taken over recent years in this regard. I do not often applaud the Government but I do on this occasion.

As the Minister mentioned, the Bill enhances the statutory minimum travel concession of free off-peak travel for pensioners and disabled people on local buses anywhere in England. Local authorities wish to work with the Government to ensure the successful delivery of this scheme by 2008. However, to do so requires sound legislative, funding, reimbursement and administrative arrangements, some of which are not yet clear, as others have said.

This is a challenging project to deliver within the time scale set by the Government, as several noble Lords have said. Experience in Essex, where some time ago a countywide scheme similar to the one before us today was introduced, suggests that funding by the Government was insufficient for some district councils. In the end the county had to help out. This in turn put at risk sensible arrangements for those who should enjoy the benefits of the scheme. Other district councils had to provide extra resources from their own finances. Finance is a big issue, as the noble Lord, Lord Smith of Leigh, pointed out.

While local authorities have an important role to play, this is a national scheme therefore local authorities must be given sufficient funding to make it work. The mechanism by which this will happen has not yet been determined. Several versions have been mentioned today. I share doubts about administering the scheme through revenue support. Most counties in England are at floor level, as are many London boroughs. As to putting money into the revenue support grant, we do not get it. How will we put extra money in to fund such a scheme? The funding of the schemes needs to be carefully thought through.

Changing the tier at which the scheme operates will have significant effects on how the funding will be sorted out. Whatever arrangement is settled on, the key principle must be—and we must watch this as the legislation goes through—that local councils will be fully funded for the new scheme and will suffer no financial risk. Indeed, authorities already have full flexibility to determine whether a scheme operates at district or county level, so I cannot understand the Minister’s proposal on that; it could be left as it is.

I repeat that I would not want to see the Secretary of State having the power, even if it was a reserve one, to run a national scheme. I agree with the noble Lord, Lord Smith of Leigh, that we have just had a White Paper on devolution, and suggesting a national bus scheme seems to be going about it in totally the wrong way.

Bus operators must also be adequately reimbursed to ensure that the commercial network remains at its present level and does not put additional burdens on local authorities again. Therefore, perhaps the Minister could clarify today—and if not today, in Committee—how the funding might become available and on what basis. It would be useful if the Minister commented on that today; otherwise, we will have to pursue it in considerable depth in Committee.

Local authorities and several noble Lords today have expressed concerns about whether the scheme can be up and running by the date intended by the Government. In particular, there seems to be doubt about whether the new passes required for the national concession could be in place by 2008. Perhaps the Minister could update us on how the re-stickering of existing passes, together with the implementation of a cost-effective procurement system, could be completed by that time.

I wish to probe the Minister on other issues that the Bill flags up, some of which have been raised by noble Lords today. What consideration have the Government given to extending the scheme to other transport modes? In some areas, concessionary fare passes can be used in taxis, community transport and other door-to-door transport modes. In Scotland, as we have heard, many ferry journeys are covered by the concessionary fares scheme. In urban areas, concessions are often also available on local rail and light-rail services. That is important where train and tram services are used as an alternative to the bus for local journeys. It would seem sensible to at least look at the possibility of extending the concession to other types of transport. I remind the Minister that, while we have heard quite a lot about urban areas today, in some rural areas there is not even a bus service to talk about. We would like to see what will come out of this for rural areas.

Does the Minister agree that the restriction of concessionary travel during morning peak periods could have a detrimental effect on disabled people travelling to work or looking for work? Here, I support much of what the noble Lord, Lord Low, said. Employment for blind people is often in lower-paid jobs, as he said; therefore, having a concessionary scheme during peak times would be very important to them. In addition to the effect on employment, restricting concessions to off-peak times affects disabled people travelling to an early medical appointment, appointments for benefits and other interviews, or education and leisure activities with an early start time. I hope the Government might reconsider that for disabled people, particularly the blind, as the noble Lord, Lord Low, stated. Why did the Government choose to operate the scheme on a basis excluding peak hours? Can the Minister tell us how much more the scheme would cost to operate if it were extended to cover that period?

There also appears to be some concern, especially among groups campaigning on behalf of the disabled, regarding the definition of the term “disabled” as used in the Bill. Again, I support the noble Lord, Lord Low. Therefore, for the avoidance of doubt, would it not be better if an agreed definition were specified in the Bill and in guidance which includes all disabled people whose impairments affect their ability to use public transport, including those with mental health issues? I would welcome any clarity that the Minister could provide today.

Putting Passengers First was published today by the Secretary of State. I have just seen it but I do not think that anyone has had a chance to scrutinise it. Perhaps the Minister could say whether that document has any effect on the Bill.

In conclusion, I repeat that we on these Benches are happy to support the principle of this Bill, which brings greater freedom and independence to some of the most vulnerable in society. However, while we understand the significant legal, financial and administrative arrangements that have to be made, we remain concerned at the lack of a clear project plan for the delivery of the Bill’s objectives and, more importantly, the lack of a clear assurance on funding issues. As ever, we will try to clarify and seek answers to our questions in Committee.

My Lords, I am grateful to all noble Lords who have spoken. Given the impressive array of local government expertise present among them, I am not surprised to have been challenged about how local authorities deal with a scheme intended to bring benefits nationwide in England.

I recognise the crucial role that local authorities will play in arranging such services. The only point that I wish to make at this stage is obvious. The noble Lord, Lord Bradshaw, emphasised local authorities’ crucial role, as did the noble Lord, Lord Hanningfield. Both were supported by other noble Lords, who, for the best of reasons, emphasised the advantages of the earliest possible introduction of a smart card that would operate throughout England, and expressed the hope that it would soon cover the whole of the United Kingdom. There is an element of contradiction in emphasising the local dimension as well as the need for solutions that can be thought of only in national terms.

There are bound to be pleas for greater clarification of some aspects of the scheme, but we are taking part in negotiations on it and there is much work to do before we can envisage introducing the wholly desirable concept of a universal smart card. While I do not concede that the Government are less enthusiastic than noble Lords opposite about the advantages of such a scheme, the practicalities of implementing it are substantial.

This Bill seeks to put myriad local arrangements into a national scheme for England. Several contributions, including that of the noble Earl, Lord Mar and Kellie, emphasised how comparatively advanced Scotland is on a national scheme. I am not sure that I entirely accept his contention that that has been due to the minority contribution of the Liberal Party in Scotland, but he is bound to make that point. There have been rather more Labour Ministers concerned with the development of that policy in Scotland, but I hear what the noble Earl said.

It is bound to take us time to get the scheme up and running. We aim to have the scheme for England in place in 2008, but the full reciprocal arrangements for Wales, Scotland and Northern Ireland are bound to take time. When I responded to my noble friend Lord Foulkes, who, regrettably, is not able to be present at this stage in our deliberations, I sought to clarify that I shared his obvious enthusiasm for reciprocal arrangements. We are already engaged in the discussions, but I hope that the House will recognise that it will take time to put the English scheme and the reciprocal arrangements in place right across the United Kingdom.

The same applies to the minor points with which the noble Lord, Lord Hanningfield, opened his speech. He said that he was only really concerned about funding and implementation. Well, surprise, surprise: it would be amazing if the noble Lord were not interested in those things; so are the Government. Funding and implementation lie at the heart of effective policy, but I hope he will understand that we are creating the legislative framework within which the funding and implementation issues can be worked out. I accept that we shall be able to discuss some of these issues in more detail in Committee, but the Bill is about identifying the necessary powers and strategy to put in place an England-wide scheme in 2008.

By the same token, I am not at all surprised that the noble Lord, Lord Low, with his enthusiastic and effective advocacy for the case of the disabled, argues about categories and asks why the scheme should not operate before 9.30 in the morning and at rush hours. We all know the basic answer to that. I accept what the noble Lord said about the advantages of no such restriction operating on the use of transport by our fellow disabled citizens at those times, but there are very acute pinch-points in transport usage at peak hours in many parts of the country. My noble friend Lady Quin identified that we have to tread very carefully when it comes to increasing pressure on services, which at present are often stretched. I recognise the validity of her point that Tyne and Wear, as a transport authority, was presented with acute difficulties. That was a source of great dismay to her, given that she was so far forward with her concept of how this legislation might work, as envisaged in her own Bill a few years ago. I understand her keen interest. She will know that we have taken some steps to remedy the position in Tyne and Wear, and we have learnt from that the necessity of meeting the objectives of all noble Lords. When we implement this legislation, it has to work effectively and fairly, but there are acute difficulties.

We have to be careful about trying to have the issue both ways. On the one hand, several noble Lords contended that they were mightily suspicious of any suggestion that power should move upwards from the local level and that the scheme should depend on anything beyond the local authority for implementation. At the same time, it was emphasised first that it was necessary to bring in the scheme as rapidly as possible to make it fully contingent with the Scottish, Welsh and Northern Irish schemes so that we have a universal position, and, secondly, that the permit to travel, which would guarantee the scheme’s smooth-working, should receive appropriate recognition. None of that is easily resolvable with local idiosyncrasies. It will be necessary for us to have effective discussions with local authorities to iron out these issues for implementation in 2008. This scheme cannot work without a universally recognised valid permit across England. The issue of smart cards is a little more sophisticated than that and will take longer. I accept that a valid travel permit will need to be recognised across all areas of England.

I was also pressed on where buses end and coaches start—or perhaps it is the other way around—as the half-fare subsidy will continue for coaches. Nothing in the Bill changes that. On that point, the definition of a local bus service is one where bus stops are within 15 miles of each other. We will operate the system on that criterion.

I reassure the noble Lord, Lord Low, that the definition of “disabled” in the Bill will not change. In this legislation we will use the same definition that governs entitlement.

My Lords, there are great difficulties with the funding of the present scheme. The noble Lord, Lord Hanningfield, referred to the flaws in the scheme operated by many local authorities. I do not think that local authorities want to keep the issuing of bus passes, and they certainly do not want to be seen to be obstructing the introduction of smart cards. As I said, that will give us the basic information that we need to ensure the efficient distribution of money to operators. We need to get on with this. I assure the House, and I hope the noble Lord, Lord Hanningfield, will concur, that we shall make every effort to ensure that the necessary discussions take place as quickly as possible. The prize at the end is very substantial.

My Lords, I am grateful to the noble Lord, Lord Bradshaw, and glad that the noble Lord, Lord Hanningfield, indicates his assent to that broad proposal. That is exactly the Government’s perspective. I recognise that implementation of this legislation involves extensive consultation with significant interests in this matter, and local authorities play their part. As I indicated, I am not at all surprised that noble Lords have emphasised the necessity for effective consultation and the crucial role that local authorities play. I am grateful to the noble Lord, Lord Bradshaw, for his commitment. Certain aspects of the problems of a national scheme will require us to negotiate on such a basis and to achieve national solutions. I reassure the House on that as I did on concessions. Every concession involves additional cost.

The Chancellor made it clear that he was making certain sums of money available for this scheme on the basis of making free that which obtains as a concession at present on those criteria. We do not propose to change the criteria. I hear what the noble Lord, Lord Low, and others say—I have no doubt that they will press these points in Committee—about where extensions might be desirable, but in the legislation we are rendering free that which, at present, is of only limited value to the elderly and the disabled. We will therefore inevitably be extremely wary of significant extensions to free travel. The noble Earl, Lord Mar and Kellie, might identify certain extensions in Scotland of our present broad position in England. That is also true of some local authorities, which have extended support in England.

In the Bill we are concerned to extend the general present situation in England on a free basis. I look forward to vigorous debate in Committee, and recognise the sincerity with which views are held on these matters. There is bound to be concern about funding and implementation, as the noble Lord, Lord Hanningfield, said. He will also recognise, however, that legislation is about the framework within which we intend to act. Some of the issues he and others have identified are properly the basis of negotiations between the Government and the appropriate authorities, to arrive at the most effective forms of implementation.

We have had an extremely interesting debate. I am delighted that there is recognition on all sides of the House of the importance and value of concessionary travel. The free use and availability of public transport are of immense importance to many in our community, particularly the elderly and disabled, who otherwise have limited opportunities to lead a full life. We are introducing that free use across England and recognising that this has already been achieved in Scotland in Wales—in less difficult circumstances, but it is an important illustration nevertheless. It is a significant cost: £250 million to enable older and disabled people to take advantage of the national bus travel concession. All sorts of points will be made in Committee, but the Bill is good news and I accordingly commend it to the House.

On Question, Bill read a second time, and committed to a Grand Committee.

Pensions: Personal Accounts

My Lords, with the leave of the House, I shall repeat a Statement made by my right honourable friend the Secretary of State for Work and Pensions in another place. The Statement is as follows:

“With permission, Mr Speaker, I should like to make a Statement on the Government’s proposals to make it easier for more people to save for their retirement.

“Despite the welcome fact that people are living longer, millions of employees are either not saving at all or not saving enough for their retirement. As the Pensions Commission noted in its second report, we must take steps now to tackle this problem of under-saving or face serious problems in the future.

“We have already acted to make sure that the state pension provides a solid platform on which people can save. The Pensions Bill published last month will create a simpler and more generous state pension. The restoration of the link to earnings will result in a basic state pension that, by 2050, will be worth twice as much in real terms as it is today.

“More generous qualifying conditions will, for the first time, properly treat social contributions on an equal footing with cash contributions—delivering fairer outcomes, especially for women and carers.

“These and other changes will reduce the extent of means-testing in the future, making sure pension credit continues to be targeted at the people who would otherwise have been poor in retirement or who only have small savings. But we must build on this foundation by giving more people greater incentives and opportunities to save for their retirement.

“Overall participation in occupational schemes has been falling since the late 1960s, and disproportionately high charges are making the personal pensions market uneconomical for those on moderate to low incomes, who often stop contributing to private schemes after a short period of time. We will therefore be bringing forward legislation to create new low-cost personal accounts as the catalyst for a new savings culture in our country.

“This White Paper sets out proposals to give every employee in Britain earning more than £5,000 the statutory right to receive a contribution from their employer towards an occupational pension. Provided that they take responsibility by contributing to their pension from their own wages, employees will be entitled to an employer contribution of 3 per cent of their salary in a band between approximately £5,000 and £33,500. We will fix the level of employer contributions in primary legislation.

“From 2012, employers will automatically enrol their employees into personal accounts or into their own existing occupational pension scheme, as long at it meets the specified minimum standards. This simple but radical step will affect around 10 million employees in Britain and will be vital in overcoming the barriers that prevent many people making the decision to save. There will be a compliance regime to protect the right of employees to be automatically enrolled and receive an employer contribution. We will consult on the detail of this approach, but expect it to build on the light touch model for the national minimum wage.

“We intend to establish personal accounts along the lines proposed by the Pensions Commission. The Pensions Bill provides for the creation of a Personal Accounts Delivery Authority, an independent body with financial sector expertise that will in the first instance advise the Government on the design of the operational structure of the accounts and prepare to get the necessary contractual arrangements with the private sector in place. It will then be responsible for commissioning the infrastructure to deliver the scheme from the private sector. The authority will eventually be replaced by a new personal accounts board, which will be responsible for the live running of the accounts. Its decisions will be independent of the Government.

“Evidence suggests that moderate-to-low earners prefer not to make a choice of pension scheme administrator. Our approach will offer greater simplicity for savers and maximise participation levels. There will be a choice of funds for those who want it, which we expect to include the options of social, environmental and ethical investments and branded products. For those who do not want a choice, there will be a default fund.

“Low charges are critical to ensuring that people build up the maximum pension fund from their savings. The Government estimate that the long-term costs for personal accounts will be in line with those set out by the Pensions Commission of around 0.3 per cent of funds under management or even lower. Together with reduced marketing costs, this approach is expected to be 20 to 25 per cent cheaper than a system based on direct competition between firms for individuals.

“These reforms are designed to fill a gap in the existing market. We want them to complement the existing market, not compete with it, so alongside the creation of the new personal accounts we will take action to support existing pension provision. There will be no transfers into or out of personal accounts from or to existing pension schemes, and an annual limit will restrict the level of contributions that individuals can put into their accounts. This will be £10,000 in the first year to allow individuals currently without access to a good-quality occupational pension to save in other non-pension products before 2012 and then move to personal accounts. We propose a limit of £5,000 for subsequent years, but will consult on this.

“There will be a simple and self-certifying exemption test for employers who operate schemes of broadly equal value to personal accounts. In addition, we are consulting on whether companies that offer higher-value schemes should be allowed to have a reasonable waiting period before employees join the schemes. We are also interested to learn more about the NAPF’s proposal of a good pensions scheme quality mark to help employees to identify companies that offer such pensions.

“The Government are committed to minimising the burden of personal accounts on employers. Mandatory employer contributions will be phased in over at least three years. The reforms have to be simple to run for a small employer. The central clearing house will mean that employers need have only one point of contact for transferring contributions. The Government will make minimising the administrative burden on employers a key task for the delivery authority and subsequent personal accounts board.

“The vast majority of people can expect to benefit in retirement from saving in personal accounts or an equivalent scheme. Of course, all forms of saving have some uncertainty, but thanks to our reforms those who work or care throughout their working lives can expect to be better off from having saved. Indeed, now someone need only work or care for 24 years to avoid pound-for-pound withdrawal. Under existing rules, even the tiny minority of pensioners who receive the guarantee credit only could still see a return from their saving by taking a lump sum.

“Simple, low-cost, flexible and portable as people move jobs, personal accounts may generate an additional £4 billion to £5 billion of net new saving each year, equivalent to about half a per cent of GDP. They will help millions of people to take greater responsibility for building their retirement savings and embed a new pensions savings culture at the heart of a comprehensive and balanced pensions settlement.

“These reforms set a sustainable and sensible course. They are in the long-term interests not only of this generation, but of generations to come, and I commend the White Paper to the House”.

My Lords, that concludes the Statement.

My Lords, the House will be grateful to the Minister for repeating the Statement, the first of three this week, this time on pensions—not three from the noble Lord, I hasten to add, but I gather that we will get another one very shortly. Now we know—or do we?—what the body to be set up under the Pensions Bill is expected to be preparing for: setting up a fallback pension scheme to be, as I understand it, ultimately provided by the private sector.

However, before I get on to that, we should put the Statement into context. When the Government took over the country in 1997, we had a pensions regime that was the envy of the world. What did they do? They started by removing advance corporation tax. By so doing, they produced a double whammy for pension schemes. The net effect was to remove £5 billion each and every year from the purchasing power of pension schemes—which, as much of the schemes' investment is directly in the Stock Exchange, damaged that, too. The Minister must be as bored as I am with responding to me on this, but I will be going on and on—and, if necessary, on—until I get convincing answers.

The Minister said two things to me on Thursday last when we were discussing the freeing up of the financial assistance scheme. First, he said that the Government do not recognise the £5 billion figure. In that case, I put it to him directly: what figure does he recognise? What has been the effect on the Treasury's books of removing advance corporation tax? He also said that,

“the fall in the stock market during that period”—

I assume that he meant 1997 to 2004—

“was greater than these figures—even if we accept the £5 billion, which I do not”.—[Official Report, 7/12/06; col. 1331.]

I challenge him again: will he now admit that the FTSE fell further than it would otherwise have done?

Whatever the answer to those questions, I wonder whether even now we know what there is to be in next year’s Pensions Bill. Noble Lords will know that, in the Budget in April, the Chancellor removed the necessity for people to take an annuity from their SIPPs at age 75 and allowed a drawdown of capital sums at various points. Lo and behold, in last week's Pre-Budget Report, he signalled the removal of that beneficial act. He is to make pensioners either take an annuity, and thereby pass their pension pot on to the insurance company that arranges that annuity, or leave it to the state via a staggering tax of 80 per cent. That does not smack of consistency, so how do we know what changes there will be between today's announcement and the Bill next year?

What the Government are now doing is seeking yet again to persuade the 50-odd per cent of people who do not invest for their retirement to take a pension. They tried to do that in 2001, when they introduced stakeholder pensions, a scheme not marked by conspicuous success. I am told that only 10,000 people took them up. As a result of today’s announcement, the Government are expecting between 7.5 million and 10 million people to be attracted to the national pension scheme—quite a different order of magnitude, and I wish them well.

In this Statement, there genuinely is much to agree with. However, I would not be doing my job unless I did a certain amount of cross-questioning. The national state pension scheme—or personal accounts, as the White Paper calls them—will apply to everyone in employment who earns over £5,000 a year. People will be automatically enrolled into the scheme if they are over 22 and below state pension age. There is some confusion here; I wonder whether they actually will be. The executive summary says that they will be eligible for automatic enrolment—hence my confusion. Will they be able to opt out, as the commission of the noble Lord, Lord Turner, recommended? Why have the Government chosen a £5,000 cap, rather than the £3,000 that the Turner report recommended? Even with a £5,000 cap, the Pensions Policy Institute calculates that under this reform up to 50 per cent will remain on means-testing. Is this really what the Government want to happen?

Most important, many employers have pension schemes into which both they and some of their employees contribute much more than the 4 per cent and 3 per cent respectively that the Government are proposing. What is going to prevent employers from closing their existing schemes and opting for these new personal accounts, which would be so much cheaper for them? They are already closing final salary schemes in favour of defined contribution schemes at a rate of knots—a reduction of 30 per cent in 2005 alone, I am told.

These proposals are likely to do damage to the pensions that already exist. The Government propose to increase the cap to £5,000. Will this not dramatically increase the scope of personal accounts? How many people put more than £5,000 into a pension? This is money that would previously have gone into the private and existing pension sector. Both these features would almost amount to nationalising occupational pensions. This cannot be what the Government either intend or want—at least, I hope not.

That said, there is much to be said for what the Government are trying to achieve, which will, I am sure, provide many more employees with some savings for their retirement. However, people will want to know what to expect. Will the Government publish projections, as the private sector does, at varying levels of age, contributions, percentage growth, dates and so on? What is someone aged 23 on £12,000 a year to expect when they come to retire aged 68—that is, in 45 years’ time—after 2012 when this new scheme comes into operation?

There is a glimmer of hope on page 33 of the report. I see in the second chart that someone investing £1 of their income would expect to receive—via, I assume, an annuity, although I shall double-check this with the Minister in a minute—£255 when he comes to retire. For someone on median earnings of £22,000 a year, that is a contribution of £920. If you multiply that by 2.55, you get the marvellous sum of £2,346 extra income in retirement. I cannot say that that is Earth shattering, and I am sure that noble Lords cannot, either.

I welcome the Statement, but these and many other questions still have to be answered before there is any hope of reaching the consensus that both we and the Government are seeking on pensions.

My Lords, I declare my interest as a pension fund investment manager for the past 30 years. I thank the Minister for an advance copy of the Statement and the White Paper, including the executive summary. I wonder what a “non-executive summary” is; perhaps we could just have summaries in future.

Let us start with the consensus, so far as it goes. We support the principle of personal accounts; it would be churlish of us not to, as we floated the original idea three years ago. The Liberal Democrats called them “National Savings pensions” because we thought then, and still do, that the tried and trusted National Savings brand was probably the right way to do it. However, we are happy to support the principle as it is set out today. We particularly support the Government’s line on low charges and the importance of keeping to a 0.3 per cent charge. I take my hat off to them. There has been sustained pressure from the industry for higher charges, and they are right, as was the noble Lord, Lord Turner, to point out the significance of keeping charges as low as possible for long-term pension returns.

We are happy to support, and to work together to design and build, the best vehicle for the national pension savings scheme that we can. That, however, is about as far as consensus goes. The problem is that a car is being designed that not only has no petrol in the engine but that has no engine at all. It is simply not possible to try to design a national pension savings scheme of this type and to get it going while the Government are still totally failing to face up to the challenge of a much higher basic state pension. The Government’s Pensions Bill simply proposes no foundation on which this can be built. The Liberal Democrats are telling the Government that they risk a massive pensions mis-selling scandal in years to come unless they face up to the need for a much better basic state pension that stops the system being riddled with means-testing right up to 2040 or 2050.

The other critical aspect is that there must also be a massive expansion of integrated one-stop debt and pension advice centres. The problem with much of the White Paper’s analysis, and with many of the assertions that the vast majority of people are better off under the Government’s plans if they save—something that is not founded on fact—is that it completely ignores the relationship with debt. Forty-three per cent of people in this country do not pay off the debt balance on their credit card each month. That means that they are paying an interest rate on their debts that is well into the teens. How can it be right for many of them to be automatically enrolled into a pension savings scheme with returns of 6 or 8 per cent when they are paying very large amounts of debt at the same time? Not a single independent commentator or expert agrees with the Government’s assertions.

I had a meeting last week with the chief executive of Legal & General, Britain’s leading life insurance company, which produced some very interesting statistics that I am happy to share with the Minister and the Government. Legal & General makes it quite clear that, according to its figures, it is better for many employees with debt to pay off that debt, even if that means losing the employer contribution and the tax relief. That sort of analysis will come back to haunt the Government.

The noble Lord, Lord Skelmersdale, referred to the tables on page 33 of the executive summary. These tables, which the Government have picked out, are for a male median earner. I remind the Government that far too much of our pension system has been geared to the male median earner and for far too long. It is high time that female earners and carers were put at the top of our priorities. The fiddling around the fringes of our system and the miserable little changes that the Government are making to those categories in the Pensions Bill do not begin to add up. Only a universal state citizen’s pension at a much higher level can deal with these problems of persistent unfairness to women and persistent means-testing.

Does the Minister not understand the interaction of debt and pension savings? Can he not see how automatic enrolment will often be very wrong for the lower paid, because they will lose a significant part of their savings through means-testing for many years to come? That combination of high interest rates on debt and low returns on pension savings will be a toxic cocktail for millions of people for many years to come.

My Lords, I thank noble Lords for their comments. Before turning to personal accounts, perhaps I may respond to the noble Lord, Lord Skelmersdale, on advance corporation tax. We do not recognise the figure that he has put forward. Many other factors were considered on the pensions to which he referred. I want to bring a new illustration to the table. I do not know whether the noble Lord saw the article written by Anatole Kaletsky in the Times on 19 October 2006 on this issue. He refuted the argument that changes to advance corporation tax were the root cause of the problems for the pension industry. He said:

“Occupational pensions and life assurance were destroyed by foolish court judgments and well-meaning but misconceived regulations under the Thatcher and Major governments”.

He said that ACT was,

“supported by most business leaders and tax experts”.

I have never seen Anatole Kaletsky as a particular friend of this Government, but I look forward to further comments from the noble Lord, Lord Skelmersdale, when we debate pensions again.

Perhaps more seriously, I thank both noble Lords for their general support of the concept of personal accounts and auto-enrolment. Although they went on to make criticisms of the detail, general support is very important, because the whole point of the establishment of the Turner pension commission was to achieve consensus. I am still hopeful that we can carry on with a consensus approach and look forward to constructive debates when the two pension Bills reach your Lordships’ House.

I very much agree with the noble Lord, Lord Oakeshott, that low charges are very important. Clearly, for the target group of 10 million people with no private or occupational pension schemes, and who are medium to low earners, low charges are critical. In the remit that will be given to the personal accounts delivery authority, the requirement to achieve low charges will be very important.

I was very disappointed by the comments of the noble Lord, Lord Oakeshott, when he suggested that this would not work and then referred to the reforms that we propose for the basic state pension and the reduction in national insurance requirements, which will ensure that many more women will get full basic state pension from its introduction. I believe that our changes to basic state pension are substantial and substantive and provide one of the core foundations for taking forward the personal accounts proposals. Of course, the personal accounts delivery authority will have to give careful consideration to the information given to individuals who have been auto-enrolled and obviously, individuals will need to be helped to make the right decision. However, the Government believe that the large majority of them can expect to benefit. The risk of not saving is much greater than the risk of saving for most people. No guarantee can be given because saving, by its very nature, is aspirational because people are planning for an uncertain future. But we believe that within this target group personal accounts and auto-enrolment will very much enhance their retirement income and should be supported.

The noble Lord, Lord Skelmersdale, asked about projections. Future directions will be very much a matter for the delivery authority. I stress the point made in the Statement. The personal accounts delivery authority will be established by statute but it will not be run by the Department for Work and Pensions. It will be run by people with professional expertise from the private sector, which will give a great deal of comfort to those who are auto-enrolled in the schemes.

The noble Lord, Lord Skelmersdale, asked about the £5,000 cap and rightly said that it was larger than the original Pensions Commission suggestion. Of course, the Pensions Commission suggestion of £3,000 was based on an overall replacement rate of 45 per cent. Work undertaken shows that many people aspire to higher than that at around 67 per cent, which is a very good thing, and that is where the figure of £5,000 comes from. But it is subject to consultation and obviously we will listen to comments on that.

It is clearly very important to have a cap in terms of the relationship between personal accounts and the private pension sector in general. We are very clear that we want personal accounts to be complementary rather than competitive and having the £5,000 cap is one of the signals by which we can demonstrate that. The fact that we consider there should not be transfers in and out of personal accounts is another signal.

I take note of the comment made by the noble Lord, Lord Oakeshott, about the issue of debt and the decisions that individuals should rationally take in relation to debt as opposed to auto-enrolment. In a sense, that underpins the report produced recently by the Pensions Policy Institute which looked at the whole issue of whether there are individuals for whom auto-enrolment would not be right. The noble Lord will know that the PPI’s conclusion is that even though some specific people might be at high risk, in general it supports the introduction of personal accounts. It also makes the point that general financial literacy will be a very important component of taking these proposals forward. The noble Lord will probably know that the Treasury shortly expects to issue a long-term financial capability paper. Obviously that will be very relevant to those questions. My time is up.

My Lords, like other noble Lords, I very much welcome personal accounts, particularly as they will benefit women working for small employers who very often do not have any pension scheme at all. They are greatly to be welcomed.

I want to press my noble friend on an issue that has been raised already by both the noble Lord, Lord Skelmersdale, and the noble Lord, Lord Oakeshott. I refer to the interaction of personal accounts with stakeholder pensions and the degree to which they represent an advance on that thinking. The references in both the regulatory impact assessment and the major report are fairly scanty on this subject. Perhaps my noble friend can help me. It is clear that stakeholder pensions did not have the effect we hoped they would because, first, they were not compulsory and, secondly, there was no employer contribution. The L&G figures show that where the employer contributed there was something like an 85 per cent take-up; where the employer did not contribute there was only a 13 per cent take-up. Thirdly, they were not fully portable, which meant that there were high set-up charges. There was therefore low persistency and quite reduced returns for employees. They also excluded small firms with fewer than five employees.

On all of the fronts where the stakeholder scheme failed to go as far as many of us would have wished in the climate at the time, personal accounts are very much to be welcomed. Through auto-enrolment they will offer self-compulsion; they will have a modest—possibly not fully adequate—employer contribution; and they will be fully portable. They should, therefore, allow for persistency, high returns and low charges.

I have some questions for my noble friend. First, he emphasised that about 60 per cent of the £8 billion or so the Government expect to go into personal accounts will be new savings. Where is that money coming from? How robust is that figure? Will it come from low-paid women? Will it come from employers with fewer than five employees? Who is paying? Who gains? Who loses?

Secondly, is it worth saving? Without going as far as the mis-selling point, there are some complicated interactions between the basic state pension, the state second pension, trivial commutation limits and pension credits which are not explored in any of the reports that I can identify. The PPI report and other research shows that someone who is older, poorer, in rented accommodation or with high debt levels will need very careful advice on whether they should stay in or stay out. I am not yet sure that we will have that generic, if not regulated, advice in place to ensure that there is no risk of inappropriate judgments and actions.

Thirdly, what will the pots be worth? The noble Lord, Lord Oakeshott, is right; we need to consider a man on median earnings, a woman on median earnings and on half earnings to see what, when turned into an annuity or possibly into a commuted pot, those sums will be worth.

Finally, what happens to people who are possibly above the UEL at £33,000 to £35,000 in a company where there is a shell stakeholder and nobody takes part? Will the employer have to make his stakeholder scheme at least as good as a personal account to produce an opt out, or will a personal account run alongside it?

I hope that my noble friend will be able to answer these questions. We need to see how much advance there will be, who will gain and the degree of robustness of some of the assumptions behind the report before we can give it the wholehearted endorsement that we want to give it.

My Lords, I am grateful to my noble friend. She takes a great interest in pension issues and I was interested in her comments about stakeholder pensions. It is worth making the point that for all the pejorative comments about stakeholder pensions, the fact that 3 million have been sold and £2.7 billion has been invested is a basis on which to go forward. My noble friend asked about the make-up of the 10 million people who are not in occupational pensions. I have some figures and hope that we can follow up with more. It is hoped that personal accounts might apply to between 2.2 million and 3.4 million women.

On the impact of SMEs and personal accounts, we reckon that of those 10 million people, around 5 million are covered by SMEs employing up to 50 people and another 1.5 million are covered by employers employing up to 250 staff. A very significant proportion of the people we wish to embrace within personal accounts are employed in small businesses. That is what makes it so important to ensure that small businesses are embraced within this system. I accept my noble friend’s point about very careful advice being available and refer her to my reply to the noble Lord, Lord Oakeshott.

I have one pot; for the median earner who earns around £23,000 per annum, starting at the age of 22 or 23 and saving until state pension age, the projection I have is of a pension pot worth around £60,000 to £70,000. That reflects a 15 per cent replacement rate which, together with the basic state pension and second state pension, would come to the 45 per cent replacement rate which the Turner report recommended.

My noble friend asked whether the scheme she referred to would be exempt under the legislation we are bringing forward. It could be exempt, but there would be two conditions—employees would have to be auto-enrolled and the employer contribution would have to be at least 3 per cent.

My Lords, I welcome the Statement as the culmination of a most intricate process, led initially by Adair Turner, and the diplomacy of Her Majesty’s Government in talking to all the parties concerned. I have to point out to the noble Lords, Lord Skelmersdale and Lord Oakeshott, that a wide area of industry and commerce, including the CBI and the TUC, has welcomed this approach. I regret the rather carping tone towards what has been a consensus development and the idea that somehow the insurance companies are miffed. That shows a lack of statesmanship on their part.

I turn to a question that was hinted at, if not stated, by the noble Lord, Lord Skelmersdale, concerning the term “opt-out”. As I understand it, there is no opt-out, in that sense, in the White Paper. Of course there would be considerable worries on the part of workers, many millions of whom rely on the automaticity of enrolment, if there were a bribe along the lines of what applies, for example, to the working time directive: “If you work here, you are expected to opt out”. I am looking for an assurance from my noble friend that that philosophy is not contained in the White Paper and that there are safeguards to ensure that employers will not be able to put unfair pressure on employees to give up their new rights.

My Lords, I hope I can respond positively to my noble friend. Where a good occupational pension scheme is already in place, it will be possible for the employer to be exempt from the personal accounts because employees will be auto-enrolled into the firm’s own scheme. We want to ensure that the process by which scheme exemption can be given will be as straightforward and non-over-regulated as possible but with the guarantee that at the very least it will be equal to, if not, as one would hope with many schemes, better than what is available through personal accounts.

We have enjoyed many constructive discussions with employers about the principles behind personal accounts. I can assure my noble friend that if employees are auto-enrolled into the personal accounts the employer has no option but to pay the 3 per cent contribution within the broad £5,000 to £33,000 band. Clearly there has to be some regulation to ensure that employers are compliant, and we want it to be in three stages. The first is a light-touch principle; it is right to assume that most employers will do the right thing. Secondly, we must ensure that education and advice are available to companies to make sure they know what is the right thing. Thirdly, there will have to be a backstop: a mechanism to ensure that where there is non-compliance, we are enabled to take decisive action against those companies. The details of that will be consulted on, but I hope I can satisfy my noble friend on the broad principle of how that will operate.


My Lords, I beg leave to repeat a Statement made in another place by the Secretary of State for Defence, Des Browne. The Statement is as follows:

“Mr Speaker, I have always said that lasting progress in Iraq cannot be achieved by military means alone, but will depend on a combination of security, politics and economics. Our security strategy is clear and has not changed. It is not driven by the American political calendar, nor will it be thrown off course by those who use violence and terrorism to provoke sectarian reaction and to stop progress in Iraq.

“Our strategy has three main elements. First, we are helping the Iraqis to build up their own security forces, still with a long way to develop, but already with over 300,000 recruited, trained and equipped. Secondly, as these forces develop, we are handing them control, province by province, city by city, moving to a point where they have complete responsibility. Thirdly, we are underwriting that hand-over process by leaving in place quick-response forces, not to do front-line security work, but ready to support the Iraqis if the situation gets out of control.

“We remain convinced that this remains the right strategy—indeed, the only one that could possibly work. I welcome the constructive approach of the Iraq Study Group. As I made clear yesterday, its assessment of the security situation is largely in tune with our own. We do recognise the graveness of that situation but I would also note the group’s own conclusion that there is no magic formula to solve the problems. People should not confuse a difficult situation with a problem of strategy. Our strategy has long included many of the elements the group has highlighted. What is changing is the pace at which this strategy unfolds. Prime Minister Maliki and his Government want it to go faster. That is a natural response and a welcome sign of increasing confidence. But it also crystallises the great challenge Maliki faces. On the one hand, to keep up momentum, to reinforce a sense of progress and nationhood, he must show that Iraq is regaining control of its own destiny. At the same time, he must not ask too much, too quickly, of its developing security forces.

“The Prime Minister made clear during his visit to Washington last week that we have always been open to engagement with Iran and Syria, but it is absolutely vital that the basis for their engagement must be support for the democratically elected Government of Iraq, not support for sectarian or terrorist agendas. Those countries know what they have to do. They must decide which path they want to follow.

“There are some parts of Iraq, especially Baghdad, where the reality on the ground is clearly a long way from the point where the coalition can hand over. This morning’s suicide bombs were another reminder. Part of their motive, of course, is precisely to provoke an escalating sectarian reaction.

“But Baghdad is not Iraq. I make no apology for reminding people that 14 of the 18 provinces are relatively peaceful. The security situation, and therefore progress along the security strategy, is different in each of these provinces. In the area under British lead in the south, two provinces have been handed over to the Iraqis and a third is soon to follow. The fourth, Basra, remains the most difficult challenge. But again, the security situation is a symptom. The underlying cause is rival Shia power blocs vying for power. Right now that is too much for the Iraqi security forces to deal with on their own, and there are real weaknesses in the local police. So, unlike in the other three provinces, British forces are still doing front-line work in the main city.

“Operation Sinbad is working through Basra city area by area, re-establishing security, building confidence, rooting out corrupt and failing police and putting Iraqi soldiers on street corners as a sign that the Government are determined to govern. Friday’s operation, Op Pisa, an impressive operation involving a number of bold strikes across the north of Basra city, shows that when we need to act we do so, and we do so decisively.

“But of course the key is that these improvements in security are followed quickly by progress in governance and by economic regeneration, building momentum and winning over local people to a positive view of the future. This is our strategy. We will continue to support the Iraqis in overcoming the violence and intimidation that disfigure their country. We will work with them to build a long-term relationship, including training and mentoring, to help with the security of the country and the region, including dealing with the ongoing challenge of international terrorism.

“But both in security and in the parallel strands of politics and economic development we have to accept that how quickly things move will depend on many factors, not all of them directly under our control. In fact, it is a measure of success if the path to progress becomes increasingly an Iraqi one. As I said in a speech last month, we must get used to thinking not just in terms of our strategy but of our role in their strategy.

“We continue to insist that we are not going to cut and run. This is not about political gestures or a trial of wills; it is about recognising the challenges we face but also the commitment we have made. We will hand over when it is right to do so, driven not by arbitrary deadlines but by reality on the ground. I have made clear a number of times why we will not be drawn into laying out a prescriptive timetable for drawdown. I note that the honourable Member for Woodspring supported this position yesterday. Our strategy will and must remain conditions based.

“We will work to ensure that our plans remain clear and realistic. But I will also work to resist cynicism and defeatism so long as I still believe that we are making a difference and so long as I still believe that the presence of our forces there is increasing the chance of a positive legacy for their work and the sacrifices in Iraq in the past three years”.

My Lords, that concludes the Statement.

My Lords, I am sure that your Lordships will be very grateful to the Minister for repeating the Statement on what I take it is an expression of what the Prime Minister calls his whole Middle East strategy. I confess that I have not yet seen a copy of the Statement although I made a number of requests to do so. Therefore, my reaction has to be immediate to what I have heard, which, as I say, appears to be an initial response to the Iraq Study Group.

The situation is, indeed, appalling, as more slaughter in Baghdad this morning—and, it seems, almost every morning—confirms. It is entirely right that the Government should report, and keep reporting, to both Houses of Parliament on what is a very fast moving scene, as the Minister rightly says, especially since more than 7,000 of our brave troops are deployed in Iraq.

In the light of the Iraq Study Group report, which the Minister mentioned and which has emerged since this House last debated the issue a week ago, when will the Government be in a position to set out their own fully considered proposals for a change in direction, given that President Bush has announced that he will tell the American people about that, and give his views, before Christmas? That is in the next few days. Or is that what we have just heard? I am not at all clear whether that was the definitive statement.

High hopes were pinned on this report, which is certainly very blunt about what went wrong. It says that the situation in Iraq is “grave and deteriorating”. That is a very different story from the line maintained until recently that improvement and success were on the way, as many of us obviously hoped. The report goes on to recommend a number of changes in the deployment and status of American troops and therefore, by implication, British troops, and to urge the rather obvious importance of somehow involving Iraq’s neighbours in trying to stop its total disintegration, which is in nobody’s interests.

Has the Government’s view on the conditions which must be met before the withdrawal of British troops changed in any way as a result of the report? Is it still the position that the troops will remain “until the job is done”? Is that still the stance after this report? What will be the objectives of the Prime Minister’s forthcoming visit to the region? Will he make his own further assessment? What was the result of sending an envoy to Syria a few weeks ago? Have any parallel exploratory talks taken place with Iran as part of the whole Middle East strategy? What assessment have the Government made of the reaction of the Iraqi Government to the study group report’s conclusions? Do the Government agree that Iraqi support and co-operation are absolutely vital if any change in strategy is to be successful? In particular, do the Government agree that any international contact group that is formed must have Iraqi involvement throughout? Have the Government noted the outspoken views of the Iraqi president, Mr Talabani, on the study group, which he obviously did not find at all helpful?

Does the Minister agree that if other neighbouring countries are to be drawn into the rescue operation in Iraq, that will not be done by threats and conditions, since the allies are in no position to lay down any such conditions? Does he further agree that the positive co-operation of the rising Asian powers and of Russia must be secured? This is not just an Atlantic matter. That must be done both on Iraq and on the closely related issue of the Palestine-Israeli settlement. All that may be just as important as the outcome of any debate or study group report in Washington, and perhaps even more so. Does the Minister accept that whatever conclusions the policy-makers or their critics are reaching in Washington—whether to “stay the course” or change direction—they will not necessarily dictate or control the events that are unfolding in the Middle East?

Does he agree that the missing piece of understanding—in all the views coming out of Washington last week, in the Bush-Blair press conference, in the media and in many of the comments of the pundits in newspapers on both sides of the Atlantic—is that the modern age of weaponry and technology has dispersed power massively away from the American superpower, for all its colossal might, and into the hands of the smallest, most lethal unit, the most vicious cell and the most malign clique? Iraq shows us that the age of ultra-asymmetric warfare has arrived. Does the Minister agree that that is the lesson that is facing us very clearly in all our thinking and new thinking about Iraq?

Given the myriad questions that legitimately arise from this situation, and the truly urgent need to carve out our own course, will the Minister press the Secretary of State and the Prime Minister to ensure that both Houses of Parliament receive a further report before the Recess and that a full debate on Iraq, the lessons and the prospects, can be held early in the new year?

My Lords, I can only extend my sympathy to the Minister for having to read out such a thin Statement, which has in its second sentence the words that our security strategy,

“is not driven by the American political calendar”.

We all understand that should be understood as reading that our security strategy is in severe danger of being driven by the American political calendar.

This Statement is clearly about the Iraq Study Group. It talks about our strategy and what we are doing, but it implies that actually our strategy is being defined in Washington, without very much influence from London. Indeed, if we want to exert influence in Washington, the Prime Minister has to go over there and do his best. The Statement says that the Iraq Study Group’s assessment of the security situation is largely in tune with our own. We may be very glad to hear that. We would love to know a little more about what Her Majesty’s Government’s assessment is, since there has been no comparable inquiry in Britain and no comparable dialogue with Parliament or with opposition parties. We are asked, as ever, to trust the Prime Minister.

Furthermore, if our assessment of the situation is comparable to that of the Iraq Study Group, there are disturbing noises in Washington that President Bush does not agree with that. The Iraq Study Group, for example, says that we have to have a dialogue with Iraq’s neighbours, including Iran and Syria; and President Bush has clearly said that he does not accept that. What are Her Majesty’s Government going to do about the divergence of view between official Washington, the rather wiser statements of the members of the Iraq Study Group, and the opinions of Her Majesty’s Government? It is not surprising that in view of that the Prime Minister looked extremely uncomfortable at various points during the joint press conference.

For the rest, we are unhappy about some other aspects of the Statement. We have again been told that 14 of the 18 provinces are relatively peaceful, but the other four are by far the most important and heavily populated. We are told that the British will hand over our provinces one by one, with two more to go as situations improve. What will happen if the British have completed handing over our four provinces before the United States has finished with its remaining three? Do we leave ahead of the Americans or do we wait for them before we do so? After all, they may wish to leave with much of their equipment through Basra.

We are told that we will hand over when it is right to do so, which I take as meaning that we will hand over when the Prime Minister considers that it is right to do so. This is not a satisfactory report. The Iraq Study Group has now set a rather more constructive direction for American policy, which we know the British follow, and we find ourselves yet again without influence in Washington as a substantial amount of influential opinion there does its best to rubbish the report of the Iraq Study Group. As ever, that leaves us in a deeply unhappy situation.

My Lords, I thank both noble Lords for their questions and I shall try to deal with each in turn. In response to the noble Lord, Lord Howell, the Government have begun their response, but the study group’s report is to the United States rather than to us. Making sure that we understand the implications for us, which in some respects are distinct from those for the United States, requires a bit more work, but there is every intention of holding all the discussions that the House requires. This is the third such discussion in 22 days. I do not regret that clear necessity and we will not stand back from any discussion, but I cannot make a commitment on behalf of the House authorities that there will be one before the Recess. I certainly have no difficulty with addressing questions.

The noble Lord, Lord Howell, asked whether we have a view about the conditions for withdrawal and whether they continue to be that we withdraw when the job is done. Perhaps I may respond to that and to one of the questions put by the noble Lord, Lord Wallace, about what we will do in the areas from which we are withdrawing and what we will do about when the United States forces begin to withdraw from the other three provinces. I do not think that it is a matter simply of withdrawing as a complete step. The first step will be to withdraw from front-line duties. As the Statement says, there will be a necessity to remain, although not on front-line duties, until it is certain that the Iraqi security forces can stand up and do the job that is required. This will have to be a phased and carefully calibrated set of events, because otherwise we might very well find ourselves inadvertently cutting and running and there is no intention of doing that.

The United States withdrawal arrangements are principally a matter for the United States, in discussion with us, but if we still have forces there in that second phase, the probability is that withdrawal through the south should be facilitated.

The Prime Minister has expressed his intentions regarding his visit to the region. He wishes to re-stimulate what he, I and, I believe, this House regard as the central plank of what is required—that there should be a re-engagement in the Middle East peace process as the vital key to resolving a number of issues across the region. That is what is needed and that is at the front of his agenda.

Sir Nigel Sheinwald was the envoy to Syria. He engaged in a deep discussion with the Syrians. I do not wish to make extravagant claims, but I believe that the decision of the Syrians to dispatch an ambassador to Iraq to begin a process of normalisation of relationships was one of the achievements of that visit and I am very pleased that it was successful in that respect.

The noble Lord, Lord Howell, asked about links to Iran. Discussions are going on all the time on a whole variety of matters to try to keep within the bounds of normality in dealing with another state—even in such areas as immigration, in which I am involved.

In response to the question about Iraqi support for the ISG, we understand that it has been measured, that the Iraqis are considering it, that there is not immediate unanimity of view because they are debating and analysing it, as we are. It would be more surprising if suddenly everyone in that troubled country and all of the factions were absolutely of one mind within two days of reading a report produced in Washington. Truly, that would have surprised me completely. But there is a debate going on, and I believe that there is a measured understanding of the report’s importance and of what some of the links with the neighbours mean.

I confirm to the noble Lord, Lord Howell, that the Iraqis will be involved throughout. I echo in this House the last words of the Statement: we need to start thinking not just about the United Kingdom and the United States—although we are responsible for the United Kingdom’s interests—but about the Iraqi Government, who have been democratically elected, and about how we can assist the progress of democracy under that Government.

The noble Lord, Lord Howell, is right: we will need to draw in others, but I do not accept that there should be no threats. A robust discussion with the neighbours should not burn off their desire to take part, but there has to be an honest discussion about the sponsorship of terrorism and the potential development of nuclear weapons. Those issues will not just vanish. The international community has a long-term concern, and I hope that a moderate and modulated discussion of that kind can be held. However, if necessary, I do not think that it would be inappropriate if, for example, the world were to say to one of the neighbours—Iran—through the Security Council, that the development outside international treaties of a potential nuclear weapon was not acceptable. In general, questions from whichever party in your Lordships’ House about that problem have emphasised that that would be an undesirable development in any terms.

The noble Lord, Lord Howell, suggests that the missing piece of understanding is the extent of asymmetry in the character of warfare. I am not sure that it is really a missing piece in terms of understanding because the conflict in Lebanon taught the lesson very thoroughly. We are seeing terrorist organisations being equipped to fight wars very much more consistently than was ever the case in the past, and that must now be part of the strategic assessment made by Her Majesty’s Government and all the allies, who are trying to achieve peace in the Middle East. I agree with the noble Lord that it would be a serious mistake if we were to overlook the significance of that change and the way that it alters or reshapes big-power politics and the capacity of big powers to exert force without a response from people much more locally. That has to be part of the analysis.

The noble Lord asked about Asia and Russia. Of course, China and Russia are both members of the P5, and there are many other links aside from the work of the United Nations Security Council. All effort, whether in respect of the Iran nuclear dossier or the dossier about Iraq, has attempted, and does attempt, to engage those powers and other emerging economic powers in Asia because, as the noble Lord said, they should not be neglected in this calculation. The international community cannot just be defined in terms of those who have traditionally been, or have become, members of NATO. I agree that it can no longer be defined without proper regard to the emergence of these powerful blocs, and work is being done very seriously on that basis.

I hope that I have responded to the question about whether there will be further reports and further debates. I believe that new developments inevitably stimulate questions and debates, and I do not resist the concept of those discussions as they arise.

I turn to the points raised by the noble Lord, Lord Wallace. If I may say so, I thought that he was unusually inconsistent this afternoon. He believes that there is every implication in the report that we are driven exclusively by Washington but, on the other hand, he says that Washington does not agree with us and that we are in a totally different position. They cannot both be true—at least, not at one and the same moment. They may be true sequentially or at other times but they are not true at the same moment.

I thought that the visit to Washington resulted in a major discussion between the President and the Prime Minister, and that is part of a constant assessment which must take place. In the context of that assessment, I have no difficulty at all in saying to the House that we have been very much more forward-leaning in talking to Syria and Iran and in trying to engage them in this process in a constructive way than, in my judgment, the United States has been, and I believe that we should continue to be so. If there is a difference about the extent to which we should do it, or the rapidity with which we should do it, I believe our position is right. The region cannot do without the major players, who can be so disruptive, taking part in processes that may be more constructive; hence the force of the point made by the noble Lord, Lord Howell, about not antagonising them too much in the process, if I can paraphrase him in that way.

I conclude my comments on the important points and questions raised by both noble Lords by saying that these are acutely difficult times. There should be no attempt to pretend otherwise. I do not suggest for a moment that, for example, four provinces with a significant part of the population are not still among the most difficult of all the problems that are faced, because I agree with that analysis. We see a willingness on the part of the Government of Iraq to stand up, to do the job that is required and to take over with assistance and our assurance that we will not abandon them before we know they can actually do the job. That is not a bad principle to guide what we do. How fast it may succeed, and whether it will succeed, are matters on which we will be tested—I accept that. However, if we believe that the democratic process in Iraq should be given every chance of succeeding in the interests of the people who have been oppressed by a brutal dictatorship for a very considerable period in recent history, then let us give it that chance. Let us have the honesty to say to the people of Iraq that we stand for democracy and we intend to fight for democracy.

My Lords, I thank my noble friend for repeating the very full and very clear Statement made by Des Browne in another place. It is very frank about the difficulties that we face, but it is equally clear in the Government’s determination to support the development of democracy and prosperity in Iraq. Although I have—to take a phrase from the noble Lord, Lord Howell—myriad questions for the opposition parties, I do not believe that that is within the rules. I will therefore ask my noble friend whether, when he talks to the leaders of the opposition parties on this subject, they suggest that the Prime Minister should not talk to President Bush about our joint strategy. Do they suggest that the Prime Minister should not try to take an initiative in the Middle East? Do they suggest that we should withdraw immediately and leave chaos? Or do they agree with the Government that we should stay until the Iraqi Government and we agree that the job is done, as my noble friend said? Do they never think of uttering just a few words about our duty to back our forces when they are mobilised fighting for democracy? I ask my noble friend whether the opposition spokesmen ever utter those phrases.

My Lords, on the last point, I believe that there is huge support everywhere for the forces of the United Kingdom and huge admiration for what they do. My personal opinion is that providing encouragement and boosting morale are never amiss, however difficult the circumstances. That is an important point. However, I would never say of either the Opposition Benches or the Cross Benches that they have disregard for the interests of our forces.

My noble friend’s other points strike a very real chord with me. I believe that we would be criticised and the Prime Minister would be hounded mercilessly if he did not talk to the American allies or to President Bush. Someone would say, “He has not gone to Washington for 6 months, 9 months or a year to hold discussions”. The demand would be that we should make those journeys, see people in the various capitals and ensure that the work is done. We should therefore expect those who believe that the democratic project is of genuine importance to the United Kingdom to be a little more upfront in saying that it is important to stay and see the job through rather than insisting, as I sometimes feel is done in the background, that it is all so disastrous that withdrawal with our tail between our legs is the only option.

My Lords, does the Minister recognise that it is precisely because we care for our Armed Forces and support them to the hilt that we express our concerns, on their behalf as much as anybody else’s? I very much regret the comment of the noble Lord, Lord Foulkes, which was entirely contrary to the spirit of your Lordships’ House and the recognition of the challenges facing our Armed Forces. There is no suggestion that the Prime Minister should not speak to President Bush. It is vitally important that he does. We are having this Statement today because of an urgent Question tabled by the shadow Foreign Secretary in another place suggesting that it might be a good idea if the Prime Minister spoke to Parliament as well as to President Bush. Is not the striking feature of the Iraq Study Group the lengths to which it went to construct a group with bipartisan support, drawing on the widest possible range of opinion in the United States? A serious crisis faces our nation. Given the situation of our forces in Iraq and our country’s reputation in the Middle East as a result of the disastrous mishandling of the Iraq operation, do the Government not think it wise to draw on all strands of opinion in this country? Should they not try to construct genuine national support for a strategy so that our forces can believe they have the backing of Parliament and the people?

My Lords, I hope I have said enough to convince the House that I believe that support for the Armed Forces is shared on all sides. Today’s Question may well have been tabled by the Opposition, but I draw to your Lordships’ attention the fact that—aside from our frequent debates in this place, especially over the past 22 days—there have been 60 debates on Iraq since mid-2003 in the other place. It is scarcely short of debates on Iraq. Whether people regard the debates as satisfactory, or having the outcome they would have wished, is an entirely different matter from the frequency or seriousness with which the other place takes these discussions. The other place has recently decided that the time has not come for the kind of review or study that the noble Lord has just urged. That time may well come, but the House of Commons has decided that that moment is not this moment.

My Lords, I thank the Minister for repeating the Statement, which is interesting in that it was a statement by the Secretary of State for Defence. I understand why the Minister is responding to this debate. Inevitably, however, the questions and discussion have moved further away from the Armed Forces than perhaps they should at this difficult time for them. My reading of the Statement is that the Armed Forces will be expected to stay there pretty well at the current level, albeit the job may change somewhat. Do the Minister and the Government recognise that the Armed Forces have been committed way above defence planning assumptions for a considerable time? There is no reduction in the likely requirement for effort in Afghanistan. It will not conceivably be possible to continue at the current level of overseas deployment without lasting damage to the Armed Forces. I hope that the Government will take that into account in the Armed Forces’ long-term interest.

My Lords, I share the view that we must be concerned about the difficulties of lengthy, extensive commitments. I hope I have made it clear to the House that our intention is that, as we move to Iraqi takeover of security, the Armed Forces will be drawn back from the front line. Once we have seen whether the Iraqi forces can stand up to the difficulties they face, there should be a real prospect of our forces being drawn down. I recall pointing out to the House just over a week ago that the overall number of forces committed in theatre reduced slightly in the last year. Of course, I would hope that it would be possible to reduce that still further. But the phrase “still further” inevitably demands that we know that there is adequate security to make further progress in Iraq.

My Lords, the Iraq Study Group was not the only body advising the American President. He has now had advice from another group which is composed predominantly of retired senior military officers. I believe he received the advice yesterday. Does the Minister know what that advice was, and can he confirm reports from some members of the group that it was effectively completely contrary to the advice of the Iraq Study Group and apparently met with the approval of the President and the Vice-President? Under those circumstances, how does the Minister see the strategy going ahead, if we think the Iraq Study Group has got it right but the President thinks that his retired military advisers have got it right?

My Lords, I am always extraordinarily cautious about commenting on retired military personnel—they always at least purport to know more than the rest of us mortals. I am aware of the report although I have not been able to study it in detail; the Iraq Study Group’s report is the document which we have been studying. The ministerial teams in the FCO and I am quite sure in the MoD and across government will be studying the two reports together and looking at the comparisons. In these circumstances I can well imagine people arguing fiercely about the different perspectives that have emerged. I cannot say that everyone will end up agreeing, and I have no reason to believe that they necessarily will. But until we do the study, I cannot tell you that we will not.

My Lords, the Statement made welcome reference to the increase in the size of the Iraqi armed forces and to their success in recruitment, but it made little reference to the Iraqi police forces. I think it is widely known that they are not totally reliable and have been substantially infiltrated by insurgent elements. Can the Minister tell the House anything about the state of the Iraqi police forces, whose activities are most important in curbing the horrors that are going on there?

The Minister also referred to the need to get the peace process back on track. He talked about the consequences of what happened in Lebanon. Do the Government fully understand what great damage has been done to the peace process and particularly to Lebanon as a result of the Israeli action, which the President and the Prime Minister appeared to condone? They certainly did not make any protest against it or any attempt to halt it. The damage has been far reaching, not just in its physical impact on Lebanon but also in its effect on the political situation there. We are yet to see what could develop as a result of the danger arising from the strength of Hezbollah as a result of Israeli action.

My Lords, in all debates on problems across the Middle East there has been widespread recognition that there were serious rocket and other attacks on Israelis from southern Lebanon and that the Israelis responded. We consistently said that it would be wholly unacceptable to the United Kingdom if the response were disproportionate. I do not believe that there can be anybody who does not know that the United Kingdom expressed strong views to the combatants on both sides, or that unless we dealt with both sides there could be no prospect of cessation. I do not accept the argument that we damaged the peace process by doing that, although I am clear that the conflict set the peace process back a long way. I can only hope, as others do, that it was a significant wake-up call and at least alerted people. The Palestinian President and the Prime Minister of Israel have tried to find ways of talking again, rather than seeing those problems recur.

On the question of the police in Iraq, there is plainly some influence and action by militia forces infiltrating the police forces, which is a very serious matter. Prime Minister Maliki has committed himself to tackling the security issues and the sectarian forces behind them and to promoting national reconciliation. As a result, a process of reform is taking place in the ministry of defence and the ministry of the interior, which controls the police. I do not for a moment suggest that it will be an easy process to deal with, because some of the conflicts are between Shia groups, let alone conflicts between Shia and Sunni. They are being played out in police forces as well, but I submit that we have as much responsibility to assure the Iraqi people of quality in the police force as we do in security and military terms.

My Lords, I apologise to the Minister for not being here for the Statement. I add to the questions asked by the noble Lord, Lord Eden. I do not know whether our failure to call for a ceasefire in Lebanon—indeed, even worse, our apparent encouragement of the Israelis to continue their military action for a further week—has damaged the peace process, but does the Minister agree that it has severely damaged our influence in the Middle East?

My Lords, every Foreign Office Minister who has responded to that question during the course of the conflict and subsequently has made the point that we believe that both sides should cease firing at each other, but that a unilateral pause by one side was unlikely to be sustainable as a matter of practical reality. I do not accept that that was an encouragement to one side to continue. The truth was that people were going to try to defend themselves. The question of proportionality arose in that context as long as rockets were being fired. It needed both sides to stop, and that was the appeal that the Government made.

My Lords, I was in the United States on Friday and Saturday, when the statement was made by the Iraq Study Group. It coincided with a powerful leading editorial in the New York Times and the Washington Post calling for the Iraq Study Group to be taken very seriously as possibly the only constructive way out of the dilemma of the situation in Iraq. I was with a group of people very closely associated with our country who were strong supporters of the Democrat Party in the United States. They looked at the television programme and said, “What has happened to your Prime Minister?”.

None of us would deny the importance of discussions between the Prime Minister and the President but, given the importance in a democratic country of having a representative voice in one’s head of government, why does the Prime Minister feel unable ever to express any public view that has any difference from the United States, even on an occasion such as this, when the Iraq Study Group was of crucial importance in widening out the possible solutions to the dreadful fiasco that we have in Iraq?

My Lords, the noble Baroness, Lady Williams, may be putting the point a little unfairly. The Prime Minister said that we believe that the Iraq Study Group has gone along strategic lines with which in many significant respects we agree. It may be that others do not agree with it and have either said that they do not agree with it or did not say enough to show that they agree with it. Everyone can draw their conclusions. I do not know that it is necessary to put it in other terms or to open a breach that might become unnecessarily wide. There is an argument going on. There is another report, which may win more support among at least some in Washington. We have made our position clear. If it is not wholly aligned with other people's positions, all I can say is that it is our position.

My Lords, there was certainly ambiguity when the Minister in an earlier response talked about safeguarding democracy, when the West often does not accept free and fair elections in the region or elsewhere. Have the Iranians and Syrians submitted thinking and proposals for peace in Iraq? If so, what might they be? Secondly, would the Minister clarify what constitutes civil war?

No, my Lords, I will not clarify what constitutes civil war. During the past 10 days I have been supplied with endless academic tracts, more or less none of which agreed with each other. Although I feel that I am being drawn back into being a more successful academic than perhaps I was when I was doing the job, I do not know that it is a great advantage to the House to rehearse the argument here.

On Iran and Syria, the discussions are really only just beginning—certainly so with Syria and increasingly, I believe, with Iran—about what the role might be. It is too early to answer that question, although there is a very important question about how to get them engaged. I believe that everywhere we accept free and fair elections. If the reference was to Hamas, as I suspect it was, let me say that there is no question about the propriety of that election in our minds. However, an issue is involved: anyone who is elected as a Government does not get a free hand as a result of that; they are bound by international conventions, the agreements that have been made, a willingness to embrace peace and a willingness to acknowledge and recognise the existence of neighbours without fighting them.

My Lords, is the Minister aware that I strongly support the comments of the noble and gallant Lord, Lord Craig, on exceeding defence planning assumptions? We are seriously damaging our Armed Forces in the long term. There are two buzz-words or phrases in British military doctrine: the comprehensive approach and effects-based planning. What is the desired end state in Iraq for the militias and armies, as agreed with the Iraqi Government? That seems to be rather at odds with the concept of a free and democratic society.

My Lords, I have no difficulty agreeing that the militias have no alignment with the idea of a free and democratic society. They would rather shoot people than encourage them to vote. There are a number of militias, and the prospects for engaging any of them by potentially drawing them into security forces on a legitimate basis, and holding weapons that are legitimately held under the control of a single authority—namely, the state—in relation to the use of violence, must be an option with some of the militias, as it is in resolving similar conflicts in other parts of the world. In some cases, I fear that it may not come to that; that is why the Iraqi Government and their forces must be in a position in which they can deal with those militias. In saying that, I do not for a second underestimate the difficulty, but that is the bottom line—the reality.

Health: Clinical Decisions

rose to ask Her Majesty’s Government whether the indirect social costs of clinical decisions are being met by government departments other than the Department of Health.

The noble Baroness said: My Lords, I welcome the opportunity to discuss this important issue. The entire thrust of the Government’s health policy is towards prevention and early intervention and, in their care policy, towards maximising independence, autonomy and dignity. The guidance, therefore, that NICE issued last November on treatment for Alzheimer’s disease is illogical on two grounds. Withdrawing the drugs in the early stages of the disease clearly undermines the strategy on prevention. In the appeal statement, NICE stated,

“the appraisal committee is not required to consider the broad clinical priorities of the Secretary of State”.

Should we ask how the clinical priorities are to be met when NICE’s guidance acts in the opposite direction?

For early-stage Alzheimer’s sufferers, that decision also puts doctors in an invidious position, knowing that their patients have to get worse before they get treatment. Equally, the decision undermines the Government’s dignity in care priorities. In the introductory preamble to the dignity in care campaign, launched barely a month ago, some elderly people were quoted as saying that they felt neglected or ignored while receiving care. They felt that they were worthless or a nuisance and that they cost too much. It would be hard to imagine a more graphic example of a decision that was calculated to lead to a loss of dignity than the withdrawal of treatment that NICE acknowledges is clinically effective in the early stages of Alzheimer’s. If there had been serious doubt about the clinical effectiveness of these drugs, there would have been no outcry. However, the decision is not being taken on clinical grounds. This is particularly poignant, given that dementia strips the sufferer of so much autonomy and dignity.

NICE has an essential role and does an excellent job within its current remit, but issues arising from this decision should be re-examined, as they go to the heart of what the debate is about. Published figures do not include costs that are exported to other government departments, such as benefit costs to the DWP or care home costs to the Department for Communities and Local Government. NICE has acknowledged, for instance, that it had not accurately represented the true costs of long-term care, which are between £355 and £520 a week for full-time institutional care. Given regional variations, this is seriously inadequate. If these costs are to be factored into the decision, they must be accurately assessed in the first place. Surely one of the prime aims of treatment is to delay the moment when expensive institutional care is required.

We know that, if we can put off the need for full-time residential care for a reasonable period in the early stages of Alzheimer’s disease, many people, usually the very elderly, will die from some other cause before they need to go into an institution. That could save a considerable amount of money, and surely that must be taken into account, too. Equally, NICE has acknowledged that more research is required, and there is clearly a need for greater clarity about the ability of these drugs to slow progression. Why not continue to make these drugs available and monitor the outcomes so that we may know more and reach a more informed decision?

We know that if these drugs are not prescribed until the later stage of Alzheimer’s, some patients will instead be given powerful sedatives that are less acceptable and more costly. NICE acknowledges that that is outside the scope of its decision-making, but this cannot be ignored. NICE also recognises that QALYs—quality-adjusted life years—are a very blunt assessment tool for dementia and, even taking into account the compensation mechanisms that have been introduced, we know that they lead to unfair outcomes for older people in many cases.

Moreover, the appeal panel that looked at this was not independent. Three out of five of the members were from NICE itself, and there was only one patient representative. I understand that, in 2002, the Health Select Committee recommended that the Government change the appeal system. Will the Minister agree to look at this again? In practice, although NICE says that its decision is merely guidance, we know that the drugs are not likely to be prescribed after this guidance has been issued. However, patients already receiving treatments are allowed to continue to do so. This is not logical, and it compounds the unfairness of the situation.

Lastly, the impact of denying clinically effective treatment to these groups has a profound impact both on carers and on the wider economy. With treatment, those with early-onset Alzheimer’s might be able to remain economically productive during this period—if not in employment, then certainly as active members of society who can still shop for themselves, travel, and sometimes even volunteer.

As we know, carers may earn only £84 a week before the carer’s allowance is withdrawn. Currently, they need to provide at least 35 hours of care a week to qualify, but they can claim very much more if they are not working and are on income support. They can claim income-based jobseeker’s allowance, housing benefit, council tax benefit, a carer’s premium and so on, all of which is much more costly. Approximately one in eight workers in the UK combines work with care responsibilities, but despite the very welcome legislation brought in by the Government in the last Session, there is still discrimination by employers and resistance to flexible working. The stress can hold back performance and even lead to people giving up work. All too often we see a vicious circle in which those with care responsibilities develop health needs of their own, which inevitably costs the NHS more money.

According to Carers UK, people with care responsibilities of more than 50 hours per week are more than twice as likely not to be in good health than those without. The same survey found that 27 per cent of people who provide more than 20 hours of care a week have mental health problems, too, compared to 13 per cent of those giving less than 20 hours. Of people who provide high levels of care, 316,000 are permanently sick or disabled. Low incomes, plus inadequate respite services, contribute to their ill health. Therefore, providing long-term care effectively rules people out of the workforce permanently. The peak age group of carers is 50 to 59 and, if their paid labour is lost, the Government undermine their aims of ensuring that more older people return to, and remain in, work and thus help to meet the objectives of the Pensions Bill, which was only just introduced.

Of course, not all carers look after people with dementia, but it is acknowledged that dementia patients are among the most challenging for carers. It is also known that the number of people in the UK with Alzheimer’s alone will almost double to 1.2 million by 2025. Anything we can do to mitigate the impact of this condition and its wider costs to society should be considered.

I end by pointing to the real cost of giving people who have early-onset dementia access to these drugs. To give the House an idea of how paltry the sum is, if the cost of funding these drugs was spread equally across the entire population of England and Wales, it would amount to 1.5p per person per month. If no money is available for this, what has happened to our country? Is it not worth this tiny sum of money to give people hope and the chance of some quality of life? I hope that the Minister will accept that NICE really must look again at its decisions and that the Government must look again at how they, and we, measure the true costs and benefits in such very difficult situations.

My Lords, I thank the noble Baroness, Lady Greengross, for the opportunity to debate this important issue, even though there are only a few of us who want to do so. NICE does a fantastic job. Setting it up was far-sighted and visionary. As it must, it takes decisions with reference only to the efficacy of the drugs and treatment that it regulates. We cannot expect NICE to consider the knock-on effects of its decisions, but that exemption does not apply to the rest of us and certainly not the Government. We are not considering only NICE decisions on drugs; clinical decisions such as delayed operations or early discharge clearly have an effect on other people and departments. Nowhere is that more apparent than in the effects on the patient or potential patient’s family, who, as we heard from the noble Baroness, are often the main carers.

Clinical decisions can affect a carer’s ability to work, their stress levels, physical health and overall quality of life. How these costs are borne by other departments and agencies is perhaps best illustrated with an example provided by Carers UK. Let us look at the example of a couple in their early 50s who still have children at school. The husband is in the early stages of Alzheimer’s disease and therefore could benefit from the drugs. We will call the carer “Jean”. Since her husband had to give up work, she is the main breadwinner. Without the drugs being prescribed for him, Jean, too, is on the verge of giving up work. If her husband had received the drugs, perhaps she could have stayed in work for a few more years, which is critical, given that she is part of a final salary pension scheme, and her children would then be old enough to go to university or to work.

What are Jean’s costs and what other departments are affected? The carers’ family allowance and benefits that they would not otherwise have claimed from the Department for Work and Pensions are over £7,000 a year, which does not include the administrative costs. Jean is no longer contributing to her pension. This affects the Treasury, through future loss of tax once Jean has retired, and the wider economy through the loss of her greater spending power. Jean is no longer paying national insurance credits, as she is not in work, so that is a loss to the Exchequer. She is no longer paying tax, and that affects the Treasury too. Like many carers, Jean is depressed because of the stress and the lack of choice about giving up work to care. She has been prescribed anti-depressant drugs, a Department of Health cost. The company that she has had to leave has had to recruit a new worker. This will cost it £12,000 in profit; the Treasury receives less in corporate tax.

We must also consider the longer-term costs, because Jean may now never return to the labour market—in fact, she probably will not—and that will affect the Department for Work and Pensions, the Department of Health, the Department of Trade and Industry, the Department for Education and Skills and, again, the Treasury. The total costs are likely to be larger than the direct costs of either drugs or substitute care to the Department of Health.

Other clinical decisions affect carers. The decision to prescribe one drug over another may mean that someone copes better and the carer has to do less. This happens in treatments such as that for Parkinson’s disease, where the balance of the drugs is critical. But the carer’s opinions about how drugs affect people are often not taken into account. This is often for the very best of motives on the part of the prescribing clinicians—they do not want to trouble the carer—but what the carer feels is something less than a partner in the provision of that care. The decision not to carry out an operation but to wait for a more productive time for either the service or the patient can often make the difference between the carer giving up work or staying in work.

We should never forget that there are 6 million carers—I remind your Lordships of this endlessly; I am sorry to be boring—one in five carers gives up work to care, and carers save the state about £57 billion a year. As we have heard, carers are twice as likely to suffer ill health, both physically as a direct result of caring—for example, from back injury—and from the huge effects of stress through confinement in the home and the fact that the caring takes place in a relationship. As we all know, relationships are not all sweetness and light, even when you do not have caring imposed on you, and emotional stress can take a very severe toll on the carer.

This problem is not going to go away. Carers UK estimates that, in 20 years’ time, we shall need 3 million more carers to cope with the demographics in our society. We will have to address this issue over the next few years.

The Government have a fine record on carers, which is the envy of the world. I do not say that lightly. I speak on carer issues throughout the world and I see the envy—the wonder even—in which our country is held for the way in which it was the earliest to address carer issues and to do many things about them, from the three Acts of Parliament for carers to the latest influence on pensions and the Work and Families Bill, which provides for more flexible working.

We have a fine record on carers, but perhaps the Government could be persuaded to do a few more things. For example, could the Department of Health evaluate how clinical decisions are liable to have an impact on carers, perhaps as part of the review of the National Carers Strategy, to which the Government are committed? Would it be possible to issue guidance to clinicians about taking the carer situation into account—specifically, if we need to limit it, the carer’s ability to go on in paid work and the knock-on effects of that?

The Government’s commitment to preventive initiatives, as outlined in Our Health, Our Care, Our Say, is very welcome. Too much care is focused on crisis situations, with many local authorities withdrawing early intervention—intervention which can enable carers to go on caring for much longer. It makes very sound economic and moral sense to support carers—I know that I do not have to convince your Lordships of that. We must continue to move on with this policy if we are to ensure that caring families will continue to be supported as they deserve.

My Lords, I declare an interest as an employee of Age Concern England. I thank the noble Baroness, Lady Greengross, for shining light on this dimly lit recess of health and social care policy. It is a much needed illumination as we tread the path towards the Comprehensive Spending Review, which will have a significant impact on all aspects of health and social care.

As the noble Baroness said, the debate has been prompted by the public reaction to decisions on the availability of drug treatments for Alzheimer’s and the NICE pronouncements. I will focus most of my remarks on that issue, but there is one other thing I want to mention which is in danger of passing unnoticed.

Unfairly, in my view, much of the criticism has been directed towards NICE and its approval statements. As health spokesperson, I meet lots of people who work in and around the health system, and I wish I had a pound for every time I heard the phrase “I am a big supporter of NICE, but…”. NICE is extremely important but it has been dealt an almost impossible hand. It is one thing for the Monetary Policy Committee of the Bank of England to make technical decisions on a narrow matter about which there is a large degree of consensus; it is something else entirely to be given the task of making clinical, technical decisions in an environment where there is neither technical, economic nor political consensus on matters which are highly emotive in social and personal terms. That is what NICE has been asked to do.

In the wake of the Herceptin judgment, a technical judgment made in the face of an aggressive, emotive campaign funded by the supplier of the drug, it is important that politicians reaffirm their true support for NICE and, at the same time, take responsibility for political judgments such as allocation of resources, which NICE should not be expected to make.

We live in an age, and will do so for the foreseeable future, in which new drug therapies will emerge that offer people hope—sometimes the only hope—of survival or the only hope for added years of life. For both groups, there is a huge benefit to carers and relatives. At the moment, the availability of those drugs offering hope is determined by a combination of NICE judgment and PCT budgets, yet decisions on budgets are made nationally only. Would the Government consider whether funding could be reserved for each primary care trust each year to enable it to purchase new drugs as they are licensed, come on-stream and achieve NICE approval in the middle of a financial year? That fund could be available for clinicians to use as they saw fit in response to emerging local need.

The noble Baroness, Lady Greengross, talked about the four licensed drugs for Alzheimer’s—Aricept, Reminyl, Exelon and the most recent drug, Ebixa. She also talked about the cost of prescribing them, which is about £2.50 a day. NICE agrees that those drugs are clinically effective but they are not cost-effective enough to be provided. By law, NICE is allowed only to consider the costs and benefits of the treatment to the NHS and to statutory social services, as well as the impact on an individual patient. If a treatment provides wider social benefits—for example, to carers—that factor is excluded from the evaluation process. That is wrong; the system should be changed so that NICE, in conjunction with those responsible for resource decisions, can make those decisions. In principle, if NICE could make those judgments it would be allowed to get on with its job. It would be wrong, in those circumstances, for non-expert politicians to attempt to influence politically the process of evaluating the cost-effectiveness and clinical effectiveness of treatments.

However, we are not in that situation in the case of these drugs. There are concerns about the way the appraisal of these drugs was carried out. Why did the appraisal not include the potential need in the NHS of treatment for aggression, which Alzheimer’s patients may need if they do not get these drugs? Is the use of the quality-adjusted life year appropriate as a measure for people with dementia? Why did the guidance from NICE fail to clarify that it should not apply to people with a learning disability? How independent is the NICE appeal process when, as the noble Baroness, Lady Greengross, said, the majority of the members of the appeals panel were members of NICE?

I, too, shall touch briefly on the issue of carers. There are 6.8 million of them in Britain, 80 per cent of whom are under 65. The noble Baroness, Lady Pitkeathley, can tell us in her sleep about the difficulties they have achieving flexible working arrangements and moving to part-time work. Many of us in this House now know that as well as she does, and I am glad she keeps reminding us. However, the cost of caring has an impact well beyond the point at which the carer has to carry out their caring activities.

Dr Maria Evandrou of the LSE has contributed a number of different studies on the continuing effects on, particularly, the pension contributions throughout retirement of people who have had caring responsibilities. It is not just occupational pension schemes that are affected, as the noble Baroness said, but quite often, particularly in the case of women, entitlement to the basic state pension. They simply do not have enough qualifying years to be eligible for a full basic state pension, so that they then go on to accumulate an enduring entitlement to pension credit. That, set against the cost of the drug treatments that might enable them to continue working while the person they are caring for is in the early stages of Alzheimer’s disease, needs to be calculated by NICE, not by itself but in conjunction with those responsible for resource decisions.

I shall briefly mention one other decision; it is not exactly a clinical decision, but it is a medical one, and it will have a significant impact on older people, in particular those with Alzheimer’s and their families. The NHS is about to announce a tightening of the criteria for NHS continuing care. At present 20,000 people are deemed to be in need of nursing care, and they have their costs met by the NHS. Social services departments and campaign groups have already said that the existing criteria and the Department of Health’s interpretation of them are so narrow that a further 75,000 people are being denied care, or having to pay for their own care, when it should be met by the NHS. A series of court judgments and statements by the ombudsman have backed that up and said that the NHS should be more lenient in its interpretation.

If a person with Alzheimer’s needs to be fed and washed, that is nursing care, not personal care, yet at the moment for many people it is being judged differently. If the Government make those criteria even tighter, more people will have their care funded, not by the NHS, but by social services. Estimates suggest that that would add an average £5 million to the social services bills, which equates to an extra 1 per cent on council tax bills. The number of people living with dementia, particularly Alzheimer’s, is set to rise, so those costs could be even higher than anticipated.

The noble Baroness, Lady Greengross, talked about the increasing number of people who will live longer with conditions such as Alzheimer’s. We also know it is most likely that people who are very elderly and live for a long time live in areas of greater affluence; therefore, there is a correlation between not just the number of older people living longer but the places where they live. That means that there will be disproportionately high costs in some areas and for some statutory authorities. I have not yet seen anything from the Government that has reflected the disparity of costs across different areas.

The future for people with Alzheimer's and their carers is bleak, and the combined effect of those two judgments will make it even bleaker. At a time when the NHS locally and social services are being forced to find ever more cost-efficient ways of providing treatment and care, should not central Government face that same discipline? If they did, they would come to different judgments about the actual cost, across the piece, of care and treatment. It is time for some joined-up thinking.

My Lords, I, too, thank the noble Baroness, Lady Greengross, for raising this debate in your Lordships' House. I declare an interest as a healthcare provider.

The NHS had a gross deficit of some £1.77 billion in 2005-06. That figure directly impacts on the amount of money available to PCTs in drug purchasing—in particular, it impacts on the availability of drugs for the elderly in the treatment of Alzheimer's, as highlighted by the noble Baroness, Lady Greengross. Some 16 per cent of the UK population is now aged over 65 and, with declining mortality rates, a huge demographic shift is occurring. In 2004-05, an estimated 1.72 million people received some form of health and support from social services in England. Some 71 per cent of them were aged 65 and over.

The White Paper, Our Health, Our Care, Our Say, announced in another place in January this year by the Secretary of State, Patricia Hewitt, committed the Government to extending the emphasis on non-hospital care. She said that four themes clearly emerged from her consultation: more emphasis on prevention with earlier intervention; more choice and say for people in the services that they receive; more support for people, in particular those with long-term needs; and more work to tackle inequalities and to provide more services within local communities. Despite the Government's commitment to a new generation of community hospitals, 81 are still under threat of cutbacks or closure, according to the Community Hospitals Association.

It seems obvious to me that early intervention not only helps those requiring treatment but impacts greatly on those who are expected to contribute in meeting the needs of others. It is, therefore, curious that, in cases of low and moderate dementia and Alzheimer's, recommendations are being made by the National Institute for Health and Clinical Excellence not to provide drugs such as Aricept, Exelon and Reminyl on the NHS. The Alzheimer’s Society and others have highlighted the fact that appraisals by NICE were void of any consideration of social and welfare costs to other government departments, in particular the costs of meeting the social and personal needs of patients who fall short of the eligibility criteria for care prescribed by social services. Meeting the social and economic needs of the carers and the cost of respite provision—and, of course, ensuring its availability—is crucial to preventing suffering in relation to long-term care.

It is right that we should have an independent body that carries out proper and detailed investigations into the availability of drugs on the NHS, but the decisions made by NICE must be transparent and accountable to ensure that both the patient and the taxpayer have confidence in the outcomes. There has to be clarity on how costs and benefits are measured in both health and social care. What should also be measured are the costs to voluntary carers who, because of taking up the responsibility of providing care, are removed from the economy, and the impact of this to the quality of their lives and their needs.

In highlighting the impact of NHS deficits on social care, my colleague in another place, Stephen O'Brien, said that NHS deficits were adversely affecting local authorities and that patients were suffering as treatment was removed from the NHS to means-tested social services. A more in-depth look at the methodology of how NICE arrives at its decisions may be needed.

The use of health technology assessment has become increasingly key in decision-making in the UK. HTA attempts to assess the value of new technologies to the health system by determining the amount of additional health gained for a given financial cost. The method used—the quality-adjusted life year—appears to be a very blunt tool to assess the value of medicines, as other speakers have stated. It attempts to combine assessments of the impact of medicine on both life expectancy and quality of life. Many feel that QALYs discriminate decidedly against older people because benefits are registered by treating people with longer life expectancy. Most economists recognise that QALY calculations pose significant limitations on creating a single method by which the value in changes in health can be calculated. Often, therefore, HTAs generate a wide range of cost per QALY estimate, leading to contestability of their results and interpretations.

It is also reasonable to say that this approach cannot be a useful tool for all medicines. The health technology assessment must ensure that risk-averse decision-making does not create barriers for innovation or deny patients access to medicines. HTA must take into account the views of physicians and patients far more than it does at present. They are essential in assessing the value of medicines and decisions taken on healthcare provision. HTA must also engage more vigorously with manufacturers during drug development to ensure that guidance is duly available during the production process and to allow ample time to respond to concerns.

Why, when NICE thought that the QALY approach was inappropriate in the original Alzheimer’s disease assessment—it was considered unreliable—did it go on to use that approach in ongoing appraisals? Does the Minister know how much engagement NICE has with drug manufacturers during the drug development process? Can she assure the House that financial considerations regarding the NHS and social services budgets are not the only factors when deciding what drugs should be made available to patients on the NHS?

I return to the question at the heart of this debate—enabling patients in the early stages of dementia and Alzheimer's to access on the NHS the drugs that will help to delay these incredibly debilitating illnesses. It is difficult enough to have to see your loved ones undergo such enormous personality changes with the onset of dementia and Alzheimer's. Caring really becomes full of challenges that you had never expected to see or deal with when the very people whom you love and care for so much gradually become unaware of events happening around them. Is it too much to expect that all that can be done should be done? Quality of life for all must remain at the heart of all decisions made on behalf of patients and their carers. We cannot shift the costs of meeting these needs to other departments just because NHS deficits have to be met and we certainly cannot short-change the British public.

My Lords, I am grateful to the noble Baroness, Lady Greengross, for enabling us to have this debate on such a key issue. I wish that more noble Lords were present this evening, but clearly we have quality if not quantity. I am glad to see the noble Baroness, Lady Verma, on the Front Bench opposite. It is the first time that I have had the pleasure of addressing her across the Dispatch Box.

The noble Baroness, Lady Greengross, has a fine record, especially on age-related matters, and the concerns that she raised today are clearly important in relation to her work with the International Longevity Centre, the Alliance for Health and the Future, and Care and Repair. I very much welcome the opportunity to respond to her comments and those of the noble Baronesses, Lady Barker, Lady Pitkeathley and Lady Verma.

I also welcome the emphasis that there has been this evening on carers. As a society, we are indebted to the more than 6 million carers that we have in the UK, but as my noble friend Lady Pitkeathley stated, the Government recognise the tremendous contribution that carers make to our society and the importance of supporting them. We have done much to improve their lives. For example, we set up a carers’ helpline to help them deal with emotional stress and to provide practical advice and we brought forward the expert carers’ programme, which offers support and gives carers the skills to carry out their vital role. There is much more that we are doing and much more that we should do; and we will persist in this.

The National Institute for Health and Clinical Excellence—NICE—was established to give advice to the NHS on best clinical practice, including the clinical and cost effectiveness of drugs and other treatments. I assure the noble Baroness, Lady Verma, that cost is not the only issue that is examined. NICE has achieved a huge amount in the past seven years and has a broad base of support across government, the health professions and the pharmaceutical industry. I was glad to hear that this evening in the Chamber. Few would question the value of its recommendations or its integrity, although its work can inevitably be controversial. We owe it our strong support, but clearly it is also right that we debate and question the way in which it works, and the way in which NICE guidelines relate to government priorities such as prevention, community care, tackling inequalities and dignity and care.

NICE is well known for operating in an open and transparent way. Since its establishment in 1999, the institute has striven to make available in the public domain much of the information used in its guidance development process. Furthermore, NICE has responded positively to recommendations made over the years to make even more information available. The methods by which NICE reaches its conclusions are also readily available and are subject to much scrutiny. Open discussion of NICE’s processes and methods is of course vital to the institute’s continued development and success, and is to be encouraged. NICE publishes the manuals for all its guidance processes on its website, where they are freely available for public scrutiny. I had a good look at the NICE website today, and it is very well managed and easily accessible.

I fully appreciate that some of the issues cited by noble Lords today have also been discussed with reference to recent appraisals published by NICE. Significant questions have been raised in this House and more widely about the way in which NICE conducts its vital, but sometimes difficult, work. Some of the issues concern NICE’s methodologies and related issues of health economics. It would not be appropriate for me to go into detail on specific appraisals that are the subject of appeals and, in one case, the possibility of a judicial review. However, I note what noble Lords have said about Alzheimer’s specifically. While I cannot make detailed comments, I would say that the technological appraisal for Alzheimer’s drugs needs to be seen as part of a package with NICE’s clinical guideline on the treatment and care of people with dementia, which was published jointly with the Social Care Institute for Excellence on 22 November. The clinical guideline complements the guidance on drugs by making it clear what care and support should be provided to people in all stages of Alzheimer’s disease. Indeed, it also addressed the needs of carers as well as those who suffer from dementia.

Some criticisms of NICE have underestimated the sophistication of its methodologies and the wide range of factors that it already takes into account. NICE’s assessments reflect all aspects of benefit to health arising from a treatment. That includes the benefit of improved health, but crucially, also the benefit derived from things that a patient can do because they are feeling better; for example, going to work. Because such benefits are already covered in NICE’s methodologies, separately taking account of wider economic benefits runs the risk of double counting.

I am aware that NICE has been accused of carrying out its appraisals on too narrow a cost base by excluding indirect social costs arising from the use of a treatment and therefore creating cost pressures for other government departments. However, as I have already stated, NICE is able to take into account wider societal benefits, and this is explicit in the institute’s Guide to the Methods of Technology Appraisal.

I note noble Lords’ comments that the appeals process is not truly independent. I believe that it is independent of the guidance development process. The appeal panel is chaired by a non-executive member, has two independent third parties and usually two other non-executive directors of NICE who have had no previous involvement in the appraisal in question. Appeal hearings take place in public and the panel’s considerations and conclusions are published. However, the appeal system will be within the scope of NICE’s review of the appraisal process and methods, which I shall speak on later. I urge noble Lords to participate in that review process, particularly in relation to appeals.

I do not pretend that these are simple issues; indeed, we must expect that NICE as a global leader will have to deal with many issues on which there is no universal agreement in terms of the science and methodology. I am sure that noble Lords will understand that, as in any complex field, the specific approaches that NICE adopts will have both their supporters and critics. This is to be expected and it is healthy. NICE is willing to learn in the development of its appraisal methodologies. Noble Lords will be aware that the processes adopted by NICE are not static. The institute has a well earned international reputation for operating at the cutting edge of technology assessment, which was reflected in the review of NICE’s technology appraisal process, carried out by the World Health Organisation in 2003. The WHO marked out NICE’s appraisal methods as setting something of a gold standard and stated that they represented an important model for technology appraisals internationally.

For NICE to remain at the cutting edge, its processes must of course develop over time. The noble Baroness, Lady Verma, suggested that the methodology of appraisals needed to be re-examined, but she and other noble Lords will be glad to know that NICE’s guidance development processes are subject to periodic review, which includes public consultation. Its technology appraisal process was last subject to such a review in 2003-04. That process involved full public consultation and extensive work with academics, patient groups, the NHS and industry. NICE will be undertaking a further scheduled review of its appraisal methodology in 2007. In addition, I understand that the Health Select Committee has announced its intention in 2007 to hold an inquiry into NICE, following its 2002 inquiry, although the terms of reference have yet to be published.

NICE’s review will again involve active engagement with key stakeholders, including patient groups and academics, and a public consultation. I understand that the review will potentially cover a range of issues, including how NICE considers carer benefits, the use of the quality-adjusted life year (QALY)—as was raised by noble Lords—and the way that NICE takes account of wider societal benefits. In keeping with its open and transparent mode of operation, NICE will publish details of this review in due course. I urge all stakeholders in NICE guidance, including noble Lords, to support the consultation next year and engage in the process. This debate is timely, because only through healthy public debate of its work will NICE improve further and consolidate its position as a world leader in the field.

The noble Baroness, Lady Barker, raised the question of a special fund for drugs. She will not be surprised to know that that would not be compatible with the Government’s policy of allowing local health services to take decisions on how they can best meet the needs of their patients. There is no pot of gold hidden in the Department of Health. Every penny used to set up the fund would come out of allocations to primary healthcare trusts. However, I hear what the noble Baroness says and I undertake to explore the matter a little further.

The noble Baroness, Lady Verma, asked about NICE’s engagement with drug companies. It has a dialogue with drug companies both generally and through consultation and specific appraisals. The industry’s views will also be important as part of NICE’s review of process and methods.

Many noble Lords referred to benefit payments and the potential for NICE to take formal account of the impact of health interventions on benefits such as those paid by the Department for Work and Pensions. Although the aim of such a suggestion might be to ensure that any savings accruing from better health in the form of reduced benefit payments are taken into account, the effect might not be quite as intended. However, I think that noble Lords were looking at a broader aspect of that issue.

The NHS devotes significant resources to healthcare interventions for elderly patients, many of whom may be retired and receiving a state pension and possibly other benefits. If a healthcare intervention prolonged the life of someone in receipt of such payments, the cost to the state in pension and other benefits would increase, not decrease, as a consequence of investment in that intervention. I am sure that none of us would want to see that kind of reasoning factored into an appraisal, but it illustrates that we cannot assume that healthcare interventions will reduce spending on benefits. Therefore, taking such interventions into account would not necessarily lead to a more favourable account.

It is important to continue to debate these issues, and clearly the focus of the debates will evolve as NICE’s processes and methodology evolve. I hope that there will be real interest in the consultation on NICE’s appraisal methodology next year, and I expect continued interest in how the institute responds to the comments received. Noble Lords should be reassured that there is a proper and public process for identifying and systematically addressing the kind of important issues that we have been discussing today. Indeed, I am sure that many of the issues raised in today’s debate will affect the way that NICE works in future. There are many challenges ahead for NICE but I am absolutely confident that it is up to the challenge.

House adjourned at 7.07 pm.