House of Lords
Tuesday, 17 July 2007.
The House met at half-past two: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Norwich.
My Lords, the report examined victim and offender satisfaction with restorative justice. It shows general victim satisfaction and supports the Government's strategy of encouraging the use of adult restorative justice as a service to victims. A further report, on the impact on reoffending and cost-effectiveness, is expected later this year.
My Lords, I thank the Minister for his reply. I strongly agree that we need to develop policy on the basis of sound evidence and we look forward to the second report. Does he agree that there is already significant evidence of the motivational power of restorative justice for offenders and that there is already compelling evidence that victims are helped by and need it? Would it not therefore be sensible already to develop policy further, which is essential for the whole criminal justice system, at least for victims?
My Lords, I certainly accept that very positive signals are coming from the research. The Government have already encouraged local criminal justice boards to develop restorative justice processes. However, the research project consists of four pieces of work; the final piece of work, as I have already mentioned, concerns cost-effectiveness and outcomes. It is important for the Government to await that before taking further action.
My Lords, is the noble Lord aware of the work of Sherman and Strang, which was also recently published? It bears out the expectation that restorative justice is effective in reducing reoffending, particularly in serious crime, violence and burglary. When that is confirmed, as we hope it will be, later this year, will he pay attention to their suggestion of having a restorative justice board to foster the spreading of this cost-effective and welcome development across the country?
My Lords, I am aware of the research to which the noble Lord refers. I think that it is fair to say that it was a fairly small-scale study; none the less, we are looking at it with very great interest. I assure the noble Lord that, in conjunction with research that my department has commissioned, we will certainly look at his suggestion.
My Lords, I can certainly send a very long definition to the noble Baroness. Essentially, it is an opportunity for victims to explain the impact of the crime to the offender and for the offender to acknowledge the harm caused; it also provides the chance to ask questions. It is not to be seen as a soft option. The research that has just been published shows, for instance, that where direct conferencing has taken place between the offender and the victim, more than half of victims said that the process provided a sense of closure and 90 per cent of victims in conferencing said that offenders had apologised; there is no question about that. Just under four-fifths of offenders thought that it would lessen the likelihood of reoffending. I would not claim that it is a perfect approach but the figures are none the less pretty encouraging.
My Lords, is the Minister aware that only two places in the country use that provision of the 2003 Act to make restorative justice a requirement of a community sentence? They are the Thames Valley and the Liverpool Community Justice Centre. Given the Government’s commitment to developing community sentences as an alternative to custody, which we heartily endorse, and the powerful benefits that restorative justice delivers to victims, to offenders and, therefore, to the country as a whole, what specific plans do the Government have to encourage and to develop a much more widespread take-up of that provision?
My Lords, the noble Baroness is quite right to draw attention to the potential of community sentencing. Certainly, restorative justice can be a part of that process. My understanding is that 13 of the 42 local criminal justice boards report some adult restorative justice delivery. Of course, more can be done. The Government’s approach has been to encourage those boards to invest and to develop those services. We shall come back to this issue in the light of the fourth research study, which, as I have said, we hope will become available towards the end of the year.
My Lords, it seems to me that the emphasis on restorative justice is one of the best features of the Government's legislation in the field of crime. Is it not, therefore, a matter of regret that the restorative justice policy team at the Home Office has now been virtually disbanded?
My Lords, of course, restorative justice is now the responsibility of the Ministry of Justice. It is not so much about what teams we have, but whether we have sufficient support within the ministry to ensure that programmes can be developed. I believe we have that. We are looking at the research with a great deal of interest. As I said, it shows considerable promise; none the less, it will be very important to see the outcome of the study on cost-effectiveness. When that comes out, the Government will make further decisions. In the light of those decisions, we shall ensure that the ministry has the people to assist implementation of any future policy that has been agreed.
My Lords, glancing at the report, we learn on page 18 that 55 per cent of offenders admitted that a very important reason for taking part in the scheme was to aid their forthcoming case. In view of that, what measures does the Minister propose to prevent the exploitation of the restorative justice system?
My Lords, it is very important that restorative justice should not be seen as a soft option. The cases are risk assessed and we shall look at the matter in the light of the research that has been published. The research shows that the face-to-face meetings can be a particular challenge for offenders; nor are they easy for the victims. That is why the risk assessment is done so carefully. I can assure the noble Lord that the last thing I, or my department, would wish is for this to be some kind of soft option, ensuring that an offender is somehow treated more leniently by the courts. It has to be seen as part of a rigorous approach to dealing with justice and helping victims. That is the context in which we shall take it forward.
My Lords, noble Lords might be interested to know, for example, that the Chard and Ilminster community justice scheme for the whole of 2005 dealt with 107 cases. Since that time, only 2.8 per cent recidivism has been recorded and there was very high victim satisfaction. I mention that because there are, in effect, two forms of restorative justice in play: one is conditional cautioning and the other is diversionary restorative justice. The reason for mentioning Chard—
My Lords, if noble Lords will bear with me, I shall come to the question. The reason for mentioning this is that such disposals by the police do not register as sanctioned disposals. Therefore, will the Minister draw that disparity to the notice of officials and try to tidy up that area in the future?
Olympic Games 2012: Gypsies and Travellers
My Lords, the London Development Agency has been working closely with the Clays Lane Travellers to provide alternative suitable accommodation as part of its work to obtain vacant possession of the Olympic Park site. Work is now under way to build a Travellers’ site at Major Road, which was considered the most appropriate to be delivered on time.
My Lords, I thank my noble friend for that Answer. Does he agree that a previous acceptable site was offered at Chobham Farm, which was well received but then withdrawn? What representations were made or pressure exerted by the property developers, in view of the potential value of this site after the Olympics are over, to have Chobham Farm withdrawn?
My Lords, the London Development Agency has to secure the Olympic site this month. There was no guarantee that it would be able to conclude the negotiations over Chobham Farm. That is why the Major Road site, which has become available this month and is very close to the site which the Travellers currently occupy, was chosen. Work is going ahead on that, and all the Travellers’ families can be accommodated on the one site.
My Lords, is it not shameful that while the Government and the Olympic Delivery Authority are trumpeting the regenerative benefits of the Olympic Games, some of the most deprived people in the area have been forced to live in intolerable conditions in the middle of a building site with smoke and dirt, while awaiting a decision on an alternative? Finally, a site that they were offered has been taken away from them, and they are being forced on to one which neither they nor the neighbours wanted.
My Lords, the House will recognise the crowded nature of the London Borough of Newham. There were no sites available for options within Newham. A site has been identified which is close to those which the families currently occupy. It is not ideal, and the families do not want to move. That is the case with Travellers’ families, many businesses and the allotment holders whom we discussed the other week. All of them are somewhat disadvantaged by the necessary compulsory purchase of the site. Of course, such a large site was bound to occasion some difficulties, but they are marginal.
My Lords, is there a proposal to resituate the Travellers on the site once the Games are over, as with the allotment holders? If not, is this partly due to the realisation of maximum property values on the site following the deal with the National Lottery?
My Lords, I cannot give that guarantee. The site identified is a new site provided for Travellers. It will meet their needs. Returning to the original position is not an option. The London Development Agency and the Olympic Delivery Authority cannot in every case guarantee that everybody who has been moved can go back to their original location. That is in the nature of such a substantial development.
My Lords, it certainly does. The noble Lord will recognise that the one virtue of this site, which I have already stressed, is that it is close to the existing site, so the dislocation is limited. However, he is correct that Travellers have their rights and the local authority is obliged to respond to them. The London Borough of Newham intends to do so.
My Lords, it is a matter of record that this large public project was completed on time, that the final cost was just 4 per cent over budget and that it was by far the most visited paying attraction in the UK with more than 80 per cent visitor satisfaction. It also helped to regenerate a wide area. However, the main lesson from the project concerns the importance of ensuring that forecasts of income from visitors and sponsors are realistic.
My Lords, bearing in mind the reported overspend of £23 billion in the past 10 years on just a handful of projects, including the huge amounts that were wasted on failed IT projects and the recent chaos in the allocation of places for doctors, will the Government, who have been described as not being able to manage huge projects, in future consult those with a proven commercial track record instead of wasting so much on consultants?
My Lords, we had a debate about IT projects in which I was able to identify the many successes that the Government recorded as well as some weaknesses. The only common factors between those and the Millennium Dome are that they are large and public. The Dome was a unique development. We all know that there were lessons to be learnt from it. As I have indicated, not only have we learnt the lessons, but we intend to implement them with regard to the Olympic development.
My Lords, the cost was significant and the number of years was several. However, the noble Lord will recognise that the Dome has been sold and is now flourishing as an entertainment centre. Greenwich is benefiting enormously from the regeneration of the Greenwich peninsula. We have learnt lessons from the Dome and are implementing them.
My Lords, while we are learning lessons from history and from the mismanagement of public projects, I exhort the Minister to have a look at what has happened with Battersea power station, which has recently been sold for £400 million. Acres of prime land in central London have remained unused for nearly 20 years when we have a grave shortage of housing, particularly for public service workers. Will my noble friend have a look at the history of that to see what happened with the management and who was responsible?
My Lords, I must confess that I concentrated on the Millennium Dome as it was the subject of the Question. However, my noble friend is being inordinately helpful in drawing my attention to another site where we may learn lessons. I have no doubt that for all noble Lords the main project that we have in hand at present with regard to site development is the Olympic site and we are getting plaudits from the Olympic authorities for the way in which we are structuring our development of that site.
My Lords, I am terribly sorry, but it is the Lib Dems’ turn.
My Lords, do the Government recognise that the three things that will be remembered about the Millennium Dome are that it was built on time, looked wonderful and was filled with what was generally regarded as being fairly tacky? Will the Government give an assurance that all future projects—for instance, the Olympic project—will have somebody looking at how to run them? Furthermore, if you are going to have a big celebration, admit you are having a celebration, and do not try to get in some private money for some form of publicity dressing.
My Lords, I am grateful that it was the Liberal Democrats’ turn because I can give the noble Lord that assurance. There will not be a need for any specific celebration with regard to the development of the Olympic Games site; the opening ceremony will provide that.
My Lords, the Minister may not be aware that I agree with every single word that the noble Lord, Lord Brooke of Alverthorpe, said about Battersea power station. “Hear, hear” to him. With hindsight, and with the figures the Minister gave, would it not have been more economic and done more for the good of England to have kept the royal yacht or built a successor?
My Lords, I am not sure that the royal yacht had quite the seating capacity of the Millennium Dome. I recognise that comparisons are always made on public expenditure with regard to which from time to time the Government may be thought to have made a mistake. I merely identify to the House the obvious fact that the concept of the Millennium Dome was established under the previous Administration.
My Lords, does my noble friend not agree that one of the lessons to be learnt from the management of the Millennium Dome is that should the circumstances ever arise again that we have a Conservative Government starting a project, when we knock them out of office we should never inherit it from them?
My Lords, my noble friend may be rubbing salt into wounds as far as that is concerned. The incoming Labour Administration in 1997 inherited a project which was substantially under way. In retrospect, we all regret the huge losses made on the Dome, but we should recognise that the location of the Dome was an intelligent choice of site for the regeneration of the Greenwich peninsula, and future generations will at least benefit from the sacrifices that we made in terms of public expenditure at that time.
My Lords, in fact when the new Labour Government came in they asked for, and were given, three months to decide whether to take on the Dome. Had they refused at that time, which in hindsight might have been the wise decision, the total cost of breaking the contracts would have been £50 million.
Lord Davies of Oldham: My Lords, the best cure is the increasing confidence that we will manage a project vastly greater than the Dome; we are going to manage with great success the development of the Olympic Games.
Turkey: EU Observers
My Lords, the European Union does not intend to send observers to the forthcoming elections in Turkey. At the invitation of the Turkish authorities, the Organisation for Security and Co-operation in Europe is sending an assessment mission. A delegation from the Parliamentary Assembly of the Council of Europe is also monitoring the elections.
My Lords, I am glad to hear that the OSCE is sending at least some form of observers, because international observers tend to have a salutary effect on elections held in countries that have, shall we say, a democratic deficit. In fact, would it not have been more appropriate for observers to be there during the current run-up to Sunday's election, considering that there has been widespread intimidation and obstruction of pro-Kurdish parties and individual candidates? Only yesterday, as my noble friend will have heard, a Turkish but pro-Kurdish independent candidate was shot dead in Istanbul. Does she agree with the statement by the International Strategic Research Organisation, which is an independent Turkish think tank based in Ankara, that,
“the more that Kurds have rights, the more that the PKK will lose support”?
Will Her Majesty's Government, from their experience in Northern Ireland and other countries, strongly urge the Turkish Government to settle the long drawn-out conflict in the south-east of the country by negotiation and dialogue rather than military force?
My Lords, it was a matter for the OSCE and Turkey as to when the observer mission went to Turkey. Of course we were deeply concerned to learn about the murder of the independent candidate standing in Istanbul, but we are pleased that the Turkish authorities are actively investigating the murder and have apparently already detained three suspects. We are confident that the authorities will investigate that fully. On the quotation cited by my noble friend, we fully agree that the more that the Kurds are allowed and enabled to participate in the democratic process in Turkey, the less that the PKK will be able to be pre-eminent in the Kurdish areas.
My Lords, has any European Union ambassador or any official from any of the EU embassies visited the three high-security areas in the south-east since they were designated on 9 June? If so, have those officials confirmed the allegations referred to by the noble Lord, Lord Rea, of widespread intimidation and harassment against independent candidates and their supporters? Does the noble Baroness really think that free and fair elections are possible in the south-east when regional parties are prevented from getting into Parliament by the 10 per cent threshold and other restrictions on their activities?
My Lords, I beg the noble Lord’s pardon but I was not aware of the allegations, and neither was the Foreign Office as far as I know. If there were allegations of malpractice, we would expect the Turkish authorities to investigate them. As far as I know, the European Court of Human Rights does not think that the 10 per cent boundary has been an obstacle to Kurds being elected to Parliament.
My Lords, does the Minister agree that if there were any further interference following the election by the Turkish armed forces in the normal practice of the democratic institutions of Turkey, that would be a major setback to Turkey's relations with a large range of countries, not least for its application to join the European Union? That would be extremely bad news for Her Majesty's Government, who I hope will be pursuing that application with great force after the elections.
My Lords, the noble Lord is right—it would certainly be an enormous setback. However, we have every confidence that the Turkish armed forces will respect the democratic norms that exist in Turkey and we will certainly pursue Turkey’s accession with the same rigour as we have shown in the past.
My Lords, while hoping that Sunday’s elections are conducted with minimum violence and that the difficult situation facing Turkey in relation to its border with Iraq and the Kurdish activities—violent activities—is handled peaceably, and while recognising that it would be quite improper for any of us to take sides in what this election’s outcome should be, can the Minister assure us—following the question from the noble Lord, Lord Hannay—that, whichever party wins, we really will do everything we can to unfreeze and take forward the negotiations on Turkish membership of the European Union? In particular, we must work out how to resolve the additional problem which has now arisen—that Mr Sarkozy and the French Government appear to be resolutely against long-term membership for Turkey anyway. Can we have a firm indication that there really is a plan to try to break this deadlock?
My Lords, the views of the French Government have long been known, but this Government’s intention, as I explained earlier, is to pursue the accession process robustly and with rigour. Indeed, I understand that just this week discussions have begun on Chapter 3 of the acquis communautaire, on fundamental rights and judicial reform. We will continue to pursue those accession discussions along with the other 26 member states of the European Union.
My Lords, on the specific question of observation, I was a member of the Council of Europe observation team. Does the Minister agree that the Council of Europe has a long and admirable record of rigorous but fair observation of elections? Is not the fact that it has a very large observation team present much to be welcomed?
Certainly, my Lords; the Government warmly welcome the Council of Europe observation team and pay tribute to its great expertise in these matters. However, I should also make it clear that the OSCE and other organisations have not insisted on monitoring the Turkish elections because they believe that it is much more important to focus their efforts on less democratically robust states. We believe that the Turkish elections will be free and fair and that Turkey has a fully functioning democracy.
National Trust (Northern Ireland) Bill
Read a third time, and passed.
Gambling Act 2005 (Horserace Totalisator Board) Order 2007
Gambling Act 2005 (Amendment of Schedule 6) Order 2007
Gambling Act 2005 (Horserace Betting Levy) Order 2007
My Lords, I beg to move the Motions standing in my name on the Order Paper.
Moved, That the draft orders laid before the House on 13 June be approved. 20th Report from the Statutory Instruments Committee. Considered in Grand Committee on 10 July.—(Lord Davies of Oldham.)
On Question, Motions agreed to.
Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2007
Community Order (Review by Specified Courts) Order 2007
My Lords, I beg to move the two Motions standing in my name on the Order Paper.
Moved, That the draft orders laid before the House on 13 and 14 June be approved. 20th Report from the Statutory Instruments Committee. Considered in Grand Committee on 10 July.—(Lord Hunt of Kings Heath.)
On Question, Motions agreed to.
Criminal Justice and Court Services Act 2000 (Amendment) Order 2007
Asylum (Designated States) Order 2007
My Lords, I beg to move the two Motions on the Order Paper standing in the name of my noble friend Lord Bassam of Brighton.
Moved, That the draft orders laid before the House on 21 and 24 May be approved. 19th Report from the Statutory Instruments Committee. Considered in Grand Committee on 10 July.—(Lord Grocott.)
On Question, Motions agreed to.
Welfare of Farmed Animals (England) Regulations 2007
My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the draft regulations laid before the House on 12 June be approved. 20th Report from the Statutory Instruments Committee. Considered in Grand Committee on 10 July.—(Lord Rooker.)
On Question, Motion agreed to.
Consolidated Fund (Appropriation) (No. 2) Bill
My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)
On Question, Bill read a second time; Committee negatived.
Then, Standing Order 47 having been dispensed with, Bill read a third time, and passed.
Corporate Manslaughter and Corporate Homicide Bill
My Lords, I beg to move that the Commons amendments be now considered.
Moved accordingly, and, on Question, Motion agreed to.
[The page and line references are to HL Bill 19 as first printed for the Lords.]
2: Page 2, line 29, at end insert-
“(d) a duty owed to anyone held in custody.”
3: Page 3, line 12, at end insert-
““custody” includes being held in prison, secure mental healthcare facilities, secure children's homes, secure training centres, immigration removal centres, court cells and police cells, and being subject to supervision by court, prisoner and detainee escort services;”
5: Page 3, line 37, leave out “or (b)” and insert ”, (b) or (d)”
6: Page 3, line 40, leave out “or (b)" and insert ”, (b) or (d)”
10: Page 5, line 8, leave out “or (b)” and insert ”, (b) or (d)”
The Commons insist on their disagreement with the Lords in their Amendments Nos. 2, 3, 5, 6 and 10, do not insist on their Amendments 10F, 10G, 10H and 10I in lieu but propose Amendments 10K, 10L, 10M and 10N in lieu.
10K: Page 2, line 31, leave out “subsection (1)” and insert “this Act”
10L: Page 3, leave out line 25
10M: Page 13, line 3, at end insert the following new Clause:-
“Power to extend meaning of “relevant duty of care”(1) The Secretary of State may by order make amendments to this Act to the effect that a “relevant duty of care” includes a duty of care owed by an organisation under the law of negligence to a person of a specified description who-
(a) is in custody or detention, or otherwise is required by virtue of a statutory provision to remain or reside on particular premises, or is subject to some other form of restriction of his liberty, and(b) is by reason of that fact a person for whose safety the organisation is responsible.(2) An order under this section-
(a) may amend this Act so as to restrict or disapply exceptions as regards the application of any provision contained in this Act as a result of such an order;(b) may make any amendment to this Act that is incidental or supplemental to, or consequential on, an amendment made by such an order.(3) An order under this section is subject to affirmative resolution procedure.”
10N: As an amendment to the Clause inserted into the Bill after Clause 19 by Lords Amendment No. 33:-
Line 30, at end insert-
““premises” includes land, buildings and moveable structures;”
My Lords, I beg to move that this House do not insist on its Amendments Nos. 2, 3, 5, 6 and 10, to which the Commons have disagreed, and do agree with the Commons in their Amendments Nos. 10K to 10N in lieu.
The Corporate Manslaughter and Corporate Homicide Bill returns to us from another place once more. The Bill now hangs in the balance. Your Lordships first sent it to the other place to consider the extension of the new offence to deaths in custody at the end of February. At that point, the other place was content to accept a number of significant changes to the Bill proposed in your Lordships’ House, and on the question of deaths in custody, the Government sought to make substantial, positive progress. Measures were proposed to improve the investigation of deaths in custody by putting the Prisons and Probation Ombudsman on to a statutory footing. That commitment is now in a Bill introduced in the other place. The Government also offered to consider how the Forum for Preventing Deaths in Custody could be strengthened. That goes directly to the issue of seeking to reduce the occurrence of these tragic events in the first place.
Since bringing forward these proposals, the Bill has been sent to your Lordships’ House four times. On the three previous occasions, your Lordships indicated dissatisfaction with the movement offered in the other place and asked the Government to reconsider their position. We have done that. I am grateful, as I have indicated on every other occasion on which we have discussed the Bill, for the time that the noble Lords, Lord Hunt of Wirral, Lord Ramsbotham, Lord Lee and Lord Dholakia, have taken to discuss with me the important issues in the Bill. Again, I pay tribute to them for their time.
As noble Lords will recall, debate in your Lordships’ House was postponed a fortnight ago for further discussions and consideration. A new Administration and new Ministers recognised that very strong concerns had been expressed during the passage of the Bill, and that it was right for the Government to allow a further pause. Ultimately, however, they reached the same view: that the Government had quite properly paved the way for the Bill to extend to custody in the future, but that to go further at this stage would not be right.
The Bill now has two further days before proceedings in the other place must be completed. As the noble Lord, Lord Hunt of Wirral, pointed out previously, that period can be extended. However, we must look at the possibility of doing so against the experience of the Bill’s passage between your Lordships’ House and the other place to date. For nearly two months, the Bill has passed between the two. The Government have put a solid compromise on the table. I recognise that this does not deliver all that the amendments adopted by your Lordships would deliver. It is a compromise, and I recognise it as such. That compromise has not yet proved acceptable. In practical terms, there appears to be little to be gained by extending the time available for the offence, simply to prolong the passage of the Bill between this House and the other place. I consider the compromise to be a good one and one on which this House should accept the passing of the Bill.
For the Government’s part, the concession that we have offered takes the offence further than we have considered is its appropriate ambit. The compromise opens the door to the offence applying to custody. Recognising the principle of extending the offence, and providing a means of doing so, is a very large movement. On the other hand, the compromise asks that, although the principle of the offence applying to custody is accepted, the power to extend must rest in the hands of the Government. That is entirely appropriate.
The further amendments proposed today provide for a specific timetable. It is already clear that the other place is not content to accept amendments that put custody directly in the Bill. Noble Lords must consider how very unlikely it would be, therefore, that in those circumstances it would agree to the more advanced proposition that puts custody in the Bill and sets a specific timetable for implementation.
I want to bring to your Lordships’ attention a difference between the amendment in lieu that we are considering today and that which we considered last week. The power to extend the offence applies slightly more widely than to those strictly in custody or detention, and includes people on specified premises. This is to ensure that the order-making power is sufficiently wide to cover, for example, local authority secure accommodation, where residents are not necessarily in custody. It might also be desirable to cover certain other circumstances, which are not custodial, such as approved probation premises.
The drafting of this aspect of the power has been improved by showing that it is now clearly targeted. I have nothing further to say.
Moved, That this House do not insist on its Amendments 2, 3, 5, 6 and 10 and do agree with the Commons in their Amendments 10K to 10N in lieu.—(Baroness Ashton of Upholland.)
rose to move, as an amendment to Motion A, Motion A1, leave out from “House” to the end and insert “do insist on its Amendments 2, 3, 5, 6 and 10, do disagree with the Commons in their Amendments 10K to 10N in lieu and do propose the following amendments in lieu of Commons Amendments 10K to 10N—
10P: Page 13, line 19, at beginning insert “Subject to subsection (1A),”
10Q: Page 13, line 20, at end insert-
“(1A) The following provisions of this Act come into force on 1 January 2009-
(a) section 2(1)(d);(b) sections 3(2), 3(3) and 5(3) so far as they relate to section 2(1)(d).”
The noble Lord said: My Lords, I am conscious that this is the fifth time that I have tabled an amendment that is concerned with trying to ensure that custody, and those held in custody, are subject to the same purposes of the Bill as victims of gross management failure, for which private companies are to be held responsible. I am conscious, too, that many noble Lords feel that the Government have gone as far as they can in giving way on the principle, and their other concessions over investigation and prevention of deaths in custody. These are enormously welcome in themselves, given the current situation in our prisons. However, they are not strictly relevant to the purpose of the Bill. Pressing for a date could therefore be felt to be somewhat ungracious, but we owe a duty to the victims, whose cause the Government so support. That duty requires us to press, as far as we can, for this one last phase.
I am conscious that time is running out; only two days before the rolling-out procedure are available to the Government. Once again, I am enormously grateful for the willingness of the Ministry of Justice, mentioned already by the Leader of the House. I had a very frank and friendly meeting last night with the Secretary of State, Jack Straw. It showed a new, fresh approach to these matters since the Ministry of Justice took them over. This is entirely to be welcomed, given the complexity, relevance and urgency of these issues. He explained to me that he had only been in his current post for two weeks and was not responsible for the earlier passage of the Bill. I then reminded him that we had had discussions about Prison Service management, particularly in the context of suicides, when he was Home Secretary. I explained that in now formally proposing a date some time ahead, I was allowing time for what the Minister, Maria Eagle, had said in the other place were significant changes to the management of the duty of care that would be required.
Personally, and from experience, I do not believe that any changes to managerial responsibilities are required, only to the way in which those responsibilities are exercised. As I have said previously, it is inexcusable that there should be deficiencies in the duty of care that those currently responsible for running our prisons owe to those committed to their care by the courts. Those responsibilities apply whatever the problems imposed by overcrowding or lack of resources. They are incumbent on all managers at all times wherever they are. I also repeated to the Secretary of State that the last thing that any of those of us who voted against my amendments wanted was to kill the Bill, which was why I was now suggesting a staged rather than a simultaneous implementation of the Bill to the private sector and custody to satisfy all parties.
From these Benches it is easy for me to say that in making one last effort to obtain acceptance of the need for a more definite commitment than the word “may” to the application of the Bill to the managers of those held in custody, I am not playing party politics. I say that because I was intrigued to read in the latest debate in the other place that, with the exception of the Minister, not a single Member spoke against the amendment.
Let me quote Mr Andrew Dismore, chairman of the Joint Committee on Human Rights, in particular. He said that if the Prison Service is against the introduction of the Bill, it is the wrong position for it to adopt. He continued:
“A well run Prison Service has nothing to fear. The Bill is not about prosecuting people, but about acting as a deterrent to make sure that things are run properly in the first place … It is not about individual liability, but management liability ”.
He went on to say that he did not find the Government’s arguments persuasive and that:
“The Government may win the vote, but I do not think that they have won the debate”.—[Official Report, Commons, 11/7/07; col. 1569-70.]
Mr David Winnick asked the Minister whether she was,
“aware that some Labour MPs, including me, are very unhappy … that the Government will give no indication whatever of a time when the Prison Service will be included”.—[Official Report, Commons, 11/7/07; col. 1562.]
The Minister did not answer the direct question of the shadow Attorney-General, Mr Dominic Grieve, as to whether the problem about agreeing a finite date for implementation lay with the Prison Service, the police, some other organisation or the bureaucrats in the departments. I found that interesting because in an earlier debate in the other place, Mr John Denham said that a date would help the Prison Service because it would have a clear timetable for putting in order whatever was needed to be put in order.
When we debated this issue last week, because of time I deliberately did not mention the police, although I realise that their views must have influenced the new Home Secretary in her reported reaction to the Bill. Fortunately, my noble friend Lord Dear is well aware of what these are and I will leave him to explain them to the House.
I suspect that like many Members of the House I have been inundated with messages from those who are understandably very concerned about the outcome of our debate on this welcome and important Bill. I have made it clear to all of them that in pursuing my amendments as far as I am constitutionally allowed, I am doing so in the interests of victims of gross management failure for which the Government are ultimately responsible, trying to ensure that they are not treated any differently from the victims of a similar failure of private sector management.
The Government appear to have something of a blind spot over disciplining those guilty of management failure while responsible for people held in the custody of the state. Frankly, I do not believe that to be an honourable position for any Government of any civilised nation to maintain. Therefore, one final time, I beg to move.
Moved, as an amendment to Motion A, Motion A1, leave out from “House” to the end and insert “do insist on its Amendments 2, 3, 5, 6 and 10, do disagree with the Commons in their Amendments 10K to 10N in lieu and do propose Amendments 10P and 10Q in lieu thereof”.—(Lord Ramsbotham.)
My Lords, I support the Motion proposed by the noble Lord, Lord Ramsbotham. I shall be brief because I have to go to the Grand Committee shortly for three orders. I simply want to inform the House about the lunch earlier today arranged by the noble Baroness, Lady Gibson, at which the first question put was about the corporate manslaughter Bill. It was obvious from those who spoke at that meeting, particularly those from the Prison Officers’ Association, that they saw no objection to implementing this aspect of legislation, and the sooner, the better. That came from the Prison Officers’ Association. That now leaves only the police, and I look forward to reading tomorrow what the noble Lord, Lord Dear, has to say on this matter. I have spoken to a number of senior police officers and their reaction was more or less the same as that of the Prison Officers’ Association. I therefore support the amendment proposed by the noble Lord, Lord Ramsbotham.
My Lords, I, too, have just been to the meeting with the Prison Officers’ Association. As the noble Lord, Lord Dholakia, will confirm—and this rather surprised me—it said that this was the first meeting it had ever had with parliamentarians. That is astonishing considering its members are in the front line of all these problems. They are very open-minded about the Bill’s provisions and the extension to prisons, as the noble Lord, Lord Dholakia, has said, but that is in the Bill with the order-making power so let us not talk at cross- purposes. They said—and the noble Lord, Lord Waddington, may confirm this—that they needed to judge the extension to prisons in the light of the manifold problems they have to face, not least the radicalisation of some classes of prisoners, which has been debated in this House, and the lack of work and educational facilities. The balance of all these problems is a factor for consideration.
If we want to change the culture of prisons—and that is prima facie what this Bill is in part about—it is obviously not just a question of adopting a clause or not. It is a hugely more complicated matter. The Government have themselves made the point that the talks which need to take place and be a precondition for triggering the order are not yet taking place. I would like to put the emphasis on those talks.
Let me put it another way for those people who have rather fixed ideas about what a trade union is, what it is for and what it does. The representatives of the prison officers are in the firing line. The responsibility they have for the day-to-day handling of many difficult problems is not just a question for the prison governors—and we may hear from a former prison governor—but there is the significant matter of the morale and involvement of the Prison Service if that culture is to change. I hope that my noble friend will be able to say that full and, I trust, positive consideration can be given to the request that the Prison Officers’ Association should be involved in any talks—not hypothetical talks but talks which we will be assured will take place in the not-too-distant future, sooner rather than later. But defining our terms is not for today; in the light of all those considerations, putting a date in the Bill is not the right way to proceed.
My Lords, I should point out to the noble Lord that we in the TUC have been campaigning for this Bill for years. It just happens to be a fact of life that we were largely talking about something different. How the relationships between prison governors, prison staff and prisoners should be handled in this context is rather different from the manslaughter liabilities of an employer when someone falls off the top of a building. It is much more complicated. I abstained last time, and I gave my reasons. The trio or perhaps now the quartet of ping-pong sessions back and forth has been quite productive, because it has shed light on some of these issues. Given that, rather than making this a yes or no proposition, I say that this is now a matter of interpretation and a consideration of how we move on from here.
In conclusion, therefore, I am not asking my noble friend to respond to my broad remarks about the ideas that talks are about to start. However, the discussion I had with the Prison Officers’ Association is one I would like him to respond to. How are these people to become involved? The genie is now out of the bottle and there is no going back. The Bill is quite radical, and, wearing my TUC hat, I must say that there can be no question of this Bill falling. In the light of the conversations that have taken place, I consider that the Bill should pass, not least because rejection now would somehow not be proportionate to all the considerations that have already taken place. The process is now going forward and I hope that my Labour colleagues who like me abstained last time or voted against will now vote on the basis that I have outlined—for the recommendation made by the Leader of the House.
My Lords, I support much, but not all, of what the noble Lord has just said. I agree that this amendment brings into relief the question of management. Management here is dependent on the relationship between prison governors, the prisoners and the POA. I will not go into the details, but that is the effect of legislation passed long ago and interpreted by the High Court. It has broken the manner in which those considerations can advance, and it is because of that that we find ourselves having to devise working rules of crucial importance by way of amendments instead of by the ordinary process of negotiation. But we are here, and certainly that requires attention.
We are now presented with a situation which has to be dealt with. The Government say, “Oh, give it to a Minister”. We have had enough government by Ministers. This is a matter for Parliament, and I shall support the noble Lord.
My Lords, I have spoken before on this issue, always in support of my noble friend Lord Ramsbotham, and I support him again in Motion A1. Like him and others, I am acutely aware of the constitutional importance and significance of the game of ping-pong that we play, and the ramifications of what might happen if we return this Bill to another place once again.
Not to have this clause in the Bill would indicate a lack of care and concern for those who are in a place where they are almost more vulnerable than in any other place within our constitution, and in a place where duty of care is absolutely paramount. As I have asked before, and ask again, what message would be sent within this country, within the organisation and outside, and within our borders if we do not include this matter? In particular, what message would it send to those countries which we seek to influence at a particularly sensitive time in the world’s history when we are trying to demonstrate that the western democracies of this world have more to offer than they do? I wonder how they would see this exclusion.
As a young student reading law at university, and later as a young police officer beginning to grapple with the requirements of that job, it was emphasised to me that arrest and detention of a citizen is absolutely fundamental within the constitutional framework. We are talking about people detained in prisons and in police cells, although more are detained in prisons. I have said before and say again in preamble that a prime test in any civilised country is how you deal with those who are locked up by the state. We should keep that at the forefront of our minds. We know that it is rare in this country for things to go wrong, but things can and do go wrong, and when they do one must ask what recourse those people or their relatives have.
We believe that police objections have borne on the Home Office’s decision. From memory, I think that was mentioned about three months ago during our debate. The Association of Chief Police Officers provided me with a letter which it sent to the Home Office. It is undated but I understand that it was sent very shortly before 11 May this year on behalf of ACPO. It is a short letter. If you take away the heading and the spare space on the back of the second page, it would come to exactly—I have measured it—one side of close-typed A4. That is the weight and the length of the police response on this matter. It pains me to say that it is a poorly constructed letter. It is more a statement of position than anything else. It comprises seven paragraphs, four of which state the obvious. I refer to statements such as one that says that the police have to,
“deal with difficult and dangerous incidents”.
It goes on to say that they have to take,
“critical decisions whilst under extreme pressure”.
We know that. The letter states that they are responsible for,
“those who pass through police custody”,
“are amongst society’s most volatile and vulnerable, often after they have been failed by agencies better equipped to provide appropriate care and support”.
It goes on to say:
“It is quite right that the police should be held to account”.
I suspect that we would quarrel with none of that. The letter concludes with the rather strange three lines:
“Extending the provisions of the Corporate Manslaughter Bill would only serve to impose an unnecessary additional level of scrutiny and, in practice, could serve to foster a ‘risk averse’ approach to operational policing”.
Only one paragraph in this very short letter could reasonably be called an argument and that, as I said, is more a statement of a position. The police case appears to be that they are trying to distinguish their position vis-à-vis custody from the position vis-à-vis operational policing. Noble Lords may remember that, under Clauses 4 and 5, operational policing and indeed operations by the Armed Forces, which are very similar in some respects, are specifically excluded from the Bill. I spoke in support of that, as did other noble Lords, and it is not now a matter of dispute or debate. However, the police are concerned about the point at which operational policing ends and custody begins. That is what appears to be inserted in one short paragraph of the letter. My own guess—not tritely—is that custody could begin when the cell door shuts or slightly before, when the charge is accepted. I would be happy to leave that to judicial decision. Your Lordships might wish to insert such a description into the Bill, even at a late stage, but I do not think it needs to go in.
On reflection and after a long history with the Home Office, I am confused—others may well be too—how on so many times the Home Office has rejected well argued, heavily argued and lengthily argued submissions by the police on a range of issues, but it is prepared to stand its ground on this one, which I have already sadly described as a poorly argued paper. I can understand where the police are coming from. They must have fears on that division between operational and custody. I understand the position, but I regret that I do not support the ACPO line. I support everything that has been said—although I will not repeat it—by the noble Lord, Lord Ramsbotham, most of which applies to prisons, but some of which can also apply to those in police cells. I urge your Lordships’ support for the Motion.
My Lords, I have spoken previously on the issue, when I declared my interests, as set out in the register. I am conscious that the noble Lord, Lord Ramsbotham, commented that when the matter was last discussed in the other place no one, in effect, stood up or spoke against his amendment. I certainly wish to speak against his amendment.
We need to be sure that the application of the Bill does not have the opposite effect to what many appear to have assumed. The assumption for the Prison Service appears to be that it will reduce deaths in custody. There is no hard evidence that this would be the result. It would be easier for the Prison Service to avoid corporate manslaughter charges being laid for gross negligence where the death is self-inflicted—by a prisoner in a cell on their own, but being regularly checked. It only takes a few minutes for someone to take their own life. With a death in a shared cell, the Prison Service might find it more difficult to resist charges being laid—even where the decision not to leave a recently arrived prisoner in a cell on their own was taken for the best of motives, such as being of help to the prisoner concerned in the light of their state when they arrived at the prison. It is thus possible—possible, not certain—that we would put the Prison Service in a position where it decides to play safe from its point of view, but minimising the risk of corporate manslaughter charges could increase, not decrease, the number of self-inflicted deaths.
The desire to hold those who are grossly negligent to account for a death is understandable and right. However, I suggest that we do not start fixing dates until we have evidence—which we do not have at the moment—that the consequence of so doing in the Prison Service will not be to change the operational culture in such a way that it increases, not decreases, the number of self-inflicted deaths.
My Lords, I would like to ask the noble Baroness the Leader of the House two questions. First, if she accepts that it is perfectly open to her to table a Motion to extend the carryover date, would she stop waving around the paper tiger of the Bill lapsing, when it is entirely in her hands to prevent it doing so? Secondly, does she accept that, if no date is inserted, it is perfectly open to the Government never to bring forward an order putting into effect the clause relating to manslaughter and custody? Even if the Government bring forward some form of order, they could do so containing any form of exceptions, restrictions or limitations that they like that rendered the duty virtually irrelevant. The House would have no choice but to either reject the order in its entirety or pass it with all those exclusions and limitations. If she accepts that, does she not accept that it is necessary for her, the noble Lord, Lord Ramsbotham, and others to get together and devise something—if she does not like the amendment—that means that, within a reasonable time, the Government must bring this clause into effect, subject only to any genuine restrictions that they really need to impose?
My Lords, I hope that your Lordships will forgive a very brief intervention. I have not taken part before because of other priorities. However, as a former Minister for police for a year, I have always thought that the police were properly responsible for the lives of any prisoners that they had in their custody. As Minister for the Prison Service for three years, it was clear to me that the Prison Service was responsible for the lives of the people who were entirely in its control. As an ex-Minister in a number of other departments, I am equally aware that if you do not put a date in a Bill you do not get it. The Government are always subject to the inertia imposed by the necessity to do other things on which there is a date, and the result is that those things on which there is not a date get put to the back of the queue indefinitely until the next election.
The noble Baroness the Leader of the House shakes her head sadly at me. I can only say that I was in the job—I cannot interpret her mood, she is now wreathed in smiles. I hope that bodes well. If this House were to be content with something that could be interpreted worldwide as saying that the actual rights to life of our citizens are at their least when they are in the care of the state, it would say something about the state too horrible to contemplate.
My Lords, for a very few years in the late 1960s, I, too, had the pleasure of being a junior Minister in the Home Office, and I wholeheartedly endorse the remarks of the noble Lord, Lord Elton. I have not taken part in the earlier discussions on the Bill, having been absent for unavoidable reasons. With great respect, I do not think that this is in any way a choice between one set of alternatives and another set of statutory alternatives, one being superior to the other.
The amendment rests absolutely on the solid rock of principle. It is a question of absolute principle, which has been articulated by so many Members of the House. There can be no higher trusteeship than that which rests on the shoulders of an authority that is responsible for persons in custody. That trusteeship is of so high a level that I cannot describe it in any terms other than absolute.
The next question then is whether, in those circumstances, a distinction should be drawn between the position of governmental authority or governmental agency and that of an employer in the area of responsibility as defined by the Bill. It should not be; it must not be. The message that would be broadcast by such a decision would be that, somehow or another, powerful interests are able to have their own way and that in some way or another the life of a prisoner is not as valuable in the eyes of the community as that of persons who are not prisoners, or that some exemption should be made for the absolution of government that has never been properly proven or established. For those reasons, I wholeheartedly support the amendment.
My Lords, the Government have been defeated four times—on 5 February, on 22 May, on 25 June and on 9 July. Now we debate this issue for the fifth time. I intend to be brief. I would like first to pay a generous tribute to the noble Baroness the Leader of the House, who has sympathetically listened to all our concerns. But obviously she is restricted by collective Cabinet responsibility.
The situation in our prisons today is a national embarrassment. It is primarily the responsibility of Government. Similarly, if this Bill fails—we all want it to succeed—then once again it is primarily the responsibility of Government, not of those who support the amendment of the noble Lord, Lord Ramsbotham. As has been said by a number of noble Lords, virtually no support for the Government’s position has been expressed in speeches made in both Houses—with one or two exceptions, such as the speech of the noble Lord, Lord Rosser. The Cross-Bench Peers, the Conservative Peers, the Liberal Democrat Peers and many Labour politicians are clearly in favour of including deaths in custody in the Bill. Outside bodies such as Liberty and Justice are in favour and today we have had support from the noble Lord, Lord Ramsbotham, with his experience of prisons, the noble Lord, Lord Dear, with his great experience of the police force, and my noble friend Lord Dholakia, who spoke of his recent conversations with the Prison Officers’ Association. Virtually everyone is lined up on one side, so what is holding the Government back?
The amendment of the noble Lord, Lord Ramsbotham—specifying the date of 1 January 2009—is a most reasonable compromise that balances humanity with managerial concerns. If the opinion of this House is tested later, those on these Benches will support it.
My Lords, although this debate has ranged wide, I think it was right of the noble Lord, Lord Elystan-Morgan, to remind us that what is at issue here is the profound responsibility of the duty of care owed to those in custody. That a duty of care is owed to those in custody is not in doubt. The families of those who die in custody are owed the same recourse to justice as the families of those who die in any other avoidable tragedy. As the noble Baroness the Leader of the House will know, I have always been a very strong supporter of this Bill. It is necessary mainly because of its deterrent effect. We all hope that none of these incidents will ever happen. But it is necessary to have the sanctions in place to ensure that.
The Government appeared to concede the point of principle. For a time, we seemed to be debating not if, but when—that has happened before in this place. Now it seems, following the most recent debate in the other place, that our optimism was misplaced. After the debate, a Member on the Labour Back Benches said, “They call it ping-pong. After that speech, it was more pong than ping”. He was referring to the speech of the Parliamentary Under-Secretary of State for Justice, who was quibbling over whether it would be necessary at all to introduce deaths in custody into the Bill. The noble Baroness the Leader of the House says that the Government have conceded the point of principle. But what was being argued in the other place was, “Let us put the principle to one side; we do not think it will ever be necessary to introduce deaths in custody into this Bill”. As the noble Lord, Lord Ramsbotham, reminded us, Chris Mullin pointed out from the Labour Back Benches that it will never happen unless it happens now. There is no better time to set out a timetable. Andrew Dismore, as the noble Lord reminded us, said that naming the day is more important than the specific date. I believe that there is consensus on all sides of the House and in both Houses.
The events of today therefore do not relate to some great constitutional question of the law, with this House pitting itself against the party of government. The party of government is clearly divided on the issue. Most of the speeches have been in favour of what the noble Lord, Lord Ramsbotham, is seeking to do. The date in the amendment, as the noble Lord, Lord Lee, reminded us, has been mooted in debate many times. It would be interesting if the Minister indicated whether 1 January 2009 was an acceptable date or whether the Government wish for another date, which may be further away or nearer. In the absence of any expressed preference from the Government it is surely a right and reasonable date. Most importantly, it will allow those institutions to embrace fully the opportunity to prove that their standards match and exceed those set by law.
In conclusion, the noble Baroness warned us that the Bill could fall. It can fall only if the Government fail to move the necessary Motion. I give an undertaking to the House that I believe so strongly in the Bill—I have taken advice—that if the Government allow the Bill to fall this week, I will next week introduce an identical Bill, although I understand that I will have to call it the No. 2 Bill. I will devote my best endeavours to steering it through all the twists and turns of the parliamentary process so that it becomes law as quickly as possible. I give that undertaking in the hope that it may persuade the Leader of the House to concede this very important case.
My Lords, I begin by saying that I absolutely understand the strength of feeling of the noble Lord, Lord Hunt of Wirral, and pay tribute to him for it. He has personally been committed for a very long time to the issues raised in the Bill. I sense the passion with which he made his commitment. My ambition is that he should not need to carry out the commitment; I want to get the Bill on to the statute book.
We are absolutely in the same place in terms of the principle. The noble Lord, Lord Elystan-Morgan, raised the essence of the principle. He will know from reading our previous debates in Hansard that that is well understood; we are discussing or negotiating—or whatever word noble Lords prefer—the means to the end and not the end in itself. The difficulty that we have had in these final stages has been that the Government must sit in one place and your Lordships in another in terms of how we get there.
I shall try to deal with some of the specific points that noble Lords have raised. I again acknowledge the strength of feeling and the principled nature of the concerns. We have talked about the Prison Officers’ Association and the police. The noble Lord, Lord Dholakia, and my noble friend Lord Lea of Crondall were at the same lunch today, although it felt like a rather different lunch when I listened to what was being said. It was important for the Prison Officers’ Association to talk to parliamentarians; I find it difficult to believe that it was the first such occasion. It was an important occasion.
It is important to recognise that the Prison Officers’ Association and the Association of Chief Police Officers will have views. I know that the Prison Officers’ Association is already in discussion with my right honourable friend the Secretary of State on a variety of matters. I have no doubt that this issue will be part of its agenda. It was not previously part of its agenda; as noble Lords who participated throughout the entirety of this Bill know, it was not the Government’s initial intention to have this issue in the Bill. Therefore, the Government were not in discussion with it during the 10 years since we committed to put this in the Bill. As it is now in the Bill—through an order-making power—those discussions will take place. I hope that answers the point made by the noble Lord, Lord Lee.
The noble Lord, Lord Dear, read out extracts from an undated letter—we think it was around 11 May—which I do not have. However, I would worry if the noble Lord felt that it was on the basis of a single sheet of A4 that my right honourable friends the Home Secretary and the Minister of Justice made their decisions. However much the noble Lord, Lord Campbell of Alloway, would prefer not to have government by Ministers, none the less, we have a responsibility to consult those who will be affected by legislation and to ensure that we take into account their views in a series of ways, not merely by correspondence but also, as is more likely, by ongoing discussion. Then, as Ministers, we have to reach a conclusion on the basis of the information and evidence presented and we have to behave responsibly on the back of that. That is what my right honourable friends have done. They will have considered properly and correctly not only the representations from the organisations mentioned today, but also those from other organisations, other colleagues, officials, legal advisers and so on. They will have brought together those views and given them full consideration.
The noble Viscount, Lord Bledisloe, and others asked about the role of the Government as regards extending the date. It will be for another place to decide; it is not in my hands at all. I am not seeking to wave a paper tiger. Noble Lords are right: it is possible to extend, but the difficulty in considering extension is that it is in order to achieve something. I have to make it clear to noble Lords on all sides of the House that I can see no further movement. The Government have compromised; they have listened; they have identified the issues that are of concern to noble Lords; and I do not see anything else that will be done.
Extending time for this important piece of legislation would be in order to achieve something—that is the point I was trying to make. I am not waving paper tigers or making threats, but I am simply saying that the purpose is to achieve something. I do not wish to give the impression that, if another place chose to extend it, that would be because the Government wished to move or change their view.
We have debated this matter extremely well. Noble Lords have asked the Government to think again and they have thought again. Noble Lords asked the Government to think again especially in the light of the fact that there were to be new Ministers and a new Administration within a Labour Government who might have different views and who might wish to look at advice differently with fresh eyes. My right honourable friends have done exactly what noble Lords asked them to do. They have looked again; they have consulted again; they have thought about it again; they have talked to each other again; and as my right honourable friend the Secretary of State for Justice did, they have talked to the noble Lord, Lord Ramsbotham. There is no question but that the Government have done what this House has every right to expect them to do.
One further point is the way in which legislation is conducted, certainly by me. I smiled as the noble Lord, Lord Elton, picked up on what the noble Viscount, Lord Bledisloe, said, implying that unless it is in the Bill it will never happen. That may have happened in the noble Lord’s Government; but it is not happening in my Government. We make commitments that we believe are important and that we wish to see through, but we make commitments in the spirit of understanding. We have to do them properly; we have to do them in a considered manner; and, where this Bill makes very radical, new changes, we have to take them into account and ensure that they are done properly and effectively in the area of public policy. That is what we have sought to do.
My Lords, the Government have made a commitment. Indeed, when the House last considered the Bill, we tackled the issue about which noble Lords have been worried— the ability to exclude huge parts of the services—with our amendment preventing the exclusion of aspects within a category. The Government have taken an order-making power that would allow us to include custody within the corporate manslaughter Bill. As I have indicated throughout, we will do so after considering the impact of the Bill as it stands and after conducting further investigation with the stakeholders. I have no doubt that noble Lords and those in another place will ensure that the Government regularly report back on that and are held to account on that commitment.
My Lords, the Government are committed to bringing the custody issue forward through the order-making power when it is clear that we not only understand the implications of the legislation as it now stands but have taken part in discussions with those directly affected, in order to ensure that the implications of such a power are fully understood in public policy especially as it applies to the Prison Service and to custody in general.
My final point is on the conduct of legislation and I shall be quite personal in what I say. This is not about pushing me to a point where we give in and do something different; I do not do legislation that way. As noble Lords will know, my ambition is never to get to the point where we are pinging anything back three or four times, because that is not the best way of approaching legislation. My ambition is always to resolve everything that can be resolved long before we reach that stage. Noble Lords may feel that it is a matter of having one last heave or push or trying one final time, but that is not the position.
We have a timing difficulty regarding the 48 hours but may be able to resolve it with the caveat I gave. But it is time to put the Bill on the statute book as it stands. The Government have done what is right and proper and what the House has reason to expect them to do. The Government have done their job. That is what this House is for, and we have done it. There is nothing further to do. As I hope noble Lords will recognise, bringing the Bill back again will add nothing to our deliberations—or, indeed, to the House—but will only create further delay for all those who are waiting for the Bill to be put on to the statute book. I say that with absolute and utter respect for everyone who has been passionately committed to the Bill. Your Lordships have achieved a great piece of legislation which is better because of your Lordships. Now, however, it is time to put it on to the statute book.
My Lords, I thank the Leader of the House for again setting out the Government’s position with such clarity and conviction. All noble Lords respect her and the case that she represents, and the Government have clearly put their case. However, the comments of noble Lords have yet again demonstrated the wisdom, humanity and experience that exist on all sides of this House.
People will look at what this House has been doing and read all the evidence, including that quoted in another place—and all the evidence is there—and ask, “When? When are you going to do this?”. I do not think that people will understand why we have not gone as far as our duty requires of us by insisting on a firm date and a commitment to which people can relate. A date has been referred to in connection with the Prison Service, for example, in order to help it work out what it needs to do and by when, and the same applies to government. That applies also to the discussions mentioned by my noble friend Lord Bledisloe. I know that the noble Lords, Lord Hunt, Lord Lee, Lord Dholakia, and others would be only too happy to take part in such discussions. So much the better if the Prison Officers’ Association, mentioned by the noble Lord, Lord Lea of Crondall, were included. I welcome wider discussion because many people are involved.
Yet again, the issues could not have been stated more clearly. My noble friend Lord Dear spoke about the police and my noble friend Lord Elystan-Morgan made a most moving contribution about the duties of this House. I am ashamed to say that the only contribution that I found myself disagreeing with was, yet again, that of the noble Lord, Lord Rosser, who has totally misunderstood the purpose of what we are doing. We are not seeking to reduce deaths in custody; we are seeking to improve the management of custody so that unnecessary deaths do not occur. That is not the same thing at all. As for talks on the culture, mentioned by the noble Lord, Lord Lea of Crondall, my conversation last night with the Secretary of State went back to discussions about management that took place eight years ago. In those years a number of people have died unnecessarily in the care of the state.
I fully understand where we have got to—the Leader of the House has so clearly explained where we stand. However, I was comforted by the words of the Secretary of State last night. Although he mentioned that our discussions were off the record, his final remark was: “Nothing is dead until the last day”. I therefore think it right to test the opinion of the House.
Motion A, as amended, agreed to.
Tribunals, Courts and Enforcement Bill [HL]
My Lords, I beg to move that the Commons amendments be now considered.
Moved accordingly, and, on Question, Motion agreed to.
My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1 to 33. I am most grateful to noble Lords for permitting me to deal with this large group of amendments together. As a very late entrant into your Lordships’ debate on the Bill, I also pay tribute to the constructive way in which discussions have taken place throughout its passage.
The new clauses in Amendments Nos. 1 and 3 and the associated Amendments Nos. 11, 15, 18, 19 and 21 to 30 deal with a single topic: the arrangements for appointing those who have served in judicial office on a salaried basis to do so on a fee-paid basis. The amendments extend and improve the provisions that were already in the Bill in Clauses 53 and 54 and Schedule 11. These provisions, as drafted, dealt with fee-paid appointments in two categories of office: deputy district judges and deputy and temporary additional masters and registrars of the current Supreme Court.
The former Lord Chancellor, my noble and learned friend Lord Falconer of Thoroton, discussed these provisions with the Lord Chief Justice and it was agreed that it would be better if they were amended and extended. First, they agreed that conversion of salaried to part-time service is more appropriately treated as a new appointment, rather than as a deployment. Under the concordat, appointment is a matter for the Lord Chancellor, so these amendments in Clause 54 and Schedule 11 now confer the relevant appointment powers on the Lord Chancellor, rather than the Lord Chief Justice. They further enable him to make such appointments without requiring a Judicial Appointments Commission selection procedure, which would be disproportionate in such circumstances. It is also essential that the relevant senior judge agree that the potential appointee is up to the job, so the new provisions also require the Lord Chancellor to obtain the concurrence of the Lord Chief Justice. There are also consequential amendments in Schedule 11 and Clause 54, resulting from the substantive changes in each one.
The other significant change introduced by these amendments is to apply such provisions to all the judicial offices at the level of circuit judge and below in the ordinary courts and to all tribunal appointments made by the Lord Chancellor. The concurrence of the Lord Chief Justice is required for appointments in the courts and that of the Senior President of Tribunals in relation to tribunal appointments. The substantive provisions are in the new clause in Amendment No. 1, adding two new sections to the Constitutional Reform Act 2005.
The remaining amendments are technical or simply consequential on these substantive new provisions. Amendment No. 2 inserts a new clause that simply rectifies a lacuna in a section of the Judicial Pensions and Retirement Act 1993. The 1993 Act prescribes a normal compulsory retirement age for judicial office holders, which is generally 70, but further provision is made for service to be extended beyond that point in the public interest. Such flexibility is clearly in the interests of justice, in exceptional cases—if, for instance, there is particular difficulty in finding a replacement for the office holder in question or if he or she has specialist knowledge and expertise that it is thought desirable to retain.
Schedule 4 to the Constitutional Reform Act 2005 modified the 1993 Act, reassigning the power for the extension of service of judicial office holders under this provision. In so doing, it catered for the exercise of the power in relation to judicial office holders respectively exercising jurisdiction exclusively in England and Wales, Scotland or Northern Ireland. There is a lacuna here because this did not cater, strictly speaking, for those who exercise cross-border jurisdiction—that is to say, those whose jurisdiction extends beyond England and Wales to either Scotland or Northern Ireland, or both. This situation normally arises only in relation to tribunal office holders.
The new clause serves to deal with the problem. It adds further provision to Section 26 of the 1993 Act, providing for the power for the extension of service in such circumstances to be exercisable by the Senior President of Tribunals, in relation to tribunals, subject to the concurrence of the Lord Chancellor, with a default provision for the Lord Chief Justice to exercise the responsibility—again with the concurrence of the Lord Chancellor—in any other case. Amendment No. 16 is a consequential drafting amendment.
Amendment No. 12 inserts a new clause setting out amendments to the Courts-Martial (Appeals) Act 1951. The current position, whereby the Judge Advocate General appoints judge advocates from a pool of 12 judicial office holders or lawyers to an individual court martial, will change once the new Armed Forces Act comes into force. Once that Act is implemented, apart from the Judge Advocate General and High Court judges, only persons appointed under Section 30 of the 1951 Act may sit as judge advocates on courts martial. Appointments under Section 30 of the 1951 Act require JAC selection. This causes a serious problem. A JAC selection would mean asking members of the existing pool to submit themselves again for selection to continue sitting as judge advocates—a role that they have had for several years. It is unlikely that they would be prepared to do this. The loss of such experienced judicial office holders would have a significant impact on the running of the courts martial system. It would also be difficult to fit a JAC selection for judge advocates into the very full JAC programme before the Armed Forces Act is implemented in 2009. We have discussed the issue with the Ministry of Defence and the Office of the Judge Advocate General, and consider that the only option is to amend the Constitutional Reform Act 2005 and the 1951 Act. Accordingly, Amendment No. 12 does this.
Amendments Nos. 13, 17 and 33 relate to the appointment of the chairman of the Law Commission. As noble Lords will know, in practice the policy of all the successive Lord Chancellors has been to seek and appoint a candidate to this post from among the judges of the High Court. This policy has brought, and continues to bring, significant advantages of independence, expertise and prestige to the commission. It has helped to make the commission the internationally well regarded law reform body that it is today.
In amending the Law Commissions Act 1965 so that the Lord Chancellor can appoint only a senior judge as chairman of the Law Commission, Amendment No. 13 will embed in the 1965 Act the policy and practice of the past 42 years. The change is necessary because the Commissioner for Public Appointments’ code of practice on ministerial appointments to public bodies requires that an appointment should be open to all those qualified to be appointed to it. In the case of the chairmanship of the Law Commission, the appointment would therefore have to be open to judges, barristers, solicitors and legal academics. That might deter applications from judges and could deny to the Law Commission the very important benefits that flow from the appointment of a senior judge as chairman. The new clause inserted by Amendment No. 13 therefore restricts the pool of potential candidates for the chairmanship to judges of the High Court and judges of the Court of Appeal.
Amendment No. 14 makes a minor correction in a cross-reference to the Bill being inserted into the County Courts Act 1984. It updates a reference to the Tribunals, Courts and Enforcement Act from 2006 to 2007 and was tabled by the Conservatives in Committee in the other place. Although we considered this change to be unnecessary, as all such references would be updated automatically when the Act is printed, we accepted the amendment none the less.
Amendments Nos. 31 and 32 are needed as a result of changes to the Income and Corporation Taxes Act 1988 made by the Income Tax Act 2007, which received Royal Assent on 20 March. Paragraph 87 of Schedule 13 to the Bill consequentially amended paragraph 6(5) of Schedule 16 to the 1988 Act, but this no longer works because of changes made to that Act by the 2007 Act. Amendments Nos. 31 and 32 correct this. Finally, Amendment No. 20 removes the privilege amendment inserted by your Lordships’ House to ensure the maintenance by the Commons of control over public funds.
I am grateful to noble Lords for allowing me to speak to this large group of amendments. These are important improvements to the drafting of the Bill and they were supported by both sides in the other place.
Moved, That the House do agree with the Commons in their Amendments Nos. 1 to 33.—(Lord Hunt of Kings Heath.)
My Lords, the amendments apply to the appointment of retired judges, to changes to the judicial pensions and retirement provisions, to the appointment of existing part-time judge advocates, to the status of the chairman of the Law Commission and to certain consequential amendments to Schedule 13. We are content with them all and have nothing to add to what the Minister has said.
My Lords, we are content with the amendments. I am grateful to the Government for consulting on these amendments while they were in the Commons, giving us the opportunity to read and consider them before they were introduced. I support this wholeheartedly, given that part of it covers the extension of judicial office after retirement age. I was told that I was too old to be a judge five years ago; it did not prevent me from refereeing four years ago in the parliamentary rugby world cup in Sydney. I hope to repeat that, with the aid of my noble friend Lord Addington, in Paris in a month’s time. Perhaps life does not stop when one is too old to be a judge.
My Lords, I said that I was a late entrant, but it has been a very pleasant entry indeed. I thank the noble Lords, Lord Kingsland and Lord Thomas of Gresford, for their kind comments. This is a satisfactory outcome for what clearly has been a constructive way of approaching this important Bill. I certainly agree with the noble Lord, Lord Thomas, about age. Your Lordships’ average age is 68. Many Members of the House show the benefits of wisdom in what they bring to our deliberations.
On Question, Motion agreed to.
My Lords, I beg to move that this Bill be now read a second time.
I am pleased to open the debate on the Finance Bill and, in particular, to address the key issues raised by the report of the Economic Affairs Committee on the Finance Bill 2007. As in previous years, this debate is the Government’s platform for responding to the report of the Finance Bill sub-committee on certain provisions of the Bill.
The Bill delivers real change, giving the UK a stronger and more competitive economy, and helping to shape a better and simpler tax system. The Bill sets out the first steps in a major package of reforms to the business tax system. This is, of course, an area identified by the Economic Affairs Committee as one where tax simplification should reduce costs and help promote economic growth. I intend to set out briefly why this is a simplifying package, and why it will promote growth by enhancing international competitiveness, encouraging investment and promoting innovation.
The 2007 Budget announced a cut in the main rate of corporation tax, to bring the cost of capital down and to make the United Kingdom more attractive to investors. We have simplified and modernised the capital allowance systems, to reduce administrative burdens and tax distortions, and to promote more efficient investment. There are a number of aspects to this. In terms of simplification, from 2008 expenditure on most plant and machinery will be handled in one of only two pools: 10 per cent and 20 per cent. We will phase out the industrial buildings allowances and agricultural buildings allowances. They had their place in helping the country to rebuild after 1945, but they seem somewhat anachronistic in this day and age and they have a distorting effect.
For small companies the rate of corporation tax will increase, but I remind the House that this is a small profit rate of corporation tax, with a quarter of large tax-paying companies paying tax at the small companies rate. Of the 4.2 million small businesses, more than three-quarters are not incorporated and are therefore not affected by this change. I give way to the noble Lord.
My Lords, perhaps the noble Lord will help me with a problem. How is it a simplification measure to increase the corporation tax paid by incorporated companies from 20 to 22 per cent, while in the same Budget reducing the rate of income tax from 22 per cent to 20 per cent, thus creating a mirror image of the position existing at the moment whereby companies, incorporated or unincorporated, pay tax at 22 per cent? Will not this change add to the burden on some companies and make it more complicated?
My Lords, my point about the simplification related to the broader range of business taxation. The noble Lord will accept that we are talking about a relatively small group of companies. I accept his point that the increase throws an extra burden on them. He also will recognise that we have a clear rationale for the basis on which we hope to encourage investment and that in general terms we have produced an internationally competitive corporation tax rate. I think that his party—in fact, the noble Lord may have had quite a strong part in this with his zealous and diligent work behind the scenes lobbying for a reduction in corporation tax—will see the merits in us having done so.
The Government have set out their rationale for refocusing incentives away from the small companies rate and on to businesses which really invest. Our prime concern is to ensure that investment takes place. The noble Lord and the House will recognise that it will reduce the differential between incorporated and unincorporated businesses. It will reduce the incidence of people incorporated for tax rather than commercial reasons and will make the system fairer. Although the noble Lord may quibble with me about the administrative dimension on this, the Government’s priority that we should be concerned that people should incorporate for commercial reasons rather than for tax is an advantage and reflects a strategic position. It is clear that tax should not drive the decision on incorporation. There are other good reasons why people might want to incorporate, but we maintain that tax should not be a driver. At the same time, small and medium-sized enterprises face very real challenges, which is why we have refocused tax incentives by bringing in a new £50,000 annual investment allowance targeted at helping all businesses to invest and grow and have increased the R&D tax credits for small and medium enterprises.
Let me turn now to the important subject of managed service companies, which was identified by your Lordships’ committee. A regrettably large number of people have chosen to incorporate for the wrong reasons. As things stood, the vast majority of people operating through an MSC were getting an unfair advantage over other workers and compliant businesses playing by the rules. This Bill therefore contains provisions to tackle managed service companies and to stop those using such schemes from undercutting compliant workers and businesses.
The committee chaired by the noble Lord, Lord Wakeham, described the Government’s measures as a “sticking plaster”, suggesting that the underlying structural issues need to be tackled. I understand the importance of that point, and the noble Lord in a short while will deploy his arguments, which the Government of course will take very seriously. Let me be clear: this legislation addresses the very specific issue of mass marketed schemes being used to disguise employment. Perhaps I may put it this way: it tackles a significant and growing compliance issue, not a structural problem. The company is being used to disguise the employer/employee relationship which exists.
It certainly is true that managed service companies make up a particularly tricky area to legislate for. In all fairness, the committee recognised how challenging the issue was and it is important that we should get it right. We consulted widely on this issue and are grateful to all who participated. Almost everyone we consulted agreed that the existing rules are not being applied by managed service companies and therefore that some action was necessary. We are grateful for the evidence that we are on the right track.
More importantly, we are grateful to those whom we consulted for providing us with practical, up-to-date insights into what we needed to do to deliver effective legislation. This Government have been willing to listen and to respond to what interested parties have told us about this issue in order to ensure that the legislation is accurately targeted to achieve objectives which I think others share with us. This collaborative approach is also reflected in the guidance that HMRC has recently published. I should like to thank your Lordships’ committee for welcoming HMRC’s efforts to consult business about these and other important issues.
Any kind of tax avoidance creates uncertainty and distorts the tax system. In making the system fairer, we are creating commercial certainty for companies that pay their fair share and we are removing unfair competitive advantages. There will always be people who want to challenge the tax system and seek to avoid paying their fair share but ordinary, honest taxpayers deserve a tax system that is clear and easy to comply with. It is the Government’s responsibility to protect compliant taxpayers both by making it as easy as possible for them to pay and by coming down hard on those who do not. We believe that we have a good record of achievement here. The Economic Affairs Committee noted that all its private sector witnesses were content with the progress of Revenue and Customs towards the implementation of its delivery plan for the recommendations in the Varney review on how the needs of large business could be satisfied in the administration of the tax system.
Let me now turn to the review of powers, deterrents and safeguards. Setting up Her Majesty’s Revenue and Customs out of the merger of the Inland Revenue and HM Customs and Excise has already helped to strengthen our system of tax administration. The merger made it possible to deliver more consistency and to reduce compliance costs for taxpayers. But merging two departments with two such distinct histories brings challenges as well as benefits. We must modernise the framework of law and practice that underpins our tax administration if we are to realise those benefits. HMRC’s review of powers, deterrents and safeguards was set up to respond to this challenge. The review seeks to provide modern tools for the department and corresponding safeguards for taxpayers.
As announced in the 2007 Budget, HMRC has delivered more than £300 million a year in savings on administrative burdens, which I know will be welcome to the whole House and in particular to members of the committee. The powers review demonstrates once again the value of consultation. Through the review’s consultative committee, HMRC has been able to draw on the considerable talents and experience of business representatives, QCs, tax lawyers and accountants. This has formed one part of a widespread consultation process and has helped to produce a package that is effective and balanced.
I should like to take the opportunity to speak briefly on the subject of online filing, on which the committee also commented. I have already made it clear that the Government are committed to reducing regulation and business costs and delivering a more efficient tax administration. I strongly believe that good e-government can and will play a key role in making this happen. In this I agree with my noble friend Lord Carter of Coles, who found in his independent review:
“Online services have the potential to offer significant benefits to businesses, citizens and government. For the customer, online services can provide greater certainty, integral validation and help faster completion of the filing task and faster repayments”.
I doubt whether anyone would disagree with my noble friend when he added:
“However, to maximise the benefits, the services need to be customer focused, designed to meet the needs of the users, and they need of course to be reliable”.
There is room for some measured confidence here. We have had two successful self-assessment filing deadlines, 31 January this year and 31 January last year, when the service withstood huge volumes and worked solidly. However, we cannot afford to be complacent.
Finally, let me put all these matters into context. As an economy, we are currently experiencing the longest combined period of sustained productivity and employment growth since records began. Today we have record levels of employment, low inflation, and the second highest GDP in the G7 as opposed to the lowest when we came into office. We also have unrivalled growth. Perhaps the best way of expressing the scale of the achievement is this: even in the hugely unlikely event that the UK economy were to stop growing tomorrow—I want to emphasise to the House that it will not—it would be at least nine years before any other major economy would be likely to overtake our record. This Bill and this Budget build on that record of achievement and strengthen it. The Bill will help our nation to continue to prosper in a rapidly changing and increasingly globalised world. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)
My Lords, I am very pleased to introduce the report of the Economic Affairs Committee on the Finance Bill. It is the fifth annual report in what is already a well established series that confirms the role of this House in the parliamentary scrutiny of Finance Bills. In the past, critics of the Government have sometimes wrongly questioned this role. As I have explained in previous years, the House is entitled to debate supply Bills and to refer them to Select Committees for consideration and has been exercising with restraint those rights going back many years. Within that remit, the sub-committee on the Finance Bill offers taxpayers and advisers a forum to express their concerns, which our reports convey, together with our own views and recommendations, in order to inform the debate in Parliament. We do this in a pretty short time in order to publish our report before the Report stage in the House of Commons, which is the last opportunity to amend these Bills, and I think that that is appreciated by those who take part.
I thank my fellow members of the sub-committee for the knowledge and wisdom that they have brought to bear, for their non-partisan approach and for their speedy and intensive work. Looking across the Chamber, I see at least two who fit the bill fully and who have been in place for many years doing exactly that. I am also grateful to the witnesses, professional and official, whose input is essential to our report. This is an opportunity for experts to make a real contribution to our legislation before it is finally passed into law. I thank our long-serving specialist adviser, Leonard Beighton, and his new colleague, Trevor Evans, for their invaluable contribution, as well as the Clerk and the secretary-administrator of our committee.
With limited time and resources, the committee cannot sensibly look at the whole of the Finance Bill; it has to focus. This year it chose four topics: the business tax reform package; managed service companies; powers, deterrents and safeguards; and mandatory electronic filing and payment. First, however, I shall make two general points. There can be tensions over the desire for fairness without opening up the scope for avoidance, but this can be done if it is well researched and consulted on widely. That is important because we are deeply concerned in the committee with simplification. The present tax system is highly complex and simplification is essential. We saw only a very modest step this year, and the committee recommends a more determined and consistent approach to simplification over several years. Indeed, the Minister rather indicated that that is the way the Government see it as well.
Consultation is another of the committee’s major concerns, especially after last year’s shambles over IHT and trusts. The committee welcomes the increasing consultation on technical, legislative and administrative matters; indeed, consultation has continued apace even since we reported. But it can be more difficult where there are sectoral changes with winners and losers, as this year with the changes to capital allowances and, in particular, the phased withdrawal of the industrial and buildings allowances. The concerns expressed to us and echoed in the debates in the House of Commons show that, none the less, ways need to be found of building on the present consultative process and of consulting on policy issues. Lessons should be learnt from the progress on consultation and followed through in the simplification of personal taxation next year.
The business tax reform package comprises rate changes, capital allowance changes and increases in research and development tax credits. There were also two administrative changes. The package was said to have three main objectives: to enhance the international competitiveness of UK business; to encourage growth through investment and innovation; and to ensure fairness.
First, the setting up by the CBI of a task force to consider whether the tax system is fit for purpose is itself evidence of concerns about the decline in our tax competitiveness. The committee considers the reduction in the headline rate of corporation tax helpful, but other countries are also reducing theirs. The extent of the burden as a whole is also important and we recognise that there is very little change here.
Administrative measures are also important. As the Minister indicated, the committee welcomes the progress that HMRC has made on the Varney review of links with large businesses. HMRC told the committee that it regarded the recommendations as absolutely fundamental and it was confident that, despite the pressure on its skills and resources, it would deliver. Other countries provide greater certainty in their tax laws, so here again the recent consultative document on clearance procedures and advance rulings is particularly welcome. The committee recommends that this should have a high priority.
The committee also recommends that HMRC should press ahead vigorously with its programme of reductions in administrative burdens. Small companies, not just large ones, also need certainty and simplicity. They should be able to take decisions on commercial, and not tax, grounds. Frequent changes in the rate of corporation tax have not helped. The phased changes in the rate now proposed along with the simplification of personal taxation will narrow, but not close, the difference between tax on unincorporated and incorporated businesses. The changes being made or foreshadowed this year have caused a lot of concern. The committee recommends a review of the issue as a whole in consultation with the small business sector. The aim should be to reduce complexity and distortions caused by tax and to provide greater clarity and consistency. The committee also recommends that, despite the pressure on its resources, HMRC should have regard to the needs of small businesses and their advisers. I think that HMRC will know exactly what I am saying.
The second aim of the business tax reform package is growth through investment and innovation. The committee is doubtful whether the package will do much to encourage growth. Its overall impact is broadly revenue neutral. The annual investment allowance to come in next year is intended to provide some incentive, but we await the details. During the consultation on it, its impact across various types of businesses will need to be considered. Otherwise the changes in capital allowances are broadly designed to recognise economic depreciation and to remove any investment incentive. The R&D tax credits are being enhanced and the administration improved. It is too early to assess their effectiveness. The committee feels that, against the impact of the package as a whole, this year’s changes might not make a very positive impact overall. The third aim of the package is fairness. No one disagrees with that, but it is an elusive concept. There is a need to balance it with simplicity.
The Minister was kind enough to refer to the managed service companies. The Finance Bill 2007 is the latest round in attempts to prevent employment income from being dressed up in a different form, producing less tax and national insurance. HMRC considered this legislation necessary because it had found applying the existing IR35 legislation impractical. The Minister rightly spotted that the committee report considered much of this legislation to be in the nature of a sticking plaster, addressing a perceived wound in the short term but not tackling the underlying cause. To address the underlying cause, the committee recommended that the Government review the taxation of employees and small businesses operating in varying forms with a view to making structural changes to reduce the differences in tax outcomes and national insurance contributions payable whether an individual is self-employed, employed or operating through a company. Only when these differences are markedly reduced will the incentive to dress up employment income in a different form, and the need for this type of legislation, be reduced. The review proposed by the committee would need to overlap with the review of small businesses that I mentioned and should generally help to meet our recommendation on simplification.
Notwithstanding the firm recommendations on how to tackle this issue in the medium term, the committee was persuaded that the revenue lost from dressing up employment income had to be addressed in the short term. However, the committee was not as sure as the Treasury or HMRC that the new legislation would be effective. The committee therefore considered close scrutiny necessary, with a fallback plan involving the allocation of greater resources to applying the IR35 legislation should that be necessary.
The committee was also troubled by the number of concerns about the breadth and imprecision of the legislation in two areas: the targeting provision that defines an MSC, which is central to appropriate operation of the legislation, and the debt-transfer provisions, which allow a tax debt of an MSC to be transferred to third parties when the MSC does not pay. The debates at the Report stage in the House of Commons showed that there remained widespread concerns in the private sector about the breadth of the legislation, which the Government have failed to calm down. As foreshadowed by the committee’s report, we are now thrown back on to guidance to provide clarity on issues of concern. We know how unsatisfactory it is for legislation to be drafted widely and then cut down in guidance. Guidance can be altered, is generally of little assistance when a case comes before the courts and is not subject to parliamentary scrutiny.
A review of powers, deterrents and safeguards was announced in December 2004, on Second Reading of the Bill to provide the statutory framework for combining the Inland Revenue with Customs and Excise. The first results of the review are in this legislation, introducing new criminal investigation powers for the new department and new civil penalties for errors in tax returns. The committee was concerned that the new powers and penalties were being introduced before the safeguards. However, during our deliberations, the Government published a consultation document on safeguards—had they not done so, our report would have been expressed in considerably more forceful terms than it was. We strongly urge the adoption of appropriate safeguards, as quickly as possible.
There was much concern about the balance between what is in primary legislation and what is in supporting guidance, and we would like to see as much as possible in primary legislation. Making a practical suggestion, the committee felt that a way should be found of keeping current and easily accessible a record of the assurances that are given in Parliament or elsewhere in respect of the application of these important powers and penalties, because they are an important factor in the interpretation of the law, which needs to be understood.
The committee was reassured by the evidence of HMRC on how it intends to exercise the criminal investigation powers. The committee considers it very important that the assurances being given at the present time are adhered to in practice. Serious consideration should be given to providing an annual report to Parliament setting out the way in which the powers have been exercised in the previous year and how the assurances that have been given have been adhered to.
On the penalties for errors in tax returns, the committee felt that, if the new regime is to influence behaviour and encourage better compliance, there needs to be a common understanding of what type of behaviour falls into which degree of culpability. The committee was concerned that some of our witnesses felt that there was a lack of clarity on this aspect and recommended that particular thought and effort go into the drafting of the guidance on this. Again, we have guidance to back up legislation. It was a disappointment that no amendments were proposed on Report in the House of Commons to address the issue. The review of powers and deterrents continues and HMRC issued a further consultation document on the developing programme of work in respect of payments and debt.
The last issue that we discussed was online filing and electronic payment. The committee fully endorses the drive that HMRC is making to encourage online filing. There are significant benefits to be won by the department and by taxpayers, but we believe that this should be done by better marketing, by ensuring the reliability and robustness of the systems and by making the changes more attractive to those who are IT-illiterate. We recommend that online filing should not be mandatory for smaller businesses and employers. The proposals to make it compulsory for corporation tax, VAT, PAYE and NIC returns should be dropped. There may come a time when compulsion is possible, but it is not yet. As for electronic payment, we agree that there should be no cash-flow advantage for payment by cheque. We were reassured to learn that payment by cheque by the bank giro method will continue to be possible, but there may be some cases where even that is not practicable, so payment by post may still be needed.
The committee did a good job in considerable detail and I think that it is right for me to give a report of our work. We were not entirely critical of the Government. We recognise that they have some considerable problems to deal with and I hope that our contribution is helpful to them and to the Revenue in the work that has to be done in years to come.
My Lords, I congratulate the noble Lord, Lord Wakeham, on his admirable chairmanship of the committee in the preparation of its report on this year’s Finance Bill. I will restrict my remarks to business taxation and the business tax reform package. I declare an interest as a past president of the CBI and a current member of its President’s Committee, as well as a UK company director.
I begin with a word of encouragement to HM Revenue and Customs. As our report noted, on Budget day HMRC published its progress report on the Varney Review of Links with Large Businesses and its plans for the delivery of all of that review’s proposals. It is not often that the business community gives its almost unqualified approval to a Revenue and Customs initiative but in this case it has done so. It is seen as a major step forward in encouraging trust and dialogue between HMRC and large businesses, and provided that the ambitious implementation plan can be achieved in practice, it will set new standards for the relationship between the two parties. It shows what can be done if the traditional hatchets are buried and the focus shifts from areas of contention to those of common ground. Indeed, it represents something of a culture shift which could beneficially be applied in a wider context.
That wider context might be provided in the recent announcement by the CBI—to which the noble Lord, Lord Wakeham, alluded—that it has launched a tax taskforce to undertake a root-and-branch examination of whether the current UK corporate tax regime is fit for purpose over the longer term and to draw up proposals for how it might be adapted to ensure the continued competitiveness of UK-based companies. It aims to report early next year.
I am not associated with the taskforce but I believe that its establishment is timely. The world economy is clearly becoming increasingly international. Economic liberalisation, boosted by new technologies, is creating more integrated markets and increasing competition on a global scale. That is all common knowledge. What is less well recognised is that, as a result, the challenges facing business are changing and becoming far more complex. Companies have wider choices to make about where they invest their capital, site their operations and, indeed, domicile their tax affairs. Business taxation has become a strategic issue for company boards in a way that it would not have been 20 years ago. This is not just a phenomenon affecting UK companies—you can see it almost anywhere you care to look. But against that backdrop, rightly or wrongly, over the past few years the UK corporate taxation system is perceived to have become more complicated, hostile, unpredictable and burdensome, leading many companies to believe that they are now operating at a competitive disadvantage, and an increasing number to consider relocating to places with more friendly tax regimes. Incidentally, this perception of the UK regime is not restricted to companies located here but is shared by firms in neighbouring countries.
This is not just a problem for UK business. For government, too, problems will increasingly arise from the reduced ability to predict and collect a stable revenue stream and from increased administrative costs. There is more to this than just sabre-rattling. The forces of globalisation and market integration which I mentioned earlier are seismic changes that will sooner or later require a radical response on the business taxation front. Yet the overwhelming sense I have of the business tax reform package in the 2007 reform Bill is that it is incremental, not radical. The right buttons are pressed and all the right words are used—consultation, simplification, reduction of administrative costs, international competitiveness, encouragement of investment and innovation and so on—but the scale of the ambition of the package simply does not match its context. This is fine-tuning of an old model, not reform to match the needs of a new world.
I would be the first to recognise that radical reform is much easier said than done, and this is not just the fault of the Treasury and HMRC—business can be to blame as well. Take the key issue of simplification, upon which certainty, reduction in administrative costs and so on depend. It is very easy for business to plead for greater simplification, but ask business precisely what simplification it would like and that can be a different matter.
Let us take an example centred on what is now Liberal Democrat policy. A substantial contribution to simplification could be made by abolishing capital allowances altogether, not just industrial and agricultural buildings allowances. Businesses could then be taxed according to their financial accounts; there would be no requirement for separate computing systems for taxation purposes; there would be no problems in interpretation; administrative costs would tumble, and so forth. But the traditional business response to such a policy would tend to be negative, for two overt reasons. First, business believes that the total tax take would be greater if capital allowances were withdrawn. Secondly, simplification almost invariably results in winners and losers. The winners silently pocket the gains while the losers kick up an unwelcome fuss. Of course, neither reason is fundamentally compelling. Hold the tax-take constant and any disbenefits to business from dismantling the capital allowance regime could be recovered through, for example, a reduction in the headline corporation tax. Shocks to companies from the withdrawal of specific allowances could be mitigated by phasing out the changes over time.
There is, I suspect, a third and unspoken reason why both government and business appear reluctant to take a truly radical approach to simplification; that is, that the practitioners—whether company finance directors, tax consultants or civil servants in the Treasury or HMRC—all share an interest in complexity. The mastery of complexity lies at the heart of their mystique, expertise, value and, ultimately, livelihood.
Those forces of reaction are quite understandable but they need to be countered if we are not to end up with too little, too late. A shift in culture is required to wean the practitioners away from their great game of the past and to take a fresh look at the future. If the spirit behind HMRC’s enthusiastic pursuit of the Varney review recommendations could be extended to HM Treasury, I am encouraged to believe that the Government might just be up for it, just as I am encouraged to believe that, with the launch of the CBI’s tax taskforce, we can look forward to some fresh thinking that is aimed at promoting the UK’s international competitiveness in everyone’s interest. I hope that it is not too much to expect that the approach to business taxation in the 2008 Finance Bill can be shifted up a gear or two, from the predictably incremental to the refreshingly radical.
My Lords, I add my congratulations to the chairman of our sub-committee, the noble Lord, Lord Wakeham, who again has done an admirable job in chairing our committee and preparing our report. I have nothing to add to all that he said today; I am happy to leave that to him.
I want to say a word about simplification, about which the noble Lords, Lord Wakeham and Lord Vallance, spoke. The noble Lord, Lord Vallance, made the very strange point that it is Lib Dem policy to simplify taxation by abolishing capital allowances altogether. I am bound to say that depreciation is a genuine business expense; it is not exceptional. All companies have depreciation if they have any plant whatever. I thought that we were trying to encourage companies to invest in more new plant.
My Lords, I shall think about that again later.
We said in the committee—I agreed with it, as I eventually went along with everything that the committee agreed on—that it “should be” possible to simplify the tax system. I agree that it should be possible but I am somewhat pessimistic that any Government ever will provide a simple tax system, for a variety of reasons, as we well know. For example, we have referred to the question of capital allowances; the Government have made changes which they and I hope will help, but I am a bit doubtful. Equally, there are all kinds of other allowances that could be abolished, increased, reduced or whatever. They include, for example, allowances for families with children, allowances for being married we are to get a new variable allowance for marriage, I gather, if ever the noble Lord, Lord Forsyth of Drumlean, runs the Treasury—no, he is shaking his head; I am glad to see that. We will also have lower rates, higher rates, we will encourage savings, we want to help pensioners, we want to help investment, we want fairness and we want to punish with so-called green taxes; all those things, I am afraid, will ensure that we never really get a simplified tax system. I see that our chairman, the noble Lord, Lord Wakeham, is, quite rightly, smiling; frankly, it would be almost impossible, as any of us who have been there know, to get a truly simple tax system to help, encourage or punish everyone.
I want to say a few words about the Finance Bill and the current headlines about billionaires paying less tax. I hasten to add that I am not a billionaire, so I have no interest to declare in that sense. I have spent most of my life as an accountant and in my personal affairs I have, perfectly legitimately, tried to pay less tax. I am not surprised that billionaires and their advisers have been successful in avoiding tax.
I refer again to private equity firms. One of the few journalists whom I admire in this area is Anatole Kaletsky, who is usually very sensible and very reliable, and, invariably, I agree with him. On tax and private equity he said that,
“on closer inspection, … criticisms of private equity companies as taxpayers applied to all private companies”.
I declare an interest, not in a private equity firm, but as a chairman and a major investor in a small AIM-listed company. If I ever sold the shares I would pay a very low level of capital gains tax—10 per cent. If I keep the shares and pass on to a better world, no one will pay any inheritance tax.
My noble friend Lord Davies said that he wants to see people invest in companies for the right reasons. The Government have rightly encouraged people to invest in AIM-listed companies for the reasons that I have indicated: one pays substantially less tax. I hope I am not encouraging the Government to change that situation, at least not for a while, because it is doing a lot of good. Small AIM-listed companies, in the main, do a great job investing in new plant and in new companies—mine is a recycling company—and that is very sensible. I admire them for doing so. I am sure that the noble Lord, Lord Jones of Birmingham, whom I am delighted to welcome to the Front Bench, will agree with me. He is nodding in agreement, so I hope the Government, of which he is an important part, will nod with him.
However, something can be done in the area of non-domiciled rules. I was interested to read something that the new Financial Secretary said on that subject at Question Time last Thursday in the other place. She said:
“Resident non-domiciled people remain a relatively small group who are liable to pay UK tax on their earnings”.—[Official Report, Commons, 12/7/07; col. 1605.]
They paid some £3 billion, but she did not say over how long a period. I am astonished that they paid £3 billion; one wonders how much they are not paying. I am concerned about the definition of “non-domiciled”.
We were also told by the Financial Secretary that the Government are mindful that any change to the current system would need to balance carefully the principle of ensuring fairness. She said that domicile rules are subject to an ongoing review. That started in 2002 so the ongoing review has lasted five years to date. I hope that my noble friend, or someone, will be able to tell me today, or in writing, what “ongoing” means. I am looking for a review on another matter, to which I shall briefly refer. I know “non-domiciled for tax purposes” is a complex area, but perhaps the Minister can give me a definition of the term and say why it has taken five years for an ongoing review to do nothing about it.
I will leave that to one side, but another aspect of Finance Bills and criticism is the tax credits system. I shall leave the unfair criticism of it to the noble Baroness, Lady Noakes, who I am sure will help the Government with some constructive criticism of the errors in the tax credits system. However, most of them are errors, not fraud. I note that this happens because the system works over 12 months. We all know that when people’s income changes during the course of a 12-month period, they do not always automatically notify the Revenue, sometimes for perfectly reasonable reasons. That inevitably means that there are many errors in the tax credits system.
For my part, I am happy to see the figures that the Government have announced for the amount of help being provided for poorer families by tax credits. I welcome that. I do not know whether the Government saw some words by Sam Brittan in the Financial Times about the US tax credit system. Both he and somebody who wrote in about it recently have indicated that they think that there are better ways. This is from somebody whom one normally regards with some respect, Rupert Darwall from the Centre for Policy Studies. He said:
“The incentives in America’s earned income tax credit are superior in every respect and show the way tax credits in Britain should go”.
Can my noble friend say whether the Government have looked at the American tax credits system to see whether it is indeed better and can offer us any hope of a better solution? My own view is that a committee like the House of Lords sub-committee would be a better committee to look at tax credits and many other parts of the tax system. Any of us who have been in the other place know that Oppositions pick the sexy bits of a Finance Bill and the rest through virtually goes on the nod. It happened to me when I was in opposition and to noble Lords opposite when they were in opposition. I well recall the first time, in 1975—a few years ago—when the noble Baroness, Lady Thatcher, was leading the Opposition. Again, they picked out tiny bits and the rest went through on the nod.
We in this House can do a much better job than the other place. I hope that this Chancellor will recognise that and agree and support our sub-committee in doing much more work to help him, the Treasury and the Revenue to provide a better system than we have now. We can do it, so I hope that we will get that kind of encouragement.
On the economy, the new Chancellor had a good economic inheritance. Again, I can rely on the noble Baroness, Lady Noakes, to tell us what a terrible 10 years we have gone through—the points of my noble friend Lord Davies were nonsense, of course: the economy was terrible for the past 10 years. But I leave that to one side. The new Chancellor has little room for manoeuvre. The Comprehensive Spending Review was virtually settled before he even took office. The possible taxation reductions in variable tax systems are difficult to achieve. The Liberal Democrats’ proposed 4p off the rate of income tax would perhaps simplify the tax system, although maybe my noble friend Lord Davies can tell us how on earth the green tax payers are going to pay the balance.
One or two changes could help. The Barnett formula could be changed, which would save quite a bit of money. My right honourable friend the new Chancellor is Scottish, so I know that he reads the Scottish papers. Tam Dalyell sends me them all, so I know that the formula is there almost every day. All I am asking for is a review, which would show that there is a case for substantial savings.
There is also the problem of borrowing. In my view—and I speak as a Mancunian—the Government were not wrong to think again about a super-casino for Manchester, but if that area is to be helped without a super-casino, it will need a lot more investment in housing in the kind of area we know. So where is that money going to come from?
The other point I wish to make to my noble friend is that he should ask the Chancellor to tell the Monetary Policy Committee of the Bank of England that its remit is not just inflation but is, in the famous three words, “subject to that” to look at the Government’s economic policy. I am assured by a former member of the MPC that it never looks at that. I ask the Chancellor to emphasise that it should look at it. In the past 10 years, the Bank of England has only once had to report inflation going over the 1 per cent margin, and that was no disaster. I hope the new Chancellor will look at that and also at the borrowing figure of 40 per cent of GDP. The trouble with that rule is that investment in current expenditure is sometimes better than investment in capital expenditure: better in the long term and better value for money. The rule needs to be rather more flexible than it is at the moment, and I hope he will consider that.
I look forward with great interest to hearing my noble friend’s answers to my specific questions because I know how knowledgeable he is on these matters, but if he does not have the details here and now, I am happy for him to write to me.
My Lords, it is like Gilbert and Sullivan when the Minister introduces a debate on the Finance Bill, which runs to 309 pages, by saying that it is a simplification of the tax system. Included in those 309 pages is Schedule 26, on “Meaning of ‘recognised stock exchange’”. I have do not have a clue what it means, but the noble Lord, Lord Barnett, will. On my reading of that section of the Bill, it appears to give HM Revenue and Customs the power to decide what is a recognised stock exchange, so the bad news for the noble Lord is that his AIM shares may very well no longer qualify under the powers contained in the Bill. He was clearly not aware of that; I became aware of it only because I happened to be looking at the index when he made the point about recognised stock exchanges.
The idea that the former Chancellor, now the Prime Minister, is some kind of high priest of simplification is a joke beyond measure. This Prime Minister, as Chancellor, doubled the size of the tax code, added hugely to the complexity of the tax system and, as the noble Lord, Lord Vallance, indicated, has taken us from having a comparative tax advantage into lagging behind our competitors, who learnt the lessons that Britain taught the rest of the world under the leadership of the noble Baroness, Lady Thatcher, and Sir John Major. At one time, we were well ahead of other countries in Europe and the OECD, but as they have cut their rates of tax and simplified their systems, they have made their economies more competitive than ours, as my noble friend Lord Wakeham stated in the introduction to his committee’s excellent report.
I am a bit disappointed that this debate is not better attended and that there are not more contributions to it, because the work done by my noble friend Lord Wakeham and his colleagues is of fundamental importance. Parliament is about voting means of supply. As the noble Lord, Lord Barnett, said, the involvement of Parliament in the control of those means of supply becomes less and less. I think it was the chairman of the Chartered Institute of Taxation, John Whiting, who worked out that every line of the average Finance Bill is considered for 10 seconds, taking into account moving, consideration, debate and voting, and, as the noble Lord indicated, what tends to happen in the other place is that focus is put on the politically contentious issues of the day, rather than the detail, which is not considered. As my noble friend Lord Wakeham pointed out, and as we saw, for example, on inheritance tax and the changes in the treatment of trusts, all kinds of avoidable difficulties are not avoided because there is no time for consultation or proper scrutiny.
I do not share the pessimism of the noble Lord, Lord Barnett, about the ability to remove complexity and bring simplicity to the tax system. I do not understand why it should be that, because he owns shares in an AIM-listed company, he is able to pass them on free of inheritance tax, whereas if he owned shares listed on the London Stock Exchange, that would not apply. It is deeply unfair because poorer people who do not have savings or shares, whose only asset is their home, have to pay inheritance tax at 40 per cent. That introduces complexity into the system because different classes of assets are or are not subject to capital gains depending on whether they are traded on a certain exchange, and if an AIM company changes to being quoted on the main exchange, there has to be a valuation, so there is further complexity in the system.
The answer to this is not to invent more rules but to deal with the fundamental problem, which is the burden of tax. The system has become increasingly complex because the previous Chancellor tried—and no doubt his successor will do so—to find ways of taking more in tax; clever accountants tried to find better ways of getting around that; and the Chancellor responded by bringing in more measures to deal with the loopholes created by the complexities that he introduced. And so we go on in a continuous cycle.
As the Economic Affairs Committee pointed out in its excellent report, this Finance Bill set out with a brief to improve competitiveness and to simplify. The proposal to reduce corporation tax by 2 per cent is welcome but, as has already been pointed out, the problem is that one man’s simplification is another man’s loss of privilege. Let us accept that there is no politically possible way to simplify the tax system on a revenue-neutral basis. If you are going to simplify the tax system, you need to reduce the overall burden so that you can compensate the losers and bring in a more effective system as a result.
Why do we have a Finance Bill every year? It is because Parliament is required to renew income tax on an annual basis. In the spirit of co-operation that was evidenced a few moments ago by someone on the government Benches who looked like a former leader of the CBI, in which apparently we all now believe the same things, I offer the new Chancellor of the Exchequer this idea: that we get rid of the notion that income tax has to be renewed annually. We would not then need an annual Finance Bill and the Finance Minister would not be tempted to tinker with the tax system every year. That might help to bring about a degree of stability. When the Prime Minister was Chancellor, the Finance Bill proved a tinkerer’s charter. He messed about with every aspect of our taxation system.
The noble Lord, Lord Barnett, mentioned the current row about private equity. It is a scandal that people who are paid the minimum wage and move from part-time to full-time work now pay an effective marginal rate of tax of 90 per cent, and 95 per cent if they are married. Someone who has perhaps made £100 million by buying a company one year and selling it two years later will pay an effective marginal rate of 10 per cent. That is a scandal; it is indefensible. How can you defend a tax system like that? Who is the author of this change? It is the former Chancellor of the Exchequer, now the Prime Minister, who introduced the 10 per cent taper relief on capital gains. He introduced the tax credit system which has created the effective high marginal rates of tax. These two initiatives undertaken by the Prime Minister have created this anomaly.
How much more sensible it would be to have a capital tax system, perhaps a short-term capital gains tax that tapered to zero, that applied to all capital gains; that does not distinguish between AIM shares, shares held by private equity companies, venture capital trusts or anything else on which anyone who makes a capital gain gets taxed. That kind of simplification would not only make it easier for people to understand our tax system but it would also remove the anomalies and unfairness which are created.
I have been critical of the noble Lord, Lord Barnett. I am a great admirer of his. Many people in Scotland would like to raise a statue to him in honour of the Barnett formula. He is a typically modest politician, and the only one I know who spends his life trying to get abolished something that was named after him. He shows clarity of thought. His comments on non-domiciled taxpayers are an example of anomalies in the system which creates complexity. I ask noble Lords, how can it be right that a young couple buying their first home in London, or in any other part of the country, have to pay stamp duty at 1 per cent while someone living in London as a non-domiciled taxpayer can buy a house for £20 million and pay no stamp duty at all? What kind of nonsense is that? Again, the Government have said that they will review the system for non-domiciled taxpayers, but nothing has happened to bring about equity in the tax system. There is too much tax law and too little scrutiny.
The work done by the Select Committee on Economic Affairs is excellent, but why can we not build on it? As the noble Lord, Lord Barnett, said, there is expertise here. I think that he did himself a great disservice. I was not in Parliament until 1983, but I have heard the tales that the Finance Committee used to sit until four o’clock in the morning with people of real substance arguing points of detail with knowledge and authority. That no longer takes place in the other place, much to the relief, no doubt, of the Members of Parliament. Perhaps there is a case for building on the excellent work done by the Economic Affairs Committee and creating a Joint Committee to look at Finance Bills.
I return to my idea of getting rid of the annual need to renew income tax. If that were done, a timetable requiring that means of supply be concluded by the summer after the Budget would disappear. We could have a more leisurely pace for considering tax matters. Indeed, you could have a rule that the Chancellor was required to publish in the Pre-Budget Report in November. He would be required to pre-announce before the Budget any major tax changes in law, so that there could be proper consultation, unless of course there were revenue implications or a matter of particular urgency. A Joint Committee could take evidence and build on the kind of good work which has been done by the Economic Affairs Committee operating in a compressed timetable.
I offer that idea to the Prime Minister because there is something very odd about a former Chancellor who on becoming Prime Minister immediately says, “I believe in more open, accountable, consultative government. Therefore, I am going to pre-announce the Queen’s Speech so that people can think about it”. Why did he not do that for the Finance Bill when he was Chancellor? If that treatment is good enough for the rest of the legislative programme now that he is Prime Minister, why is it not good enough for the Finance Bill? I know the answer. It is that it takes power away from the Treasury. It prevents the Treasury springing daft ideas on us, which we would have to spend time unscrambling in subsequent Bills. But it is an idea that would go a long way towards meeting the Government’s declared objective of having a fairer and simpler tax system.
I have spoken for longer than I expected. I make one other suggestion to the Government. We get Bills with vast numbers of clauses written in incomprehensible language referring to previous Bills, written in equally incomprehensible language. Would it not be possible to have an economic impact assessment of a new proposal? The Government declare that their proposals will improve competitiveness without a shred of work being done to show that that is the case, and without any attempt to give an indication of the cost and impact that it will have on business as a whole.
The noble Lord, Lord Vallance, rightly pointed to the importance of economic competitiveness and what had happened to our ability to attract companies from elsewhere. I never thought I would say it, but Ireland has become a beacon of what is achievable in increasing revenues, cutting taxes and simplifying the tax system. We can have fairer, flatter, simpler, lower taxes, prosperity and growth at the same time. That is the challenge. It is a challenge on which this Government have failed, and which I hope the next Government under David Cameron’s leadership will take up with gusto.
My Lords, I do not agree with many issues raised by the noble Lord, but he was right to say that the House of Commons spend their time on the Finance Bill dealing mainly with political issues. We have a much wider arrangement in this House so we can look at the whole matter of economic affairs and Finance Bill problems to a much wider degree.
I thank the noble Lord, Lord Wakeham, for chairing the Select Committee so very well. He produced a great deal of agreement throughout our debates.
The House of Lords very effectively scrutinises the Finance Bill. We look at the whole range of financial measures and the ones that are introduced. The membership of the committee is extremely good and includes a couple of former Chancellors of the Exchequer, a number of former Ministers and an ex-governor of the Bank of England. So we look at the Bill with a great deal of financial background, rather different from that which operates in the House of Commons.
In the past 10 years we have seen unrivalled growth. Nobody ever expected that growth to continue for so long and now nobody even questions that it will continue. That is one of the great achievements of this Government.
My noble friend Lord Barnett said that the move to simplification would be limited. I agree with him that we cannot produce the provisions in just a few pages; it always has to have the complications of legislation, but we should agree to move in that direction. He also mentioned scrutiny of the Finance Bill. The House of Lords scrutinises the Finance Bill more effectively than does the House of Commons. We have bipartisanship in a number of areas, which obviously is of great value in examining these matters.
First, I refer to the simplification issues. We have made many changes to create fairness and a greater degree of compliance. The problem is that these changes can lead to complications. As soon as you try to have simplification and to consider fairness you find that they are frequently opposite. The better balance has to be found, which is also very difficult.
I refer to the evidence given in answer to question 42 by Mr McCafferty, an economist at the Institute of Directors. He said:
“It is clear that the abolition of the agricultural buildings allowance and the industrial buildings allowance does offer some element of greater simplicity but in terms of the other allowance changes, the changes to plant and machinery, the simple change to the relative calculations rather than simplifying the nature of the allowances and introducing a new category, that of plant integral to a building, if anything they add a further modest complication or complexity to the system”.
That is undoubtedly true and is one problem. In our report we mention that at paragraph 21, where we state that it is understood that the present tax system is highly complex and that simplicity is essential if the United Kingdom is to be made more attractive to international businesses that can move in our direction. In paragraph 22, we state:
“We recommend that a more determined and consistent attempt at simplification be made. What we see in this Finance Bill is a very modest step and more could be done. This will necessarily take more than one year and will require a combination of administrative and legislative measures. There clearly may be a tension here with the desire for fairness: it will also be necessary not to open up scope for avoidance. But it should be possible to find a balance here if the work is well researched and subject to wide consultation”.
I agree entirely with that. We had a long discussion on those matters and came to general agreement on that.
I turn to mandatory online filing, which is the main thing that I want to deal with. I understand why there is a recommendation for online filing. Obviously, if all taxpayers had the ability to undertake online filing, compulsion would be acceptable. The problem is that, despite the efforts made by Her Majesty's Revenue and Customs, insufficient understanding has been given to the problems of those who are unable to meet the requirements. We refer to that in paragraph 265, where we state:
“The witnesses were unhappy however at any suggestion that electronic filing be made compulsory. They thought that there would be some people who would remain IT illiterate or who for whatever reason would be unable to use the service and there would be costs involved. They were also concerned at the possibility of systems breaking down, of which there was some experience”.
We must understand that some of people in this country are not as IT-literate as many of us. We go back to our rooms, switch on our computers and do all sorts of things, but many people cannot do that. To make it essential that they do that will lead to problems. As one witness said at paragraph 266,
“We are right behind the drive but it has to be business led. It … makes life easier for businesses and taxpayers and it reduces costs. But I do not think we are in that position at the moment ... We are a long way from having robust, reliable electronic systems … I am afraid we disagree. What we should be concentrating on is getting these systems right and then the natural move for businesses and taxpayers will be to use them. You may then have 90% and you will have to decide what to do with the ten per cent but we are not at that position at the moment”.
Theresa Middleton of HMRC said:
“we believe [compulsion] is essential to maximise the benefits for business”.
The problem is the timing. At present, there is a number of not very computer-literate people engaged in businesses. She believes that some employers should not be required to file on-line until 2010.
In answer to question 342, Mr Hartnett said:
“We are actually looking at what other countries are doing in relation to contingency. Generally the answer is to provide more time. The USA have just had to do it, but also a number of countries—and we will be part of this route as well—are looking at how we can build much more resilience into our systems than perhaps we have had in the past. There is a great pooling of work going on in the tax community around the world”.
Our report states:
“We remain concerned that the implications of making online filing mandatory for Corporation Tax and Value Added Tax have not been fully thought through. We understand why HMRC has taken the line which it has and certainly it has taken many steps to encourage on-line filing: it should continue to do so by every means. But the range of issues raised by our private sector witnesses need further consideration. There should be further concentration on ensuring the robustness and reliability of the systems and on making the change more attractive for those who are IT illiterate. We do not think that the efficiency savings to HMRC justify compulsion ... we recommend that the present proposals for requiring online filing by smaller businesses be dropped: better marketing by HMRC of the benefits of e-filing would be a better approach. There may come a time when e-filing could be made compulsory, but we think it premature at present,”.
We all know a number of people in that position who are just not able to do that kind of thing. To make it compulsory is likely to lead to some serious problems.
My Lords, once again it is time to examine the Finance Bill. We are also grateful for the report produced by my noble friend Lord Wakeham. As usual, his committee has produced a thorough and professional document, to which I shall return shortly.
First, I want to make some comments about the economic background to the Budget. Then I want to look at the area of simplifying tax. Then I shall look at the Budget in a bit more detail. Finally, I will look at some other areas of my noble friend Lord Wakeham’s report.
First, I shall look at the economic background to the Budget. The Minister is right to emphasise the record of economic growth and the noble Lords, Lord Barnett and Lord Sheldon, the inflation record so far—although there might be a case for being more cautious now. The Chancellor claimed that,
“our fiscal discipline is the foundation of the strength of Britain's finances”.
If the story were that simple, he would have had the cash to cut taxes uniformly, rather than reducing the burden on some taxpayers while raising it for others. Nor would he be planning a squeeze on taxation and public expenditure over the next three years that will raise the tax burden to levels last seen at the start of the 1980s.
Let us look back at the Chancellor's record on public finances since Labour first came to power. Between 1997 and 2001, the public finances improved sharply as the result of extremely tight controls on public expenditure and unexpectedly rapid growth in tax revenues. Then the Chancellor started spending and a black hole of lost revenues emerged. The Treasury's forecasts moved from persistently pessimistic to overly optimistic. The cyclically adjusted current budget surplus fell into deficit and, at its worst, was 1.5 per cent of GDP in 2004-05. The Chancellor has been clawing back that deficit ever since, first with upfront and stealthy tax increases raising tax rates and revenues as a share of GDP, then by planning much tighter public spending control in the years ahead.
Every year since 2001—for seven Budgets in a row—the Treasury public sector net borrowing forecasts have been too optimistic. Analysis of the Budget figures shows a current budget deficit that is £3 billion higher than the Chancellor's December forecast in 2007-08 and £1 billion worse in every subsequent year.
The problems have come from forecasting taxes and public expenditure. Tax revenue predictions have again been too optimistic and the Treasury has had difficulty in living within its current generous spending totals. Compared with last year’s Budget, tax revenues are now projected to be £2.1 billion lower in 2007-08. Corporate tax revenue is the villain of the piece, with North Sea oil revenue falling far short of expectation. The Chancellor blamed a lower oil price, lower production, higher investment and a stronger pound for reducing sterling profits in the North Sea. I would argue that the tax increases in 2002 and 2005 have been a big hindrance. In addition, the Chancellor has extraordinarily excluded oil companies from the corporation tax cut, which I shall come to later. Can the Minister say why they have been excluded?
On public expenditure, the Treasury was also unable to keep within spending plans for day-to-day bills, overshooting by £1 billion this year and £2 billion subsequently. “So what”, you might say. Persistent forecasting errors delay the point at which the Government can stop squeezing the public with a higher tax burden and slower spending growth.
I turn to my noble friend Lord Wakeham’s report. One of the three key topics covered by the report is the simplification of business tax. I agree with my noble friend’s conclusion that more needs to be done in this area, and would extend that observation to personal tax. As the noble Lord, Lord Forsyth, said, since 1997 Tolley’s Tax Guide, which is usually referred to as the accountant’s bible, has doubled in length to 9,841 pages. Prior to the 2006 Budget, a Pricewaterhouse and World Bank survey stated that the length of our tax code was second only to India: 8,300 pages of primary legislation compared with India’s 9,000 pages. The 2006 and 2007 Bills have probably made the UK’s tax code of primary legislation the longest in the world.
According to the Financial Times of 22 March, in private briefings to a financially aware audience after the Budget, the Chancellor made a virtue of his reforming Budget. He claimed that it would secure his legacy as a tax simplifier, trumping even that of the noble Lord, Lord Lawson, between 1983 and 1989. But is this portrait of Mr Brown as a tax simplifier convincing? Did he not introduce many of the measures abolished yesterday? And will the personal and corporate tax system really be less complicated in future than it was, say, a decade ago? The Institute of Chartered Accountants described the Budget as,
“a piecemeal budget which tinkers with the system rather than starting the comprehensive reform which is so overdue”.
While the Chancellor’s proposals reduce the number of tax and national insurance rates from five to three by April 2009, the story does not end there because many people will have to claim tax credits if they are to be winners from the personal tax changes. If tax credits are included, there are still myriad rates of tax. According to the Financial Times of 22 March, a lone parent with two children faces a 70 per cent tax rate until earning more than £25,000 a year. It states that more than 1.7 million people face these extremely high marginal tax rates, as my noble friend Lord Forsyth said, and have to deal with a tax system so complicated that a Revenue and Customs official admitted just before the Budget that she did not expect ordinary people to understand their tax credit awards. Since the personal tax reforms include another expansion of tax credits, the Financial Times believes that,
“it would take a bold chancellor to describe them as simpler than the current system”.
Turning to the detail of the Finance Bill itself, as usual, I will give praise where it is due. I can applaud increased investment in science and technology innovation with support for research and development in the area of fuel efficiency. I can also respect some of the raft of environmental proposals, such as grants for home insulation and heating for pensioners. I can also applaud reduced VAT on energy efficiency in the home. In the area of savings, it is good that there has been an increase, albeit small, in the overall ISA limit from £7,000 to £7,200. On the Chancellor’s tax measures overall, however, they can be summed up in one sentence: what the Chancellor gave on the one hand, he took away with the other. For example, with regard to personal tax, the 2p cut in income tax was funded by the abolition of the lower 10p rate and an increase in the upper limit on national insurance contributions, moves which mean that few people will pay less tax and lower income households with no children will be worse off. It was curious though, that the Chancellor chose not to abolish the 10p band on certain interest income, prompting Mike Brewer of the Institute for Fiscal Studies to say that,
“if the budget was genuinely about simplification the chancellor would have gone the extra step and abolished this anomaly”.
Likewise, on the corporation-tax front, the 2p cut will be funded by the clawback from raising the small business corporation tax rate and the overhaul of capital reliefs. Essentially, that means that while long-life assets are written off quicker, the vast majority of assets now take a further two years before 90 per cent of their value is written off. Many commentators were unhappy with the sudden scrapping of industrial building allowances and agricultural building allowances—which amounted in effect to retrospective taxation. In my view it would have been fairer if allowances for existing buildings had been kept. Also, the Chancellor is poised to recoup nearly £1 billion a year by clamping down on corporation tax relief for empty industrial buildings.
Smaller and medium-sized companies were particularly badly hit by the Budget. They will see their tax rate rise by 1 per cent per annum to 22 per cent by 2009. While the Chancellor has put in place a 100 per cent investment allowance for the first £50,000 of capital spending, details of which were not in the Finance Bill, this will not help service companies. Smaller companies are now paying more tax than in 1997, according to Roy Maugham, a tax practitioner at the accountancy firm UHY Hacker Young. Does the Minister think that that sends the wrong signal if the Chancellor is trying to create an entrepreneurial environment?
Another area that I wish to focus on, which may appear rather technical but I think goes clearly against the former Chancellor’s expressed wish for simplicity in taxation, is the so-called targeted anti-avoidance rule—TAAR—for capital losses. I am indebted to Simon Mabey, tax partner at Smith and Williamson, for alerting me to this. I am referring to the general CGT anti-avoidance rule in Clause 27 of the current Finance Bill. HMRC has issued guidance to the clause in a separate document completely outside the Bill. The Chartered Institute of Taxation, in its submission of 1 June, makes the following statement:
“The proposed guidance is likely to be ineffective as we believe it is (improperly) attempting to concede by concession relief from losses which Clause 27 has granted”.
So we have the curious situation where, as Mr Mabey believes, HMRC is taxing by legislation and un-taxing by guidance.
Taxpayers should also worry about the Wilkinson judgment which said inter alia:
“HMRC’s powers ... could not be construed so widely to enable the commissioners to concede, by extra statutory concession, an allowance which parliament could have granted but had not granted”.
In another place, Mr Ed Balls defended the Government’s approach, saying that experience with the company TAAR had been good and he could not understand why the Chartered Institute of Taxation and the Institute of Chartered Accountants were concerned about Clause 27. That missed the point that companies are rather different from individuals and do not have spouses or trusts. The Chartered Institute of Taxation is considering judicial review of the guidance rules, and I would be grateful for the Minister’s up-to-date view on this area.
The report of my noble friend Lord Wakeham and his committee’s views on managed service companies are full of good sense. The verdict in paragraph 305 is clear that,
“the Government should review the taxation of employees and small businesses operating in various forms with a view to making structural changes to reduce the differences in outcome in terms of tax and NICs payable”.
The third topic covered by the report was the Finance Bill and the review of powers, deterrents and safeguards. I particularly support the sentiments of paragraph 320, which says:
“We see it as particularly important that where serious matters such as powers and penalties are under consideration, as much as possible is written into primary legislation”.
This re-echoes my concern, which I have already stated, about Clause 27. I also like the idea expressed in paragraph 327 that serious consideration should be given to setting out the way these powers have been exercised in the previous year and how the assurances that have been given at the present time are being adhered to.
The report’s section on online filing and electronic payment recommends in paragraph 336 that present proposals for requiring online filing by smaller businesses should be dropped because it is premature. I agree. However, I am surprised that the report makes no mention of the accelerated date of 31 October for income tax self-assessment returns from the tax year 2007-08 onwards that are filed manually. Will the Minister say why this date has been brought forward from 31 January, as it may well make it difficult for some taxpayers to provide the information in time?
In summary, the Budget fails to simplify the tax system—a simplification that is desperately required. I like my noble friend Lord Forsyth’s idea of an economic impact assessment on any future tax changes.
My Lords, like other noble Lords, I begin by congratulating the noble Lord, Lord Wakeham, and his colleagues on producing such a thorough and sensible report in such a very tight timetable. I join the noble Lord, Lord Barnett, in expressing the hope that this Chancellor will see this committee as having a major and positive part to play in developing public policy on taxation, unlike the current Prime Minister, who saw it in some way as a threat to the constitutional settlement that has been in place for about 100 years.
I agree with the noble Lord, Lord Forsyth, that Parliament could do more to improve the way in which taxation is considered. I think that our colleagues in another place would find revolutionary his proposal for a Joint Committee of both Houses on taxation. Much as I am in favour of radical and revolutionary change in some things, I simply do not believe that that is within the bounds of possibility, although perhaps we could consider it in a review on the powers and operating structures of your Lordships’ House. However, I am not overly optimistic. We on these Benches have for a long time been in favour of a slightly different way of getting around this, although it may be no more realistic—a tax administration Act that would deal not with tax rates but with all tax administration issues. Such an Act could logically be subject to scrutiny in both places. We have advocated it for a long time, but I fear that we have made no more progress than the noble Lord, Lord Forsyth, in advocating a Joint Committee. We all agree, however, that the current scrutiny of tax legislation is inadequate, not least given its length and complexity. Although I congratulated the sub-committee—I have served on it and know how hard it works—I fear that it does not have the impact that its work really justifies.
The part of the sub-committee report that has taken the most time to debate this evening and that is arguably the most important relates to tax simplification, particularly for businesses. I agree with the noble Lord, Lord Forsyth, that the noble Lord, Lord Barnett, was too pessimistic when he suggested that nothing can be done to simplify tax. The choice is not between the tax system that we have today and a simple tax system, which probably is a chimera, but between the tax system that we have today and a simpler tax system, which is possible. Incidentally, a simpler system is possible without being as generous as the noble Lord, Lord Forsyth, suggested when he said that the system can be simplified only within the context of reducing the overall tax burden. I do not see why one cannot have a simplification in which there are losers as well as winners, as we have seen with this Budget.
I float two suggestions this evening. The first, made by my noble friend Lord Vallance, would be to abolish capital allowances and to replace them using tax-deductible depreciation as the basis of corporate taxation. That would be a simplification. For all the Government’s trumpeting of their simplification in this Budget in this area, they did not simplify it at all, as the noble Lord, Lord Sheldon, pointed out. In some respects, they have made things more difficult. The second simplification would be the introduction of a general anti-avoidance rule, which we believe would remove a minimum of 500 pages of tax legislation. That would undoubtedly be a simplification. We would need a sensible pre-clearance system, as this simplification would not be straightforward, but if we want to simplify the tax code, that is one way of doing it. It is by no means impossible to do.
As the noble Lord, Lord Northbrook, said, the Budget was a sort of “now you see it, now you don’t” Budget. On the one hand, there were tax cuts such as the cut in the main rate of corporation tax. In the small print, however, the rate for small companies went up and the capital allowance changes meant that more revenue was coming in, so the overall effect was neutral. Equally, the two income tax changes more or less cancelled each other out. The one unambiguously tax-raising measure, which we debated a couple of weeks ago, related to empty property relief. I will not repeat those arguments again, except to say that the way of introducing this so-called rationalisation—a marvellous phrase in the Red Book to describe a major tax increase—and the economic costs that it will incur in areas of low demand and high unemployment mean that its net economic benefits are likely to be modest at best.
Looking forward, reports in the press in recent days have said that the Chancellor is planning to announce the Comprehensive Spending Review and the Pre-Budget Report together. In many ways, this is a sensible approach. In our own lives, we tend to have to worry about expenditure and income together, but will the Minister confirm that this is going to happen this year? If it is, will he also confirm that it will happen on 17 October?
What are the key challenges for the Chancellor? The main challenge for the macro-economy appears to relate to the consequences of higher interest rates and continuing higher inflationary pressures. These challenges are most likely to be seen when those who have incurred high levels of personal debt find that they can no longer cope as interest rates remain high. I fear that we will return to this issue a number of times in the months ahead. The second challenge relates to the public finances and the squeeze on public expenditure, particularly public sector salaries, which has been heralded in recent times. The Chancellor, now the Prime Minister, was planning and continues to plan on the basis of a rise in public sector pay of 1.9 per cent—a real-terms wage cut. The imposition of such a cut makes one wonder whether the Government are signalling that they believe that public sector workers have been paid too much in recent times, or is the real reason that, having increased public expenditure at unprecedented rates in recent years, public sector pay is the easiest element of expenditure to reign in? Either way, it seems to us that a period of rapidly rising public sector pay, followed by one in which there will be real wage cuts for the public sector, is not a wise way to manage employees or the public sector as a whole.
The third challenge is almost new; it is an issue that, until recent months, has not reared its head much. It has to do with fairness and inequality. Today a number of noble Lords have discussed elements of the tax system which are now seen as encouraging inequality. There is evidence that inequality is rising, and stands at its highest level in more than 40 years, according to the report of the Joseph Rowntree Foundation. We know that the bottom 20 per cent of households pay a higher proportion of their income in taxes than the top 20 per cent of households. In this afternoon’s discussion we have heard that inequalities are rising, in part because the super rich are able to pay lower taxes at the margin than those on low incomes.
When we last debated this issue, last week, it was suggested by a number of noble Lords that it did not matter that private equity millionaires paid tax at a lower rate than their cleaners, because in aggregate they paid a lot more. That does not sound fair or acceptable, but for many it is even worse than that. John Moulton, head of Alchemy Partners, recently stated that a large chunk of private equity players pay no tax at all. The debate about the tax treatment of the very wealthy, whether private equity magnates or the growing number of non-doms, is very important not only for tax receipts, but for the kind of society we want to live in. I accept that we should not impose a punitive tax regime that punishes effort and risk-taking, but paying a level of tax that broadly equates with the rest of the population is not an unduly harsh principle to apply to the very rich.
The galling aspect of this is that, in part, at least, the problems we now see with the very rich and their ability to avoid tax, stem from changes that this Chancellor has made to the tax system itself. First, I refer to capital gains tax taper relief, which other noble Lords have discussed. The relief was originally designed to encourage enterprise but at its extreme it now accrues to second-home owners and those sophisticated financiers who are able to roll up interest on debt into capital. It now costs the Exchequer more than £6 billion per annum.
Another issue, which has not really been discussed this afternoon but is an unacceptable anomaly, is the way that inheritance tax is now, for the very rich, in effect, a voluntary tax. However, for the affluent middle classes, it is a tax that bears increasingly heavily. Since 2000, the number of estates charged inheritance tax and valued at more than £2 million has fallen by 8 per cent, which is clearly crazy, given the vast increase in the number of such estates. The number of estates valued at between £300,000 and £500,000 and covered by inheritance tax has increased by 20 per cent.
By transferring ownership of property to an offshore trust or company, the stamp duty bill on high-value property can be reduced from 4 per cent to a mere 0.5 per cent, which equates to £175,000 on a £5 million house. These are changes which have occurred because of changes to the tax system. The good news is that having changed them in one direction, it is equally possible to change them back. I have three or four suggestions for the Chancellor to consider over the summer.
First, he can abolish capital gains tax taper relief altogether. That was the system before it was introduced by this Government; it can revert to the previous system. Secondly, he can make non-doms pay capital gains tax on the property they buy and sell in the UK by simply changing the rules that apply. Thirdly, he can close the loophole that allows individuals, in effect, to move their houses offshore. Fourthly, he could change the inheritance tax rules by extending the seven-year rule on gifts to 15 years, and using the proceeds to lift the threshold towards £500,000. These are simple changes which the Chancellor could make in the next Budget. They would begin to address some of the major issues of fairness and inequality discussed by noble Lords this afternoon.
As ever, this debate has taken place at the end of a Session. When we next debate these issues, it will be unusually close to the beginning of the next Session. We hope that Treasury Ministers have a productive summer, considering the ideas noble Lords have given them this afternoon, but I doubt that they will.
My Lords, I thank the Minister for introducing the Finance Bill and I congratulate my noble friend Lord Wakeham on yet another significant report on the Bill from his economic affairs sub-committee.
At 309 pages, this year’s Finance Bill is long but relatively modest compared with those of recent years. Nevertheless, it helps the UK to retain its title of the longest tax code in the world, having overtaken India a couple of months ago. My noble friend Lord Northbrook referred to this. Our tax code is not only long but it is so complex that the World Bank has said that it now threatens our international competitiveness. The committee chaired by my noble friend Lord Wakeham specifically looked at the extent to which this Finance Bill created any move towards simplification and concluded, rightly, that it did not do so. What little simplification there was in the Bill was outweighed by yet more complexity. I simply do not recognise the Minister’s description in his opening remarks of the Bill as “a simplifying package.”
The Treasury’s usual mantra is that complexity is necessary in order to combat tax avoidance and thereby achieve fairness. The Treasury does not grasp that simplification requires a radically new approach to tax legislation, which does not rely on micromanagement by way of reliefs and allowances, in turn buttressed by reams of anti-avoidance legislation. I share the approach of my noble friend Lord Forsyth to simplification: it can be achieved if there is the will.
The Treasury’s approach to simplification is much the same as its approach to lower rates of tax. I am pleased that my noble friend Lord Forsyth spoke today about the example of Ireland. His tax commission report last year was a valuable analysis of the benefits of both lower rates of tax and simplification. The Treasury really does not believe in either of those things. As has been pointed out, the Budget this year had some lower rates of tax, both corporate and personal, but it was not a Budget that reduced taxes. At best it merely redistributed them, but there were some significant categories of loser. Most of the media spotted that it was, to use the phrase coined by my honourable friend George Osborne, a “tax con budget.”
This Finance Bill is the only opportunity your Lordships’ House has to debate the Budget from which it derives, since we do not customarily ask for the Chancellor’s Budget Statement to be repeated in your Lordships’ House. We may well wish to revisit this in future because it is not satisfactory that your Lordships’ House has no timely opportunity to debate the economic and fiscal judgments in the Budget.
The Budget was the last to be delivered before the Chancellor finally succeeded in his takeover bid for Number 10. It is right that we pause to examine his 10 years of economic stewardship. The noble Lord, Lord Barnett, loves to predict what I am going to say in my speeches; I am not going to disappoint him. But let me disappoint him in another regard: I am not going to talk about either tax credits or the Barnett formula.
The good thing about the Chancellor’s stewardship is that he has continued the period of unbroken growth which we started in 1992. I say to the noble Lord, Lord Sheldon, that it started in 1992 and not in 1997. But the UK’s growth rate is now among the worst in the EU and there are other downsides. In 1997, RPI inflation was 3.1 per cent. This morning’s news had it at 4.4 per cent. Since 1997, the trade deficit in manufactured goods has increased more than eightfold to £59 billion and industrial production has stagnated. In 1997, the savings ratio was around 10 per cent. In the first quarter of this year, it had collapsed to 2.1 per cent. If one strips out the effect of employer pension contributions, the savings ratio is currently negative. In 1997, the Government inherited one of the best occupational pension schemes in the world. It is now one of the worst. That is not my judgment, but that of Mr Frank Field. The ACT raid was a big part of that. Unemployment overall may not be that bad, but the number of young people not in employment, education or training—the so-called NEET—has risen by 27 per cent in 10 years, which is not satisfactory.
The past 10 years have been characterised by a combination of rising taxes and borrowing. Taxes as a percentage of GDP are now at levels not seen since the early 1980s. Borrowing is perilously close to the Chancellor’s 40 per cent rule. We and the British public might not have minded all the extra tax and borrowing if our money had been spent wisely, but public expenditure has been accompanied by no public service reform and no amount of statistical ingenuity can mask the fact that for the past eight years public sector efficiency has been negative.
The Budget also announced corporation tax and income tax changes that will be included in next year’s Finance Bill. The Prime Minister has left his successor in the Treasury with very little room for manoeuvre on the tax front in the next couple of years, a point to which the noble Lord, Lord Barnett, has already referred. In turn, this will no doubt give the new Chancellor a problem on spending when he announces his Comprehensive Spending Review. So I join the noble Lord, Lord Newby, in asking the Minister to confirm that 17 October will be the date for the announcement of the CSR. I also ask the Minister to say whether that CSR statement will be combined with the Pre-Budget Report, as has been suggested in some parts of the media.
The noble Lord, Lord Newby, has already referred to the swingeing increase in business taxes from the removal of empty property relief from business rates, which will cost the business sector another £1 billion or so each year. We have already debated that Bill, which I regret to say recently completed its passage through your Lordships' House without amendment. Like the Finance Bill, it was a money Bill and, hence, unamendable in your Lordships' House. I rather hope that the constitutional settlement referred to by the noble Lord, Lord Newby, will be revised, because this House has a lot to offer on tax legislation, as the committee chaired by my noble friend Lord Wakeham amply demonstrates each year.
The corporation tax changes were presented as largely neutral, but, of course, life is not that simple and there certainly will be winners and losers. This timid reduction in the headline rate to 28 per cent hardly affects our position in the international tax league tables, to which the noble Lord, Lord Vallance, referred. The report from my noble friend Lord Wakeham showed that our tax competitiveness remains a very serious concern. As has been said, small companies are hit even harder with their headline rate rising to 22 per cent. This, too, is presented as revenue neutral due to new investment allowances, but not all small companies will invest enough to trigger the allowances; and who can blame them with interest rates now rising to the highest level for eight years?
I can remember when the previous Paymaster General explicitly encouraged small businesses to incorporate. She actively sold the lower tax regime that applied to small companies. But the past few years have seen a progressive reversal of the advantages because the Government decided that when small businesses took advantage of them, as they were encouraged to do, it amounted to tax avoidance.
The Government have a new seek-and-exterminate weapon in the managed service company provisions in this year’s Finance Bill. We are concerned that the new provisions will affect more companies than might reasonably be targeted and that there will be unintended consequences for the labour market. More importantly, my noble friend Lord Wakeham’s committee has highlighted that this is yet another piecemeal alteration to a system that has structural faults. I hope that the Minister will respond clearly to the recommendation made in the report that the issues of tax between the employed, the self-employed and those operating through a company need an overhaul. In his introductory remarks he referred to the recommendation but did not give a clear, unambiguous response to it.
The Finance Bill includes a significant increase in HMRC’s powers, which we predicted when the Commissioners for Revenue and Customs Bill was debated in your Lordships' House. We completely support HMRC having the necessary powers to combat tax avoidance, but we fear that, armed with its new police-type powers, the culture of HMRC could change towards the vast majority of taxpayers who are compliant.
One of the worst bits of the new powers—using the term “HMRC think”—was modified in the other place, but we remain concerned about how this and the other powers will be used. I join my noble friend Lord Northbrook in supporting the recommendation of my noble friend Lord Wakeham’s committee that public reporting and parliamentary monitoring should focus on the use of these powers.
Clause 98 contains a modest provision aimed at combating missing intra-Community trader fraud. Last year’s Finance Act contained the more substantial reverse-charge provisions, but these were not implemented until last month because we had to wait to get permission from the EU, which resulted in a considerable watering-down of our proposals. Noble Lords might find it extraordinary that we had to go cap in hand to Brussels in order to fight VAT fraudsters. They will doubtless find it even more extraordinary that we have had to concede another £7.2 billion of our rebate in the process. Will the Minister update the House on the net impact on the UK economy of the diminished reverse charge provisions less the cost of the rebate given away? Is there now any net benefit to the United Kingdom?
There is much more in this Bill which is unattractive. There is a continuing attack on private pensions in the provisions on alternatively secured pensions and pension term assurance. The sideways loss relief provisions in Schedule 4 and the capital loss provisions of Clause 26 are so widely drawn that they require heavy intervention by HMRC to make the provisions half-way decent. The so-called environmental provisions are primarily a vehicle for raising taxes via air passenger duty.
The Minister was loyal in his introduction of the Bill, but I do not believe that he can take pride in it. We have no option but to let the Bill pass, but we take no pride in so doing.
My Lords, I am grateful to all noble Lords who have spoken in this debate, particularly the noble Lord, Lord Wakeham, for introducing his important Select Committee report and for highlighting the points that the committee identified.
I emphasise the fact that about 60 per cent of the Budget represents the result of extensive consultation with all those affected, which is why we have, in crucial areas, an element of consensus on the changes. I understand what the noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, have said about the general issues with regard to the Budget and the management of the economy, but they will not be surprised that I disagree with their analysis.
As I said in my opening remarks, when I tried to presage the Government’s response to the important aspects of the report, we take the report very seriously indeed. As the report recognises, the issue of managed service companies is complex, but we are resolved on tackling it and we will engage in further consultation. We need to produce legislation that balances clarity and certainty and is robust against abuse. An important technical area to which we need to address more thought in the light of the report is the growth of these companies and the problem of the issue of taxation with regard to employment, or other returns as far as taxation is concerned. That is the most important aspect of the report and the Government will pay serious attention to it.
I want to reassure the noble Lord, Lord Wakeham, who mentioned online taxation, and my noble friend Lord Sheldon, who devoted the bulk of his speech to the issue. I agree with both of them. Progress in this area is a reflection of the increasing capacity of business to cope with online demands, which will improve relationships between the tax-gathering authorities and business and the taxpayer. My noble friend is right; we must not run before we can walk. We must bear in mind the fact that not everyone is totally familiar with IT capabilities. We could not possibly make it mandatory which compliance could not be met by those who were incapable. We have to approach this with some care, but as my noble friend will recognise, because he played his part in the committee, and as the noble Lord, Lord Wakeham, identified, this is an area where, certainly as far as business is concerned, we are getting an increasingly voluntary approach to online compliance, which we expect to grow. Percentages are increasing right across business. I am not just talking about the big corporations; small businesses, too, are showing increasing capacity to comply. We will therefore seek to extend against the capacity of taxpayers to respond while recognising that reserve point of my noble friend Lord Sheldon that we would not dare to make it mandatory in law in circumstances where people were just not able to comply. So we will make progress on those issues.
My noble friend Lord Barnett raised a wide range of issues. He is not going to get an answer from me on the Barnett formula today. He asked a direct question only a week ago and I thought that I gave him a perfectly satisfactory answer—he totally disagreed with it, of course, as he said to me outside the Chamber afterwards. I have no doubt that he is going to sustain the pressure, but I have nothing more to add such a short time after I last tried to give him satisfaction on the matter. He will have to rest content with the Government’s position for the time being.
I heard what my noble friend said about the tax credit system; he said that he thought that the American system was better. I am not in a position to comment. I have enough trouble keeping up with British systems of taxation and support without trying to verse myself deeply in American systems, so I cannot be authoritative in my response about the comparison with the American system. Despite the difficulties, we all recognise that the tax credit system, as we seek to make it work effectively for everyone who is entitled to it, still provides 20 million people, including 6 million families and 10 million children, with support. The take-up is a significant success. The latest figures show that the take-up rose from 79 per cent to 82 per cent in 2004-05. There is no doubt that it has decreased the level of poverty among many of the people whom we always had difficulty reaching with any other form of support in terms of benefits. Therefore, the Government, as my noble friend knows only too well, will seek to improve the system while defending the concept behind it.
Where I did enjoy my noble friend’s contribution was when he referred to the extent to which any proposals from the Lib Dems on the reduction and even the abolition of income tax in favour of massive increases in green taxation would be a very heavy burden. The noble Lord, Lord Vallance, also gave voice to certain aspects of possible reductions in taxation. Unless the proposal is to significantly reduce resources to the Exchequer, noble Lords on those Benches will have to address themselves to where the costs would lie. Of course, they may be able to convince the electorate that very heavy emphasis on green taxes will produce these resources.
My Lords, it would probably be too much to expect the Minister to have actually looked at the costings that we produced earlier this week for our tax package, but I can reassure him at least to the extent that the environmental component of it is only approximately a third. One of the major components, as I indicated earlier, would be the abolition of capital gains tax taper relief.
My Lords, I shall come on to the noble Lord’s speech in a moment, but he will recognise that a third represents an extensive increase in taxation directed towards his objectives. He will know how difficult it is to persuade the electorate of the enormous virtues to be seen in a massive increase in air passenger duty or in a tax on fuel, or in other areas that I have no doubt his party will need to canvass if it is to make its figures add up on the overall position.
My noble friend Lord Barnett also questioned me on another area that we have debated in the House quite recently—non-domiciled status. He indicated that he thought that the time for us to reach our conclusions was overdue. However, the review has been thorough and considered over a period of time. He will recognise that we have to balance the effects on the economy of tax returns with concerns among the public about the unfairness that certain aspects of non-domiciled status convey. I say to him that, when he is pressing the Government in this respect, he is joining a large number of representations. The Government are not mindless—or do not fail to be mindful, I should say more accurately—of the importance of fairness with regard to taxation and we intend to produce conclusions on this in due course. What he cannot expect me to do—although I do not think that he expects it in his wildest dreams—is to speak about the Finance Bill and produce fresh taxation proposals at this very late stage. I am not going to do it. He is going to have to put up with the Bill that we have before us, which I will defend rigorously.
My Lords, none of us expects the Minister to produce new tax proposals, but could he help us by saying why the Government are happy with non-domiciled taxpayers, perhaps billionaires, paying no stamp duty on very expensive properties in London while those paying tax at 40 per cent or less as domestic taxpayers are expected to pay 2, 3 and 4 per cent? What is the logic of this? What is it that the Government need to think about here? Can the noble Lord tell us what the Government think makes this a justifiable system?
My Lords, the noble Lord should not presume that these are straightforward and easy issues. The issue with regard to non-domiciles is obvious: we have to balance the tax loss of not taxing them as fully domestic residents against the obvious mobility of that community and the possibility that their investments might be taken elsewhere. That is a proper equation for the Government to worry about.
I know that it is a long time since the noble Lord was in government, but he will remember that his colleagues struggled with these kinds of issues when preparing Budgets. The noble Lord shakes his head, which may suggest that the Conservative Government never had the slightest problem with rates of taxation in terms of both their effectiveness and fairness. All I can say to that is that they made a sorry mess of 18 years in power given that they found managing the economy so extraordinarily facile and straightforward. I think that the noble Lord will have to give credit to the Chancellor for having to wrestle with some fairly complex issues in areas where changes to rates of taxation have to be measured against what the yield might be. In another context, the noble Lord would be the first to acknowledge the fact that, if you increase the taxation for a particular group, the yield may not necessarily be greater. I hope that he will recognise the importance of my point.
My Lords, that simply will not do as an argument. If Russian billionaires are paying almost no stamp duty on houses in London costing £20 million, making them pay will not reduce the yield. What it might do is have an impact on the house price boom in central London, where domestic people, paying their taxes, cannot afford to pay the prices.
My Lords, that is to presume that, if such individuals then made up their minds that living in London was no longer an option that they wanted to exercise, there would be a straight gain for the Exchequer. All I would say is that I do not think that it is as cut and dried as he suggests. However, we shall continue with that argument later.
My noble friend Lord Sheldon said that the value of the committee lay in the strength of its bipartisan approach to these matters. However, I have to say that in certain representations made in this debate I am not convinced that bipartisanship has been the order of the day. The noble Lord, Lord Wakeham, set a magnificent example, but I am not sure that he has been totally successful in influencing the overall debate. Certainly the noble Lord, Lord Forsyth, has engaged in this debate in similar terms to those that he used so ably when he was in another place. Of course the Government take the views of this House on the Finance Bill seriously. The Government are also aware of the ability of the Economic Affairs Sub-Committee to produce a report, which is a great advantage to us.
However, we should not live in the land of delusion, which I think has attended some contributions to the debate. Some noble Lords have suggested that it will not be long before the House matches the Commons in its responsibilities for the Finance Bill. Some disparaging remarks were made about the conduct of the other place. If it is said about the other end of the building that people there over-engage in politics, it must be observed that the Budget and Budget decisions are made at the highest level of politics and of course are prioritised by all Oppositions. If the fault lies anywhere at this time, it lies on the Conservative Benches, but it is the same fault that we enjoyed when we were in opposition. However, this House is a revising Chamber and its responsibility for finance is bound to be more limited, so I do not think that it is suitable for us to suggest that we should take an equal position with the other place regarding this Bill. What we can do is bring informed comments and considered thoughts to the matter, and the debate has strongly reflected that.
I shall come on to the more general points made by the noble Lord, Lord Northbrook, in a moment, but I say to him that we do not think that the issue of managed service companies is about structural change; it is one of compliance and how we might succeed in getting the yield to which the Exchequer is entitled, rather than anything more fundamental, as the noble Lord suggested.
I am afraid that I have the most negative response for the noble Lord, Lord Newby, to his most straightforward question, and I apologise to the noble Baroness, Lady Noakes, for the same response. They asked me to confirm that 17 October would be the date of the pre-Budget review. At the moment I am unable to confirm that. It will not have escaped the attention of noble Lords that there have been one or two minor transitions in the Government in recent weeks, which may occasion a slight change in the dates. I apologise to the noble Lord and the noble Baroness for not being able to assure them on that point.
On the overall position as presented, the noble Lord, Lord Newby, and to a more moderate degree the noble Baroness, Lady Noakes, identified failures of the Government as represented in this Finance Bill and in the way in which we have conducted the economy over the past few years. I have to say that the House needs to recognise the confidence with which the Government approach these issues. I heard the noble Baroness bemoan the fact that interest rates are rising. Interest rates have risen to 5.75 per cent at the present time. That must be measured against the record of the previous Administration, which never managed to get them down into single figures. That is the difference.
My Lords, I shall certainly withdraw it if the noble Baroness challenges me, because I am sure that she is quite accurate. Let me say that average interest rates over that period were in double figures; that I will assert. If the noble Baroness presses me and I am wrong, I will certainly write to her.
My Lords, through the majority of the years during which the Conservatives were in power, average interest rates were in double figures. That is the clearest definition that I can give. If I have made a slip, I shall certainly write to the noble Baroness and apologise.
While the noble Baroness deplored the fact that growth rates in the economy have declined over the past year, she will appreciate that over the 10 years that we have been in power we have achieved growth rates that have guaranteed for average families an increase in living standards that are far above those that obtained under the previous Administration. Moreover, if the growth rates seen under that Administration had continued to obtain, average families would now be immeasurably worse off.
I thank all noble Lords who have participated in the debate. The report of the sub-committee is important and identifies in several areas clear points about which the Government have to think very seriously on issues where further work needs to be done and for which there are no immediate and easy solutions. On the general issues, the Finance Bill continues a pattern of successful management of the economy that is there for all to see. I therefore take great pleasure in commending the Bill.
On Question, Bill read a second time; Committee negatived.
Then, Standing Order 46 having been dispensed with, Bill read a third time, and passed.
Finance Bill: EAC Report
My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That this House takes note of the report of the Economic Affairs Committee on the Finance Bill 2007 (4th Report, HL Paper 121).—(Lord Wakeham.)
On Question, Motion agreed to.
Local Government and Public Involvement in Health Bill
My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved accordingly, and, on Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Tordoff) in the Chair.]
215: Before Clause 121, insert the following new Clause—
“Contractors’ duty to cooperate
(1) Where any private or voluntary organisation is funded by a local authority to provide a public service or function, that organisation shall be subject to local authority scrutiny by the same council, in relation to that service or function.
(2) This shall include—
(a) provision of information to a relevant overview and scrutiny committee, as defined by the Local Government Act 2000 (c. 22),(b) attendance at a relevant overview and scrutiny committe to answer questions,(c) a requirement to consider any report or recommendations of an overview and scrutiny committee, and(d) a requirement to respond to the overview and scrutiny committee indicating what (if any) action the organisation proposes to take.”
The noble Baroness said: I wish to speak also to Amendments Nos. 216 and 217. These amendments take us to the area of overview and scrutiny. Amendment No. 215 deals with who shall be subject to the attention of an overview and scrutiny committee. The amendment proposes that this should extend beyond the immediate local government family to others who provide services.
The White Paper stressed the need to expand competition and to have a diversity of providers. I think that it said that service deliverers should not be protected from public scrutiny. The requirement could apply to contractors delivering services through contracts and companies involved in public/private partnerships, which are a very topical issue. I say in parenthesis that the Greater London Assembly has paid some attention, and will pay a good deal more, to the London Underground PPP with Metronet. However, it is a bit early to apply the word “legacy” to the new Prime Minister. The amendment could apply also to PFI consortia, joint ventures, strategic service delivery partnerships and so on.
The Bill extends councils’ scrutiny powers to enable them to require the attendance and engagement in scrutiny of public service bodies defined as “partner authorities” in Clause 106. Partner authorities have a duty to co-operate in the context of local area agreements. They are required to take part in scrutiny and to have regard to scrutiny recommendations where the scrutiny report or recommendation relates to a local improvement target in the local area agreement. Amendment No. 216 would strengthen the duty to take part in scrutiny by requiring participation in scrutiny meetings as well as the provision of information. I am sure that the Committee will understand that it is not possible adequately to scrutinise an activity unless one can ask questions. Simply receiving written information is not enough. Amendment No. 217 would extend the scope of scrutiny to require the participation of partner authorities more broadly on issues which are of specifically local concern.
This area was debated in Committee in the Commons where the Minister referred to the first of my amendments as being “unnecessary and potentially bureaucratic”. She added that it “could undermine accountability”. She raised an interesting point. Is it confusing and does it dilute accountability to require contractors to provide information to overview and scrutiny committees, as she said? She talked about encouraging,
“a culture in which partner authorities could shift responsibility away from the organisation holding the agreement with the council and on to the contractor”.—[Official Report, Commons, Local Government and Public Involvement in Health Bill Committee, 22/2/07; col. 380.]
It is interesting to note where the balance lies in this. Intellectually, one should hold to account the partner authority which engages the contractor. That is absolutely right. But in a world where we look to contractors to do so much work for local communities, and where they are brought in by the local authority, it is right to consider whether the contractor should be subject directly to the scrutiny function.
Contractors would also be witnesses, as it were, in this structure. What they have to say in explaining how things are working as part of the total picture is important. I should like to think that the Minister’s comments in the Commons constituted a rowing back from contracting out services, but I suspect that they were not.
The Minister in the Commons also talked about overview and scrutiny committees being able to investigate any issue, to decide for themselves what they wanted to do and to “ask anybody to attend”. She referred to ploys that an overview and scrutiny committee might use to shine the spotlight on an unco-operative contractor. That is all very well. She referred to the occasion when the noble Lord, Lord Hattersley, did not accept an invitation to appear on the programme “Have I Got News For You” and a tub of lard was put in his place. However, you can do that only once. The formal arrangements and powers are important. I would not want to symbolise the shortcomings of local government members by putting tubs of lard in their places and recording that in the minutes. I do not think that is the way to go. I beg to move.
The name of my noble friend Lord Hanningfield is attached to this amendment. Therefore, it is clear that we support it and are in general sympathetic to it. It needs to be made clear that it refers to organisations and contractors that are funded by the council; that is, the council is handing taxpayers’ money to people to do a job for the council. That covers not only private organisations, but voluntary organisations and, as the noble Baroness, Lady Hamwee, said, it applies to contractors, who are being paid by contract.
The whole of this part of the Bill is designed to increase the authority and power of overview and scrutiny, which until now has been a toothless tiger—no one much enjoys it and it has not had a hugely influential role. That is beginning to change. Interestingly, a short time ago three overview and scrutiny committees in my area looked at a plan for bringing two hospitals together, of one of which I am chairman. The three scrutiny committees worked together. It was a very effective inquiry into the proposals, which produced an effective and important report. There is beginning to be more of a role; clearly, where council money is concerned, overview and scrutiny ought to be able to extend its role, which is very important.
There are endless areas—IT systems, care of the elderly in old people’s homes, contractors providing food and voluntary organisations providing services for bathing and, in many cases, now running old people’s affairs. It is crucial that the overview and scrutiny committee should have a role and be able to be part of a rigorous process that enables it to get information. It is not satisfactory to say that a written report will be made and that someone will not need to appear. As the noble Baroness, Lady Hamwee, said, that would be useless. You need to be able to ask people questions, to see the colour of their eyes and how they respond to the question. It is over-protection of people in that position that they should not be required to appear and give information as put forward. Some might be limited, but it should be there.
For those reasons and because local area agreement targets will need to be scrutinised—some of those targets will be with people receiving public money—I think that the two amendments are extremely important. I therefore support them.
I entirely agree that the amendments are important and I appreciate the spirit in which they are brought forward. Obviously, we want to ensure that overview and scrutiny committees are able to hold public service providers to account. Unfortunately, we do not think that the amendments are necessary for that. I will try not to duplicate what was said in the Commons Committee, but it is difficult, because the arguments offered there were sound. I will try to find different language.
However, I took the point of the noble Baroness, Lady Hanham, about how overview and scrutiny committees could be seen as rather toothless. Part of the Bill’s purpose is to build on the Local Government Act 2000, as we have, to make three changes that will toughen up the overview and scrutiny committees and give them more power. Of those three ways, one essentially requires local authorities—executive members and members—to respond when called to a committee; they are required to attend and to respond to what the overview and scrutiny committee says. What have now come into the frame are the partner authorities; in the Bill is a requirement that information should be provided from partner authorities connected to the local area agreements and that they should sit together. There is also the duty to have regard to the report and recommendations of the overview and scrutiny committee. Those are three important changes that toughen up the O&S committees.
The point about contractors is, however, important. As the noble Baroness said, a lot of work is now done through commissioning. Our principle, which is why we cannot accept the amendment, is the importance of those who are commissioning—the local authorities and public service providers—actually being responsible for the quality and delivery of the work that they commission. Once you start asking contractors to turn up and account for themselves, you have let the contracting body off the hook. It is terribly important, given the pattern of commissioning, that you get the responsible people to come and explain why they actually contracted those people, if it turns out that they have not got the capacity to deliver or whatever. Sometimes it is no good asking the IT provider to come. You want to know who made the decision, on what grounds and on what evidence. We might find ourselves in a position where we are allowing partner authorities to shift responsibility.
It is perfectly open to the overview and scrutiny committees to request anyone to appear before them. If they feel that they have not got to the bottom of something in this situation, then they can call the contractor to come. It is a slightly different context, but there is nothing to stop them doing that. Furthermore, when local authorities contract, they have to specify in the contract those arrangements that would enable them to obtain information from the contractor, so that they in turn are able to respond to a request from an overview and scrutiny committee for information. A means for councillors to obtain information from contractors exists. We have provision for making information available. On those grounds, I have difficulty with Amendment No. 215.
Amendments Nos. 216 and 217 concern the requirements on partner authorities to respond to an overview and scrutiny committee. In response to Amendment No. 216, about partner authorities being required to attend to provide information, we think that the regulation-making powers under Clause 123 are sufficiently wide enough and that they address the question of attendance. We intend to provide in the planned regulations for partners to appear before scrutiny committees. However, I think it wrong to impose a blanket requirement on partners to attend in person. I take the point that on some days you have to look a person in the face in order to test out resolve, commitment and so on, but I do not think that where councillors are working in partnership with public service providers it is all that helpful to allow overview and scrutiny committees to compel attendance. In some instances they are statutory bodies in their own right. We do not want to destabilise or undermine relations. We think it right to provide discretion about whether there is oral evidence or a written submission. My impression is that if the written evidence is not sufficient, they could always call for oral evidence afterwards. I should have thought that that option remained open to them, but it may be appropriate in some circumstances simply to have written submissions. That would certainly reduce the work of the committee.
Amendment No. 217 requires partner authorities to have regard to any overview and scrutiny report. As I have explained, overview and scrutiny committees have the power to make reports to their executive on any matter that affects their area—quite rightly. We all probably agree that where the councils have formal partnership arrangements with local partners, it is right that councillors should be able to send reports to those local partners to which they must have regard. The Bill requires that where councils and local public service providers work together on LAAs, local partners will be required to have regard to reports relating to the LAA targets. That is the focus and what they would want to be chasing up and ensuring that they are getting delivery on. It would not be appropriate to allow councillors to require partner authorities to have regard to wider reports on any matter relating to their areas. That strikes me as certainly losing focus. I could imagine, for example, that a council might do a report on global warming—that would be forward-looking in some respects—but requiring partners to respond to that report would be taking it beyond their scope and taking up time that they might be rather short of.
We need to strike a balance, focusing on matters where partners work with local authorities, rather than exposing them to the potential burden of responding to a whole range of reports. Once again, I hope that we have struck the right balance in the Bill. I hope that noble Lords are satisfied with those explanations.
I think we will end up simply differing on this. I wrote down the words “horse’s mouth” as the noble Baroness was speaking. That was a reference to the contractor, not to anyone who is taking part in the debate. I suppose it depends on who is the horse for this purpose, whether it is the contractor or the commissioner. As I said in moving the amendment, it is important to hold the commissioner to account, but this would be an extra tool or mechanism that adds to the powers of the overview and scrutiny committee.
I am sure that I have seen something somewhere in the Bill about defamation and whether there is qualified or absolute privilege in overview and scrutiny committees; it might have come at a different part of the Bill. It occurred to me to think about that only as the noble Baroness was speaking. It is much better to be able to say to a contractor, “There are assertions that you have not done so and so; now tell us about it”, rather than having a debate with the commissioner that brings into play allegations about the contractor’s services. We should perhaps follow up that point, which is important in terms of how these things might function. Essentially, in the other comments by the Minister, I would characterise her as saying, “It is not necessary”; and I am saying, “Better to have a stick and not to use it than to assume that the stick will never be necessary”.
On Amendment No. 217, I would not want to envisage a lot of worthy reports gathering dust. It is important that they are part of a process and not the end of another process, which is why I suggested that regard should be had to them, which is not such a high obligation. However, we have a slightly different view on how these things may work. We will see. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 121 [Reference of matter by councillor to overview and scrutiny committee]:
215ZA: Clause 121, page 77, line 9, leave out “local government”
The noble Lord said: I will speak also to the other amendments in the group, Amendments Nos. 215ZB and 215ZE. We are coming on to discuss what has been called the community call to action. I take it that this is meant to be one of the really sexy parts of the Bill, which provides an exciting new right for people in communities and for communities to call their representatives to action and to achieve action. When this was first revealed in the local government White Paper, some of us on these Benches looked at the charts showing how this would work and we fell about laughing. Even now I do not regard this as much more serious than that. It might be a bag of beans, but it is not more than a bag of beans as far as the community and action are concerned, or even—and this is what it is really about—concerning what ordinary backbench ward councillors can do.
This is all tied up with the role of backbenchers, why people become councillors and the undoubted feeling in local government that the role of ordinary councillors has been downgraded since the introduction of new arrangements in the 2000 Act. We can talk about whether that is justified and what can be done about it, but there is a widespread feeling in local government that ordinary councillors do not have the status and the ability to influence things that they used to have; the existence of that feeling is a fact.
A very interesting report was produced recently which unfortunately came a bit late to inform the discussions on the Bill. It is The Role of Councillors: Report of an Inquiry by the All-Party Parliamentary Local Government Group. I will briefly refer to that report, because it confirms what I have been saying. On page 9, one of the witnesses, Councillor Katrina Bull from Nottingham—who I do not know at all—says:
“I would think backbenchers feel they are not part of the decision-making process any more … the perception is that they are excluded from lots of decisions because of the new structures”.
Professor Steve Leach says:
“Overview and scrutiny, which was the main element of the Act which involves ward councillors, has struggled to establish a high profile among local councillors”.
Councillor Maggie Foot from South Somerset Council—who I do know—says:
“Scrutiny is becoming much more issue-led”.
She is from a council that is making a real effort for overview and scrutiny to be successful.
Two elements are identified in the report: first, holding the executive to account and, secondly, investigations and policy development. It is interesting that, more and more, councils are finding that the investigations and policy development side is productive and helpful and provides a useful role for backbench councillors. Simply holding the executive to account and doing investigations some three, six or nine months after things have happened has turned out, in many cases, to be fairly arid.
The question that comes to the fore here and which is crucial to the amendments is: why do councillors get elected in the first place? Why do people stand for the council? Some might stand because they see leading councillors as role models in the community and they would like to be one of those people in due course, or even immediately. We have all come across such people. I do not think, on the whole, that councillors get on to a council because they want to take part in overview and scrutiny, even if they have heard of it before they get elected. It is well understood that most people, when first elected, want to represent their ward. They also want to take part in decision-making about things that affect their ward. Most new councillors do not expect to take part in the broad strategic decisions or the major decisions that the council makes, but they expect to be able to have a direct influence on what happens on their patch.
Page 14 of the interesting report from the All-Party Parliamentary Local Government Group sets out a table of 12 roles for councillors. I will not read them all out, but they are interesting. They range from managing relationships within a political group, to attending whole council meetings, to advocating on behalf of their ward, to taking part in overview and scrutiny, and so on. What is missing from that list is the idea that councillors want to be part and parcel of the decision-making process about the things that happen in their ward, in the slightly wider community, in the town or rural area or in their part of the city. Ultimately, they may become leading councillors and take part in strategic decisions. What is fundamentally missing in the new arrangements is the sense that people are able to take part in the decisions that affect their patch. That is at the heart of it, and that is where we need to get to.
What do the proposals do? A community call for action re-enacts Section 21(8) of the 2000 Act, which enables members of overview and scrutiny committees and members of sub-committees of those committees to put items on the agenda. That is no big thing. Proposed new Section 21A(1)(c),
“enables any member of the authority to refer to an overview and scrutiny committee of the authority of which he is not a member any local government matter which is relevant to the functions of the committee”.
I am astonished that there are councils that do not allow that anyway. I know there are councils that do not allow it, and giving people that right is a very small advance. But it is something that councillors ought to be able to do without legislation. It is a minor step forward—it is a bag of beans. In councils that are run so autocratically they do not allow that kind of thing, it will be a step forward. But as a community call for action, it is incredibly weak. These amendments attempt to firm it up a bit. Amendment No. 215ZA seeks to take out the words stating that it can only be a local government matter, and Amendment No. 215ZE to take out subsection (10), which defines a “local government matter” as a matter which,
“relates to the discharge of any function of the authority”
“affects all or part of the electoral area for which the member is elected or any person who lives or works in that area”.
When people vote for a councillor, they do not expect that that councillor’s ability to raise issues will be limited to the things that their authority can do. That is particularly so in two-tier areas. If there is a local health issue—perhaps a controversy about building a new local health centre or closing one down—everyone will expect the councillor to be able to take part. Under this legislation, overview and scrutiny committees will have a wider remit than they have now—which would be welcome—so why on Earth can a councillor not raise that as well as something that is the direct responsibility of the authority? Ideally they ought to be able to raise anything. If the overview and scrutiny committee then says that it is not going to do it because it has no power over the trains or whatever, then so be it. But it ought not to be limited at the initial stage when the councillor makes the application. It ought to be allowed particularly within the wider new powers of overview and scrutiny committees generally.
Amendment No. 215ZB refers to proposed new Section 21A(3), which says that the member has to have regard to guidance from the Secretary of State before they put forward an application. As my noble friend said on the previous group of amendments, “having regard to” is a weak form of words, and perhaps it is. But when it says, “Have regard to guidance issued by the Secretary of State”, and it is statutory guidance, people will have to obey it whether they like it or not. That means that the Secretary of State can give instructions without having to get orders through Parliament. That a member should have to have regard to guidance from the Secretary of State is ridiculous. The ordinary ward member ought to be able to put forward what they want. If the authority then has to have regard to guidance, fair enough. At the very least, any guidance ought to be locally determined. So that clause ought to be taken out—it is a step too far where detailed national guidance is concerned.
The final point relates to Amendment No. 215ZE, which would remove proposed new Section 21A(10)—which restricts “local government matter” not to the function of the authority but to all or part of the electoral area, or any person who lives or works in that area. Who on Earth, apart from councillors and other such people, knows where ward boundaries are? Sometimes they are obvious, but very often towns are divided in a completely arbitrary way between wards and nobody apart from the people who represent those wards knows where the wards are. If you get elected as a councillor in a town like Wilmslow in Cheshire which might be divided into four or five wards for the district, you ought to be able to raise any issue that affects that town. But councillors do not represent just their ward; they represent their town, their wider community, the whole council area and their political party if they have one and their own views. This is the balance—the synthesis—that all councillors have to sort out to their own satisfaction. If there is a call to action and an ability to take it to an overview and scrutiny committee, it ought to be open to a councillor to take on any issue, not just one linked to their own ward. Otherwise it is very narrow, very restricted and, I’m sorry to say, not very sexy at all. I beg to move.
I am sorry that the noble Lord cannot give a warmer welcome to this, because so much of what he said is reflected in what we are trying to do. I have a lot of sympathy with the points he raised about why people stand for the council and what it is that makes them want to represent an area and offer public service. What we have done here is to find ways of strengthening the role of the ward councillor by giving greater visibility, raising profiles and making clearer the expectations that constituents should have of ward councillors. The noble Lord is right to say that many local councils undertake a version of this as a matter of course, but he is also right to say that not all do.
We have tried in the Bill to flag up that it should be the expectation of local electors that their council is there to raise issues that concern them and that can be acted on in ways that are above and beyond the normal processes of the council. I think we are right to express that in terms of the citizen’s right to be able to make a community call for action. So although I think that there is much we agree on, I am sorry that we do not agree on the significance of this. It is a mechanism that allows local councils to escalate issues of concern to their local community by referring them to the O&S committee. It is certainly for the committee to decide whether and how to proceed, but once an issue is raised, it must put it on the agenda and address it. If the committee chooses not to pursue the matter, then it must let the member know the reason, which is a new and very important power to pass on to the constituent. If it does take a matter up—and it has a lot of flexibility in how it does so—it has to let the member know what recommendations it ultimately makes.
We have seen in the development of O&S committees over the past few years how some are turning into policy and development committees. It is often the case that an issue raised by a constituent can reflect either the failure or success of a policy, and how it might be developed. So what we are looking at is also a way of O&S committees becoming more proactive and growing. The clause also provides for excluded matters, which I want to address now.
Amendment No. 215ZA, taken with Amendment No. 215ZE, would change the effect of the clause by enabling any member of a local authority to refer any matter. This switches the focus away from the community call for action. The noble Lord himself said that if they were to raise a matter of improving a railway, for example, they would know that they could not do anything about it. To raise matters over which the council has no control not only diminishes the purpose of the community call for action, but also reduces the credibility of the councillor as well.
Secondly, I detect a contradiction in what the noble Lord said. He was extremely focused on the ward councillor, and the first function of the councillor is to represent the ward and how things affect people in the ward. He is right to do that, and to speak of the direct influence of the people in the ward. But Amendments Nos. 215ZA and 215ZE together would mean that this measure would empower the elected member to go beyond the ward. Our intention is that the elected member is able to force a committee to address an issue of concern to the community in the area that he was elected to represent. That is what gives him his locus and his credibility—if and only if those concerns are about the way the council is doing its job in that area. Yes, ward boundaries are arbitrary and often people do not know where they fall. That area-based responsibility is important. The two amendments open the door very wide to people who are not as scrupulous as the noble Lord. This could become an opportunity to trespass across boundaries and issues in ways that would not be helpful to local people.
I will give the Minister an example and see how she reacts to it. Some time ago—this is an historical example—in my ward there were a whole lot of houses on a railway line, and the assertion was that the railway was affecting the houses and that they should be double glazed. Double-glazing those houses was the responsibility not of the council but of the railway authority. The council took up that matter as a result of pressure from local residents. It was not strictly a council matter—it was a matter for the railway. The only way in which any action could be taken was by the local ward councillor and the council putting forward the case. I do not see why a local councillor should not be able to take such a case to the overview and scrutiny committee as that is probably now the only way of getting the matter discussed. In the event, that matter was taken to a committee, which discussed it and the decision was that action should be taken to get British Rail to do something about it. You could not do that now because there is no committee to take it to; the only committee that you could take it to is the overview and scrutiny committee. If the noble Lord’s amendment is not agreed to, that would mean that you could not raise such a matter—that is, a matter for another public authority, not the council, but on which the council needs to effect some sort of amelioration.
That is a very good example. I was thinking of the example of double-glazing to deal with aircraft noise, which raises the same sort of issues. I wonder whether the Minister can answer the noble Baroness, Lady Hanham, in the context of the leadership role that local authorities are being urged to take as part of place-shaping and all that. Noble Lords have referred to local authorities acting as community leaders, which is a good thing; those points fit in exactly with that. To deny it frustrates the community leadership role.
Part of the issue is what exactly the role, scope and functions of local authorities are. In this instance, the local authority would have been acting under its responsibility to deal with nuisance—with noise—rather than with the railway per se. That is my understanding but I would be very happy to take the case away. Local authority powers and responsibilities are wide and there are ways to deal with the issue. That may be different from the case that the noble Lord raised about the powers; perhaps not. We will disagree on that.
One of the problems with the amendment is that removing the definition of “local government matter” from the clause also removes the specific focus of the community call for action. Incidentally, it also sweeps away the provision for excluded matters. We will discuss that later; it is important.
The noble Lord is not impressed when I say that the amendments are technically defective so I shall not go into detail on that. Whether they are politically defective he is happy to debate with me.
Finally, I turn to the issue of guidance. On Amendment No. 215ZB, we are only trying to help. This is not a heavy-handed intervention. We offered to issue guidance because the proposal is innovative and we thought that local authorities might find it useful. It will be light touch and we will work in close consultation with our good friends in the LGA. We are seeking to be helpful and positive. I hope that the noble Lord will withdraw the amendment.
That last comment about guidance is welcome but it raises the obvious question of why it has to be statutory guidance which will be read as having a particular significance. Material from central government may be helpful or a councillor may discard it. I understand that the Government may feel that it would be useful to suggest how the power might be used, and the clause is about the “what” of the power and the content. Those are two very different things. I come back to the first question, which involved whether non-statutory guidance should do the job.
I am grateful to the Minister for taking this matter seriously. We are not in any way against what the Government are trying to do here—we welcome it—but are disappointed that it is so feeble. I hope that the Minister takes our comments in that light.
I deliberately did not give lots of local examples. One of the big issues in the past year in Colne, where I live, has been the fire service: the proposal was to reduce the number of pumps from two to one. The local council was prominent in the campaigns to stop that; the Lancashire fire authority is a separate body. That is a proper function of a district council in such circumstances. I could bring to the Minister’s attention dozens of cases that are similar to the case raised by the noble Baroness, Lady Hanham; that is what local councils do. They are the only body that has the legitimacy of being directly elected and they therefore take on anything to do with their community. The fire station in Colne happens to be in my ward—just—but there are three other wards in Colne. Could my two ward colleagues in Pendle have raised the matter if I had not thought it was important, although others in other wards could not? That would be ludicrous. The fire service covers more than just the town. There is an issue here which I hope the Minister will think about seriously. If the new power is to be used effectively, it must be widened.
A brief point occurred to me during our debate. If, as a member of the public, I want my councillor to raise an issue but I have only one councillor or they are in the wrong party and for some reason will not raise it, why can I not go to another councillor in the town or the area and ask them to? It is a bit like the situation with the ombudsman; you used to have to go through a councillor if you wanted to take your council to the ombudsman. That was changed because a few people found that their councillor was being obstructive and refused to refer it. I used to take the view that you referred it on principle, whether or not you agreed with it. There is a practical problem there.
Finally, I do not think that there is a conflict between strategic leadership and local things. Strategic leadership, if it is good, is about wider opportunities for the whole district and area. We are talking about problems or issues in a neighbourhood. They are linked not to what the district or county council does but to the problems that people have in that neighbourhood. The problems often affect a series of different agencies. My concern about the scope being drawn too tightly—this is also my concern about statutory guidance—is that in some councils lawyers, officials or those running the council will try to keep the matter as restricted as possible. They will use legislation and government guidance to stop people doing things rather than encourage them to do things.
In many ways there are two types of councillor: those who want to encourage the public in and encourage that kind of activity, and those who want to say, “No, you are out of order and cannot do it”. In my view, if this is to succeed, it is very important that it is as open and responsive as possible. I hope that the Minister will consider some of the issues that have been raised, if not my drafting. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
215ZAA: Clause 121, page 77, line 12, leave out from beginning to “enables” in line 13 and insert “Provision for a person for the purposes of subsection (1) is provision which”
The noble Baroness said: I shall speak also to Amendments Nos. 215ZC and 215ZD. It is helpful to have time to read parts of the Bill and to hear explanations on them. As we have debated today, I have realised the error of my ways in tabling Amendment No. 215ZAA. I shall not speak to it, as I now understand the clause.
Amendment No. 215ZC provides that an O&S committee or sub-committee can ask for information from members of the public. Here we are dealing with the so-called community call for action: the opportunity for a ward councillor to bring the matter to an O&S committee. It took me some time to find this clause in the Bill; I knew there was to be a clause that allowed the public this extra right but there is no mention of the public in the clause and I thought there should be one. An overview and scrutiny committee inquiring into an issue will want to hear from the people who are affected by it and possibly the people who brought the matter to the ward councillor. However, others might feel that the ward councillor is making a case that it applies to only one or two people, but there is a wider and different interest which needs to be aired. I speak to that amendment with some feeling.
Amendment No. 215ZD adds to the provision that if a committee decides not to exercise the powers that we have heard about, it has to tell the member that it will not do so and give the reason. I am saying that it should publish its decision and its reasons. Local authorities are used to publishing things; that is the way in which the system works. Notices of what will happen are published and records of what has happened are published. This amendment should fit in with that. I beg to move the amendment and I do not expect an answer from the Minister.
I shall not even comment on Amendment No. 215ZAA, because I, too, now have a completely superfluous note. I see nothing wrong with the way in which the draftsman framed the provision in the first place. The noble Baroness could be forgiven for saying that she had to search for the clause in the Bill.
Amendment No. 215ZC inserts a new subsection purporting to empower O&S committees to ask for information from members of the public. It does not go so far as to say that they may require it, which I believe is right. This power already exists in Section 21(13) of the Local Government Act 2000. It already provides that an O&S committee may invite any person to attend meetings of the committee. I think that takes care of that point.
Amendment No. 215ZD would require O&S committees to publish their reasons when they decide not to act on a reference from a councillor. I have to go back further because Section 21(11) of the 2000 Act provides for Part VA of the 1972 Act—access to meetings and documents—to apply to overview and scrutiny committees. As the noble Baroness said, local authorities are very used to publishing things and that means that the public should have access to the committee meetings, to the documents of the committee and to the decisions that are recorded. In effect, that will be the publication that she seeks. There may be some circumstances—for example, where confidential information is discussed—where access is withheld or restricted, but I believe that the provision she seeks exists already.
The difficulty experienced by Members of the Committee in tracking through the legislation suggests to me a rather strong case for guidance to ensure that people understand where the rights are and where publication is available.
I can see that nothing would give the noble Lord more pleasure than if I agreed that we should tie up the whole of the next Session consolidating local government legislation, perhaps from the old local government board at the beginning of the last century. I shall see what I can do.
I have now found the provision in Section 21 of the 2000 Act to which the Minister referred. I am grateful for that. I should have been reading even more widely. It was exactly Part VA that I had in mind when I drafted the amendment. I am glad to have the confirmation that it applies. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 215ZB to 215ZE not moved.]
215A: Clause 121, page 77, line 46, at end insert “and”
The noble Baroness said: This brings us to the community call for action. We support the additional powers being given to ward councillors with this community call for action. We believe that it strengthens a councillor's ability to take action to address local problems raised by their own constituents. I am also mindful of the amendment that I supported previously and which was tabled by the noble Lord, Lord Greaves, to make that even stronger.
However, some issues prevent this welcome power and we think they should be removed from the Bill. Amendments Nos. 215A, 215B, 215C, 215D and 224A seek to ensure that the community call for action covers all local issues that include crime and disorder matters and to ensure that the Secretary of State cannot use his discretion to exclude matters from the community call-for-action process. It is with some frustration that we think that the Government have not listened entirely to what has been said about this and that there is a widespread consensus, shared by the Local Government Association and people such as the National Council for Voluntary Organisations, that there should be just one community call-for-action process.
I cannot grasp why a councillor is able to refer a matter affecting their area to scrutiny by the council but cannot do so if it relates to a crime and disorder matter. There are problems here because of things such as ASBOs, which one should be able to raise. A councillor may have in his area a council estate where ASBOs are being issued. When there is a criminal aspect to a matter, it is of relevance. We cannot see how having two separate community call-for-action procedures—the one set out in this Bill and the one covered by the Police and Justice Act—will in reality operate. It will cause confusion for local people and councillors.
The Local Government Association has highlighted some important points that make it essential that these amendments and clauses are added to this Bill. The community call-for-action process has far clearer benefits in this Bill than that in the Police and Justice Act provisions. The additional powers given to ward councillors make certain that less council time is taken up by frivolous and vexatious complaints. That contrasts with the Police and Justice Act, where a member of the public, regardless of the council’s refusal to send the matter to the overview and scrutiny committee, is still able to appeal to the executive. For those reasons, these amendments should be accepted. I beg to move.
I fully support my noble friend Lady Hanham on this issue. I am of course no longer chairman of the Local Government Association, but I can say how strongly the LGA feels about this issue. As a member of a local authority, I know that some individual issues that come forward, such as education appeals or planning, are not dealt with by scrutiny, but that issues coming forward from the community, such as crime, social disorder and simply the fear of crime, are often so limiting to people’s lives. The inclusion of these amendments is therefore absolutely fundamental, and I give them my full support.
This is certainly a powerful lobby. The noble Lord may no longer be with the Local Government Association, but he is clearly not going to get away from it that easily. We know that these issues have been raised by the LGA. There is an important difference between the measures already in place for crime and disorder matters via the Police and Justice Act, and those which are proposed for local government matters. Noble Lords will know that, for crime and disorder, any person who lives or works in an area can initiate the process simply by asking the councillor representing it to consider a crime and disorder matter. The councillor is then under a statutory duty to respond, indicating what action he proposes to take. The councillor has a power to refer it to the crime and disorder committee. He can do so even if no one else has asked him to consider it. If he declines to refer it, the person can, in a local authority operating executive arrangements, refer the matter to the executive of the authority, placing them under a similar duty.
The provisions of this Bill cover local government matters other than crime and disorder. They are simpler. The only person empowered to initiate the process is the councillor himself. No duties are placed on him. A little background: in the Local Government White Paper Implementation Plan, we undertook to work closely with the Home Office to ensure that our provisions, and those set out in the Police and Justice Act 2006, formed a coherent package, and bring them both into force on 1 April 2008.
Noble Lords will be aware that the Home Secretary has asked Sir Ronnie Flanagan to carry out a review of the Police Service, and to make recommendations around the end of this year. Part of his brief is to consider how to ensure that the public are driving local policing priorities and how to improve local involvement and accountability. I understand that the Home Office has recently indicated the need to reconsider the implementation date for community calls for action in the light of the review.
Amendments Nos. 215A to 215D, taken with Amendment No. 224A, would have the effect of bringing the treatment of community calls for action on crime and disorder matters within this Bill, taking them out of the Police and Justice Act and aligning their treatment. The Police and Justice Act received Royal Assent only on 8 November last year. The provisions have not come into force yet. Parliament very recently decided that it wanted crime and disorder matters dealt with in this way.
I am trying to follow the argument. I believe that the Minister is saying that these can be referred to the crime and disorder committees. Members of local authorities, in referring these to the local authorities themselves, see that the crime and disorder issues are intrinsically linked to youth, education, social care, family and children’s service issues. They must therefore be able to be taken by the local members to the local authorities themselves.
I would not dispute that. There is an inextricable relationship with social and economic affairs. But in the Police and Justice Act, it was decided that community safety issues were different and that it was a more reasonable expectation. People are so exercised about personal safety. They are exercised about their family’s safety, and the safety of their community and neighbourhood, so it required a more stringent process in place to ensure that it could be treated differently, with additional powers for the councillor. That is what the 2006 Act provided, and why the distinction was made.
That is the case we have made, expressed in the Act, for why there is a distinction in how councillors will respond. On the other hand, we also had to consider whether we should go in the other direction, placing an equivalent duty on councillors and council executives for any and every “local government matter”. But surely it would be insupportable for a local councillor to have to respond to everything that came from any direction. Most councillors are wonderful part-time workers, but to extend the duty to cover virtually all their work would impose an impossible burden. We have achieved a balance between those two situations in the Bill.
There is a third, unintended, consequence of the amendment. Section 19(4) of the Police and Justice Act provides that the community call for action should not apply to county councils for areas where there are district councils. The noble Lord, Lord Greaves, will appreciate that that was included to ensure that the measure has the local focus which was intended for it, and to prevent confusion between the scrutiny role of police authorities and county councils’ scrutiny committees. If these amendments were carried, that distinction would be lost.
Amendments Nos. 215A to 215D go further than that, to bring the treatment of crime and disorder matters within the scope of this Bill. They seek to deprive the Secretary of State of the power we propose for her to make an order defining other descriptions of excluded matters. We said in the local government White Paper that there must be circumstances in which the community call for action should not be available for all; this goes back to the 2000 Act. There are already statutory appeals processes—for example, on planning, licensing, council tax, non-domestic rates, the quasi-judicial functions and so on. In consultation with the Local Government Association and others, we will work at the detail of these exclusions, which is consistent with the present powers.
I understand the point that the noble Baroness has made. Her argument is being heard loud and clear by the Government. We do not feel that we can move on that, for reasons explicit in the Police and Justice Act about the importance of community safety. Again, the amendment has unintended consequences. We will have to ensure that measures to put community calls for action in place are implemented in a coherent way so that councillors, the police and the public can understand them. I assure the Committee that we will be doing that.
I suppose one of the best ways to do it would be to call them different things. We are here inviting the public to think that there is an entity called a community call for action. Why would they think that it would go either to one committee or another way? There is a real potential for confusion over this. The fact that the council is involved makes the whole thing much more confusing.
I hear clearly what the Minister says about the discussions that took place during the passage of the Police and Justice Bill. Not being involved in those, I do not know the content of that totally. But I am not sure whether consideration was given to the fact that this Bill was coming along, and that therefore a similar community call for action would be introduced in future legislation. I should have looked up whether those debates took place, but I did not. It is worth considering whether, when that Act came into force, it was realised that two areas were going to be covered by this in different ways but in the same community.
I am quite attached to the amendment. I understand that there may be some technical hiccups over it; we could begin to see how those could be ironed out. However, we must not have a situation where we have two similar processes going different ways. For today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 215B to 215D not moved.]
215DA: Clause 121, page 78, line 5, leave out from “matters” to end of line 7 and insert—
“( ) A member of an authority who exercises the power under subsection (1)(c) shall have the right to address the committee or sub-committee when it is discussing whether to exercise any of its powers under subsection (2) in relation to the matter, and if and when it does so.””
The noble Lord said: I shall speak also to Amendment No. 215DB. They are about the rights of councillors within the proposed system and within their authority generally. I referred to the report of the inquiry by the All-Party Parliamentary Local Government Group into the role of councillors, and I shall not say anything more about that now. However, I hope that we will find an opportunity to discuss that report in this House; perhaps it would be a suitable Question for Short Debate, when they come back in the new Session.
I find it thrilling to be here discussing councillors and what they do. Thirty years ago, I got a job as, effectively, the local government officer of the Liberal Party in our redoubt in Hebden Bridge in the Pennines. I spent a lot of time advising councillors on what they could do, how to do it, how to get things done and how to find their way through the particular system and culture that existed in their council. It is important that councillors are able to do that, but there is vast variation in the cultures of councils and the ways that they work, so I have tabled these amendments.
Amendment No. 215DA gives a member of an authority the right to address the overview and scrutiny committee that is considering his call-to-action request. In some ways, I had to pinch myself when I tabled this amendment because I asked myself which councils would not allow that. In the local government culture that I come from, councillors have always been able to attend any meeting of any committee, whether they are on it or not, and often take part in it in an informal way by asking permission or sometimes under the written or standing orders. That has been the case at county and district level. I regard it as something that should happen automatically, but I know from experience and from my colleagues that there are councils where it would be regarded as a heinous offence that should not be allowed. I think it ought to be written in as part of the process to strengthen it and make it work better.
I tabled Amendment No. 215DB knowing that there are some councils where some of the powers that be—senior staff and councillors—will do anything they can to restrict the ability of back-benchers to take part or to be influential. There are councils with a very centralist culture, which I would call a very Stalinist culture, although I am not saying they are necessarily left-wing or right-wing as it applies across the board. The purpose of this amendment is to set out that those things that already happen in councils should not be restricted by this new right. It should not be regarded as being the maximum right of councillors, but the minimum floor. For example, there are many councils where a councillor already has a right to refer a matter to a decision-making or other body of the authority, whether that is a committee, the executive or a member of the executive or cabinet taking a decision that has been referred to it under the new arrangements. There are many councils where councillors can make representations to such decision-making bodies in person in public, and there are many councils where anybody—never mind a councillor, any member of the public—can turn up to a committee and can have their three or five minutes’ worth—whatever it is in the standing orders—on an item on the agenda before the decision is made. I sit on a council where hundreds of people do that every year. We regard it as normal. Twenty years ago, it was thought to be revolutionary, but now it is happening in more and more councils around the country. It leads to better decision-making, and it certainly leads to people believing that decisions have been made after taking account of what they said. That should continue and should be expanded in councils that do not do it.
The danger of putting this in the legislation is that councils will think that it is how they have to do it and that they must go this far, but no further. I do not expect the Minister to think that this rather long amendment ought to be put in the already long Bill, but I hope that when the Government are giving statutory guidance on the various clauses about the community call to action they will give councils very strong advice that what is proposed is a minimum, a floor; that it should not under any circumstances be regarded as a maximum right for the public or councillors; that it should not affect existing rights for members of the public or councillors; and that they should go beyond it. That is the spirit of this amendment. I hope I shall get a generous response and look forward to the Minister’s reply. I beg to move.
The more I learn about the comprehensiveness of the noble Lord’s experience in local government, the more I wonder that I have the temerity to sit on the Front Bench and respond to him. He has clearly been doing this for so long on behalf of so many people, and it is a source of wonder and admiration to me. I do not mean that as flattery; it is a very impressive record.
I have a lot of sympathy for what he said. Amendment No. 215DA relates to the right of a member raising a matter to address in person the committee to which he referred it. However, we must retain the discretion of local committees to decide how and when they want to hear evidence from the people they call. New Section 21A(6)(b) already empowers, but does not require, a committee to have regard to representations made by the member. We have to oppose an interpretation that requires a committee to give a personal hearing to any member who raises any issue, however frivolous. Although I understand the sentiment entirely, this has to be a matter for the judgment of the committee. Some very serious issues would be raised if we were to accept the amendment and require committees to behave in that way. They are so experienced and know what they want to get out of evidence and out of people appearing before them. It would be counterproductive.
I now turn to Amendment No. 215DB—
How does the committee know what it will get from a member raising a subject? Will it rely entirely on that member writing a request for the committee to consider? Why would members not have a right, or why would the committee not want to hear that member’s representations? I do not understand why this should not be a member’s right.
It may be that the member does not want to exercise that right. He may feel more comfortable raising an issue or being able to set out a complex case in writing and maybe following it up with a personal appearance. It is difficult to legislate for that. How to approach it is best left to the discretion of the member and the committee.
The second point is that Amendment No. 215DB seeks to ensure that the existence of the community call for action is not taken as preventing local authorities engaging their communities in other ways. I could not agree more with everything the noble Lord said. It is a minimum, a new step, and it will certainly not sweep away both current best practice and future best practice. I have absolutely no doubt that the sort of example the noble Lord gave might be unique in some respects, but councils up and down the country are very proactive about engaging people in innovative ways and going beyond the usual suspects. That is admirable. It is reinforced in different parts of the Bill; for example, the new duty to inform, consult and involve, which we are putting on best-value authorities, takes that argument further.
Although I agree with much of what the noble Lord said, he was quite right to predict that I could not accept the amendment.
I thank the Minister for her slight enthusiasm for the ideas I put forward. She did not respond specifically to my request that the Government should seriously think about giving guidance that this is not a minimum, particularly giving guidance that authorities should seriously think about going beyond it. I shall leave that thought with her for the moment and hope that she will ponder carefully on it. As she said, there is a huge amount of good practice around the country—it was originally pioneered by the Liberals, but it is not now a Liberal thing—of involving people and councillors across the parties. The more people who engage in it, the more they will realise that it is good local government. It leads to better decision-making and it certainly leads to a great deal more engagement of the citizen, which is what the Government want. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 215DB not moved.]
Clause 121 agreed to.
Clause 122 agreed to.
Clause 123 [Powers to require information from partner authorities]:
215DC: Clause 123, page 78, line 26, after “authorities” insert “or registered social landlords”
The noble Baroness said: There are six amendments in the group, Amendments Nos. 215DC, 215DD, 216G, 217ZA, 217ZB and 217ZC. The amendments have the support of London Councils and are put forward on its behalf. London Councils is the body which represents all 33 London authorities.
The Bill currently allows local authorities the power to require information from partner authorities. We have just been discussing that. Those partner authorities have a duty to respond to reports by the overview and scrutiny committees. Registered social landlords deliver public services and receive considerable funding from central government in the form of capital subsidy to build new homes and revenue subsidy for rental charges through the housing benefit subsidy system. Hence overview and scrutiny committees should have the power to require information from RSLs operating in their local authority area, who should be required to respond to reports by the overview and scrutiny committees.
In the recent consultation paper issued by the Department for Communities and Local Government, Delivering Housing and Regeneration: Communities England and the future of social housing regulation, the Government stated that they propose to take forward the recommendation of the Cave review that all social housing providers,
“should have a statutory duty to engage constructively with the place-shaping role of local authorities”.
My amendments meet the Government’s commitment to ensure that registered social landlords are engaging with the local authorities and they seek to put this on a statutory footing.
Many elected members of the 33 London councils have expressed their concern about RSL management. Lack of responsibility is particularly evident in areas where registered social landlords have a small number of properties in a given area. London Councils has identified that of the 390 registered social landlords operating in London, 85 per cent operate schemes of 50 or fewer units within certain boroughs. That has led to inconsistency of service provision and management standards across social housing and left local authorities and tenants without appropriate influence over registered social landlords and a lack of accountability to their residents.
There is sometimes—not generally, but sometimes—a lack of transparency in the performance of registered social landlords locally. They are not required to disaggregate performance information locally, which makes it much more difficult to engage them in delivering local objectives. The Bill provides an important opportunity to ensure that social housing providers are brought in to work with local authorities and to be recognised as bodies which should be considered. I moved an amendment—was it yesterday or was it a few days ago?—raising that as an issue.
I should be grateful if the Government would support the positive move proposed in the amendments. I beg to move.
I strongly support the amendment moved by the noble Baroness, Lady Hanham. In doing so, perhaps I may say that when we discussed the previous group of amendments the Minister was very kind about the things that I have tried to do in my life. Only a few of us are here across the parties, but we have people with immense experience of different sorts. I hope that the Government understand that and recognise that we are trying to improve things—certainly in this part—and are not opposing the Bill out of hand.
The noble Baroness, Lady Hanham, is certainly one of the people with that experience. She spoke about small registered social landlords. I agree with her that that sometimes causes a problem, especially if it is in a part of the country where they do not have many properties and they are mainly based somewhere else. That can cause a difficulty. I want to speak in support of social landlords who exist after a large-scale stock transfer has taken place in an authority. They are not small players in the area but a very important part of the local scene. They are running what used to be, and what people still call, council estates.
In some cases, they are running the whole of the previous council stock; in other cases, in bigger authorities, it may be just part of it. In either case, they are running what people think of as council estates and, regardless of that, are important providers of rented housing and social housing in the area. In those circumstances, it is very easy to get into an uneasy relationship between elected councillors—the ward representation side of local councillors—on the one hand and registered social landlords on the other. If there has been a stock transfer, typically, the council will have representation on the board of the housing association. So at a strategic level, at the level of looking at investment patterns in the authority and overall housing and allocation policies, the authority is well represented. But from the point of view of the ward councillor, it is very easy for the new landlords, the new housing association, to say, “It is nothing to do with you any more”, and have a slightly offhand approach.
The proposal of the noble Baroness would go a long way to assist in that and create some accountability. At the moment, from what I am told by my colleagues in other areas around the country—I am not speaking about Pendle here where the relationship at the moment is very good—there are problems. I support the amendment, which I think would go a long way to solve the problem.
I would just add one ingredient to the discussion. Social housing providers are not the same as registered social landlords. Although I am very sympathetic to the amendment—it sounds to me like good practice for registered social landlords to behave as they are expected to and to provide information to their partner local authorities, as suggested by the amendment—unfortunately, they are not the only organisations empowered to provide social housing. Social housing grant is now available and will increasingly be given to private developers and house builders. This is despite my efforts to the contrary. But if you were to include all those providing social housing as being required to provide information to local authorities, you would be stretching this to include a large number of private sector organisations now moving into this field. That hazard is inherent in considering this amendment.
I am also happy to support the amendment. Social housing issues are, as we all know, immensely important and a great deal of public money is directly involved in registered social landlords. The point about consistency in providing information, as raised by my noble friend Lady Hanham, is important. Information helps to drive up quality, it adds accountability and I hope that in the long run it will also add choice. What we need to see in the housing sector is wider choice. Information helps to provide quality, accountability and choice.
Noble Lords have spoken with great experience and wisdom on this subject. I wish it were possible for me to give the noble Baroness anything other than the sort of response I gave her yesterday. It was yesterday, I think—it is hard to imagine what else we have done over the past week except this Bill. Noble Lords have spoken about the importance of social housing, the RSLs themselves and the other provision now coming in from the private sector. The problem is that we cannot deal with that so long as we are dealing with bodies that are not part of the public sector. The amendments would apply to RSLs the same powers that the overview and scrutiny committees have in respect of their public sector partner bodies. They would add them to the list of partners in all but name. However, RSLs are private, not-for-profit organisations and they use largely privately raised capital. They are regulated by the Housing Corporation but they are not part of the public sector. It is this legal problem which confounds us here and makes it difficult for us to treat them as if they were.
However, I can give noble Lords some encouragement. It may be that we have another tool which can deal with some of the problems that have been raised. I refer to the independent Cave review of social housing regulation. Many of the points made by the noble Lord, Lord Greaves, about the small provider—for example; the difficulty of regulating standards and the issues of quality and choice—are important and the growth of the sector presents a challenge in this area. The Cave review of social housing regulation has made clear recommendations on the engagement of social landlords with local authorities on place-shaping and on the role of stakeholders in the regulatory system. The Government are now consulting on their response and propose to accept the recommendation and incorporate it in housing legislation at an early opportunity. We will take the recommendations of the Cave review and see how we can strengthen the regulatory system.
It would be premature to agree these measures before the consultation has ended and in isolation from other aspects of the new regulation regime. But we are certainly not indifferent to the problems in the sector and to the sorts of problems that London Councils has raised in its support for this amendment. Unfortunately, the amendment is not the way to deal with the problem as there is the legal issue I have already described, but we have got a way forward into solving some of the problems.
It is all about missing buses. It is the most extraordinary thing that in this place Bills pass by us and we think of wonderful ideas about what will go into them. There is always another bus coming behind on which you can put another passenger and if you are lucky they will not get off before they get to the right stop. This has happened with the community call for action measure, which is exactly the same measure. It was put into the Police and Justice Act and now makes it difficult for this Bill.
We have raised this issue in good time. The Cave review is obviously extremely important, and I very much hear what the Minister says about the consultation, but we have a problem here and now. We are setting out powers for the overview and scrutiny committee to require and to get information about things that are to do with its own area. Every council is steeped in housing run in some way by registered social landlords, by ALMOs or by tenant management organisations. I imagine that ALMOs are bodies to which councils already relate because they are by definition still associated with them. However, registered social landlords are sucking up enormous sums of money. I hear what the noble Lord, Lord Best, says about other private organisations that are coming in. In our discussions on the previous legislation, we had quite a happy exchange about how to prevent that, but, at the end of the day, people who are in social housing believe that the council has something to do with it and has to help them.
How can we let this Bill pass without ensuring that the overview and scrutiny committee can get its paws on that? We need to think very carefully about that. If it is simply because the Bill is steered only towards partner authorities, cannot we change a word? There must be some way in which we can get a foot in the door in this Bill, because no amount of other legislation will do it. People will have to keep referring again and again to this issue. This is where we need it. However, I hear that the Minister has the problems. I simply think that it might be helpful if, between now and the next stage, we could talk about how we can get over those problems. I hear what other colleagues have said. Housing is such an important area, but it looks as though the overview and scrutiny will not get in on it. For today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 215DD and 216 not moved.]
216A: Clause 123, page 79, leave out line 18
The noble Baroness said: I shall also speak to Amendment No. 217C. They are in essence the same amendment. Amendment No. 216A relates to Clause 123(1), which is the first clause in which police authorities and chief police officers are excluded and which is about information that associated authorities—the technical term—must provide. Amendment No. 217C relates to Clause 124 and to recommendations going to “relevant partner authorities”—another technical term. My amendments were tabled to understand the Government’s reasoning behind this exclusion. The noble Baroness, Lady Hanham, talked about another bus coming along and hoping to jump on it. I might be told that the bus went last year and that I have missed it. Without wanting to extend the transport analogy too far, that is simply why the amendments are here tonight. I beg to move.
Amendments Nos. 216A and 217C would remove the exemptions for the scrutiny of police authorities from the provisions relating to the scrutiny of LAA partners. More specifically, Amendment No. 216A would allow the Secretary of State to make regulations about the information that the overview and scrutiny committee could require from police authorities. Amendment No. 217C would allow the overview and scrutiny committee to send reports to police authorities to which they could be required to have regard. The noble Baroness asked why the Bill is as it is. The exemption in the Bill regarding the overview and scrutiny of police authorities is not an accident or oversight; nor is it because we think that crime and disorder matters should be subject to strengthened scrutiny. Quite the opposite is the case. The amendment will simply duplicate what is elsewhere.
The Committee will recall that only last year the Police and Justice Act 2006 received Royal Assent. Sections 19 and 20 of that Act provide specifically for local authorities’ scrutiny of crime and disorder matters. These provisions are far stronger than the general local government scrutiny arrangements set out in Section 21 of the Local Government Act 2000. Section 19 of the Police and Justice Act 2006 provides that every local authority shall have a crime and disorder committee, which can make reports and recommendations. When it does so, it must provide every chief officer of police, police authority, fire and rescue authority, PCT and local probation board in the area, and any other person named in an order by the Secretary of State, with a copy.
Where such an authority or person then receives a copy of the report, they must consider it and respond, stating what action they are to take, and have regard to the report’s recommendations in exercising their functions. In essence this Bill strengthens councils’ overview and scrutiny by allowing them to hold to account those public service providers they are not already able to hold to account through the specific provision of crime and disorder bodies—by virtue of the Police and Justice Act 2006—and health partners, which are provided for by the National Health Service Act 2006. Given that we have only recently legislated to provide for scrutiny arrangements on crime and disorder, there is no need to bring these back before the House and duplicate them in this Bill. As I said earlier, we intend to work as closely as possible with the Home Office in order to make sure that these provisions are lined up together.
I realised that it must be a bus that had passed towards the end of last year. I ask the Minister one question arising from that: are all the functions of the excluded bodies covered by the Police and Justice Act? It is obviously right that legislation should be “lined up”; otherwise there will be confusion. In the lining up, are there any functions that might not go on one or other of those tracks?
I rise technically to oppose Clause 123 standing part of the Bill and to speak to the amendments grouped with the clause stand part debates. These are all probing amendments. Their purpose is to ask one or two interesting questions relating to overview and scrutiny. Amendments Nos. 217A and 217B and Clause 126 stand part probe the relationship between the district council’s scrutiny committee and the county council’s scrutiny committee in a two-tier system. The Minister will tell me that the amendments are not well drafted; I agree that they are not up to my normal brilliant standard. In particular, they probe the role of a district council’s scrutiny committee. The Minister is nodding, so the amendments at least establish their aim, which is to get some debate on that matter.
Can a district council overview and scrutiny committee make a report to the county council? I think that, under Clause 126, it can, but under what circumstances? Does it have to be by agreement, or can it take up an issue, even if the county is not too keen on the matter?
Clause 125 allows the setting up of joint overview and scrutiny committees between different partners. Amendment No. 218A probes whether such an arrangement has to be by agreement of all the partners, unanimously, or whether, for example, a county council could agree to set up a joint overview and scrutiny committee even if the district council or one of the other partners was against the idea. How would that work?
Amendment No. 222A probes the matters that a joint scrutiny committee between a district and a county can scrutinise. I am talking about a district scrutiny committee scrutinising a county council function. Why might just the local improvement target be involved? Why could it not be widened to a designated improvement target? It is likely that, in the basket of improvement targets existing in the local area agreement, some will be designated and some will not, and they may be closely linked to each other. Why, by agreement, can the committee not do a scrutiny investigation into anything else? If the county and district councils are agreed, why could not either of those scrutiny committees do a scrutiny review of any subject in which either or both of them were involved by agreement between the two?
On whether Clause 123 should stand part of the Bill, I wish to ask a question about the regulations, which cover, as I understand it, the whole of the overview and scrutiny function. They will be extremely important; the powers to require information from partner authorities are vital. There could be real difficulties if they are too bureaucratic or prescriptive, although there is the necessity to get the right information. Perhaps the Minister would comment on these regulations and the approach that the Government will take to them. They are some of the most important regulations in the Bill.
Clause 127, on guidance, refers to the whole of the overview and scrutiny function. Again, it would be helpful if we could see the draft guidance before Report after the Recess. When might the Government have at least some draft guidance on these matters? Will it be in the autumn like the other guidance that we have talked about? If so, how does the Minister define autumn?
I shall reiterate briefly what I said earlier. The Bill strengthens the O&S provisions in the Local Government Act, which enabled any overview and scrutiny committee to review or scrutinise and make reports to its council or executive on matters that affect the local authority’s area. The provisions enabled overview and scrutiny committees to invite any person before them and to request information from any organisation, and they required members of the executive and officers to attend before scrutiny committees. The Bill builds on those provisions in the 2000 Act by requiring executives and councils to respond to the reports and recommendations of an O&S committee. It provides that the O&S committees may require information not just from the council and its officers but also from the council’s local authority partners, and it allows O&S committees of county and single-tier councils to send reports to LAA partners, which they may require these partners to have regard to in exercising their functions. That is the context in which the noble Lord has asked some important questions.
The role of districts in formulating LAAs, as we discussed yesterday, is very important. I assure the Committee that we believe that district councillors and councils themselves must be vital partners in any successful LAAs. I also explained that in two-tier areas district councils would be placed on an equal footing to their county councils on the agreement of local improvement targets. Therefore, it is obvious that districts should also have a key role in holding public services to account. We have strengthened that role in two ways. First, we have provided for joint O&S committees with equivalent powers to upper-tier authorities when they are so desired. Secondly, we have made provision for regulations that will allow districts to scrutinise LAAs where they have a direct partnership with an LAA partner.
I will come on to explain why we have made that distinction and that restriction; we brought forward amendments in another place to clarify this. The point of creating joint committees is to enable us to make regulations to allow for the establishment of joint O&S committees in two-tier areas between district councils and their respective county councils. We brought that amendment forward because we wanted these joint O&S committees to be able to require information from and make reports and recommendations to LAA partners on matters relating to the attainment of an LAA target in the same way as a county or unitary authority could. We thought that joint committees were potentially a very important vehicle for improved working between districts and counties in two-tier areas. Therefore, in response to Amendment No. 218A, it would be wholly contrary to the spirit of joint working if we were to coerce local authorities into forming such a joint scrutiny committee. It would be counterproductive and something of a tautology. I assure the noble Lord that regulations will provide that the establishment of these joint scrutiny committees will be entirely at the discretion of the constituent local authorities. Therefore, I cannot accept Amendment No. 218A.
We will be issuing guidance about how joint O&S committees might minimise or avoid overlap with other O&S committees in the same area and we will commission that guidance in collaboration with key bodies. At this point I cannot give a date for the guidance, but officials are working exceptionally hard on this Bill. If I can provide some idea of when we can expect it, I will. But while we know that joint scrutiny committees could play a valuable role—and I think that many will take it up—that does not mean that there will not be a continuing role for O&S committees of district councils in two-tier areas to scrutinise district functions. We also recognise that, in some two-tier areas, councils will simply not be able to reach agreement on these joint committees.
We have also brought forward amendments in another place to make provision to strengthen the O&S committees of district councils of two-tier areas in their own right. The amendments that we have made allow us to make regulations under Clause 123 to enable district councils in two-tier areas to require information from local partners. The noble Lord asked me whether they would be able to send reports. Yes, they will. These amendments provide a new general power in Clause 126 to allow us to make regulations to enable district councils in two-tier areas to send reports to their respective county council where these reports also relate to matters that are LAA targets. Regulations under Clause 126 will enable us to make provision about the requirements on county councils to respond to those reports and on local public service providers to have regard to such reports.
I also explained when we discussed LAAs yesterday that, while there is a mutual duty in two-tier areas on both the county and the district councils to co-operate to agree LAA targets, it is equally important to avoid duplication and overlap. The county council, therefore, will have to have overall accountability for preparing the LAA. We believe that those local authorities that have responsibility for preparing an LAA should also have primary responsibility for holding to account any partner to whom a target specified in the agreement relates. So while the amendments that we brought forward are designed to give a real voice and real influence to district councils to recognise the responsibilities, in a two-tier area we must avoid duplicate scrutiny that would place unnecessary burdens on service providers, whoever they are.
The noble Lord’s Amendments Nos. 217A, 217B and 218A would allow, in two-tier areas, O&S committees of district councils and county councils to scrutinise and make recommendations to LAA partners on the same LAA target, including targets for which the district council might not be responsible. They would also allow O&S committees of district councils to send reports to their county council on any LAA target. So the answer to the question why we have restricted the scope of the district is essentially to avoid duplication and the bureaucracy and confusion that might come with it.
The regulations will provide that the scrutiny committees will be able to require information from local public service providers in the more limited circumstances where they have formal partnership working arrangements. We have done that conscientiously. We also propose that the district council scrutiny committees should be able to send reports to their county council where, as a consequence of the partnership arrangements, they report on a matter that also relates to a target in the county council’s LAA. Obviously we will have to consult before we do that, but it is worth reminding ourselves that local improvement targets cover both designated targets and purely local targets—the undesignated ones. We are very anxious that district councils and two-tier authorities should exercise their scope for scrutiny on these partnership arrangements. However, a balance must be struck, otherwise reports will fly backwards and forwards on all sorts of areas and the resulting duplication will create exasperation, with the burden falling on public service providers, who are there to deliver services to the public.
I hope that, with that explanation in relation to the regulations as well, the noble Lord will feel able to accept Clause 123. However, I take the point about the importance of the regulations. I will look at the timetable and give noble Lords such information as I can about them.
I am grateful for that comprehensive reply, which is what I hoped that I would get when I tabled this series of amendments. I think that I understand the position a great deal better now than I did 10 minutes ago and I hope to understand it even better when I have read Hansard, so I genuinely thank the Minister. Her specific point was that the phrase “local improvement target” includes both the designated targets and the locally agreed targets, which I had not grasped previously. I am grateful for that as well. This is certainly going to be horrendously complicated; whether it will lead to great frustration and annoyance, I do not know. We certainly do not want duplication.
Clause 123 agreed to.
Clause 124 [Overview and scrutiny committees: reports and recommendations]:
216B: Clause 124, page 80, line 11, leave out “may” and insert “shall”
The noble Lord said: I shall speak also to Amendment No. 216F. The three further amendments in the group are in the name of my noble friend Lady Hamwee. Amendment No. 216B is a traditional “may/shall” amendment relating to the recommendations and the report of an overview and scrutiny committee. New Section 21B, which is to go into the 2000 Act, states:
“The overview and scrutiny committee may publish the report or recommendations”.
It seems to me that the word should be “shall”. Clearly, a general assumption that a report should be published will be subject to the constraints of acceptable information in terms of what can be made public. If a report contains personal or financial information, it may well be caught in that way. Subject to that, however, I should like to know why the Government are suggesting that there might be circumstances in which a report should not be published. The legislation should reflect a presumption for publication subject to the normal exemptions that apply throughout local government. Amendment No. 216F is consequential. I beg to move.
Amendments Nos. 216C, 216D and 216E in this group stand in my name and are all designed to achieve the same end. I congratulate those who deal with amendment groupings, whom we never see but from whom we receive many e-mails during a Committee day. As I prepared for today’s debate, I thought that I really should have sought to amend “may”. However, I find that my noble friend has done so in an amendment in this group.
Sometimes we are told that “may” really means “must”—that it is a slightly politer way of saying “must”—or that it means “may” but you must be reasonable about it, which amounts to “must”. However, I do not read it in that way in this instance. Like my noble friend, I feel that publication is important. I support his points. I shall not need to move my amendments.
It is wonderful to see the Liberal party so joined up, discovering their amendments synchronised by accident.
I am very happy to answer the questions raised by Members of the Committee. The noble Lord asked why we framed the Bill as we did. Amendments Nos. 216B and 216F seek to require overview and scrutiny committees to publish any report that they make and executives or councils to publish every response to such a report. Amendments Nos. 216C, 216D and 216E would seemingly narrow the instances in which executives or councils must respond to reports by requiring them to respond only to those published by an overview and scrutiny committee. I shall explain why I believe that the Bill is correct.
The Local Government Act 2000 enables overview and scrutiny committees to make reports and recommendations to their executive or council where they feel that it is appropriate, and they may determine whether it would be helpful to publish these reports. This Bill builds on these sensible provisions and requires executives and councils to respond to reports and recommendations and consider what, if any, action they will take. Where these reports or recommendations have been published by the overview and scrutiny committee, the executive must publish its response.
Together, these provisions grant overview and scrutiny committees the freedom to decide where it would be helpful to make reports and recommendations and to consider whether these should be published, so placing them in the public domain. However, Amendments Nos. 216B and 216F would require an overview and scrutiny committee to publish any report or recommendations that it makes and an executive or a council to publish all responses to reports of an overview and scrutiny committee. I shall explain why we do not think that this is very sensible.
These amendments would severely undermine the discretion of overview and scrutiny committees in relation to making reports and recommendations. For example, where a scrutiny committee reviewed a matter and concluded that it should make a report to its executive or council, perhaps on a sensitive matter such as community cohesion, but not publish it, it would not be able to exercise its discretion; the report would have to be in the public domain or not made at all. There are sensitive issues in local politics where such discretion should be retained. Not only would this requirement make this process more bureaucratic, but these amendments also indicate a lack of trust in the judgment of overview and scrutiny committees. The noble Lord will surely agree with me on that. If the committees were required to publish everything in the way that the noble Lord suggests, they could become risk averse and very cautious, whereas we want to see them taking a robust and far-reaching role in contributing to local decision-making.
Amendments Nos. 216C to 216E would achieve much the same effect. They would not place a requirement on scrutiny committees to publish all their reports but they would require an executive or council to respond to the reports and recommendations of an overview and scrutiny committee where those had been published. There will be legitimate reasons why a scrutiny committee does not always want to publish its reports, but the matter would still justify a response. These amendments go in the opposite direction to the previous amendments and would prevent this.
The noble Lord’s amendments seek to provide improved transparency. However, we should be very careful about making these sorts of requirements because they would reduce discretion and therefore effectiveness and they could sometimes raise rather problematic issues about whether it is wise and helpful to have things in the public domain if they are very sensitive or to prohibit a response being made just because the report was not published in the first place.