I remind the Committee that in the case of each Statutory Instrument the Motion before the Committee will be that the Committee do consider the Statutory Instrument in question. I should make it clear that the Motion to approve the Statutory Instrument will be moved in Chamber in the normal way.

rose to move, That the Grand Committee do report to the House that it has considered the Parliamentary Constituencies (Northern Ireland) Order 2008.

The noble Lord said: The purpose of this order is to give effect, without modification, to the recommendations made by the Boundary Commission for Northern Ireland, which were received by my right honourable friend the Secretary of State for Northern Ireland in September last year. The report was laid before Parliament on 31 March this year with this order, in line with the Parliamentary Constituencies Act 1986.

The commission’s report recommends that Northern Ireland should retain its 18 constituencies, with modifications recommended to the boundaries of 12 of them. In line with the statutory rules for the redistribution of seats, the recommendations seek to balance improvements in electoral equality with the preservation of community ties.

Extensive consultation has been carried out in relation to those recommendations. The commission published its provisional recommendations as long ago as spring 2004. The representations received on those recommendations led the commission to hold three public local inquiries, all of which took place in September 2005. The commission accepted the recommendations of the local inquiries wherever practicable, and, in doing so, acknowledged the importance of preserving community identity.

Following on from those local inquiries, the commission published its revised recommendations in May 2006. These recommended that Northern Ireland should have 18 constituencies with revisions made to the boundaries of 12 of them. Those became the commission’s final recommendations to the Secretary of State and he has accepted them without modification. Therefore, subject to Parliament approving the order before us today, the new constituency boundaries will take effect upon the dissolution of Parliament prior to the next general election.

I thank the Boundary Commission—that is, the chairman, Mr Speaker; the deputy chairman, Mr Justice Coghlin; his fellow commissioners, Mrs Joan Ruddock and Mr Dick Mackenzie; and their advisers and secretariat—for its work. I am satisfied that the Northern Ireland Parliamentary Boundary Commission has carried out its work thoroughly and that all affected parties have had the opportunity to raise any concerns that they may have had, although they may not always have liked the answers. Having been on the receiving end of Boundary Commission inquiries myself over 27 years, I realise the sensitivities of boundaries for elected Members of Parliament. They probably are the rawest aspect of their role, particularly when their boundaries are being changed by someone else. Nevertheless, we have an independent rule and a set of recommendations from the commission that have been accepted without modification. I commend the order to the Committee and I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Parliamentary Constituencies (Northern Ireland) Order 2008. 17th report from the Joint Committee on Statutory Instruments.—(Lord Rooker.)

I thank the Minister for bringing this order before us. As he said, there is little to say once a Boundary Commission has ruled. I once tried, as a consultee, to contest a ruling when it was trying to lump a whole lot of wild countryside into an urban authority. My complaint had no effect and the said urban authority has never caught up in managing the countryside. There we are. I am concerned that we have increased the number of MPs from 12 to 18 but I do not think that is a matter for this debate—it is the way life is. We are already overgoverned and this makes us even more overgoverned. I support the order.

I, too, thank the Minister for introducing this order. I have two comments to make, one by way of a question. First, can the Minister give me guidance on the extent of coterminosity between the Northern Ireland Assembly seats and the parliamentary constituencies? Is this a criterion which the Boundary Commission bears in mind? Secondly, although the noble Lord, Lord Glentoran, commented on the number of Westminster seats in Northern Ireland, and said that this is not an appropriate occasion on which to raise this question, there are very few appropriate occasions on which to raise it. Bearing in mind, thank goodness, that we now have a sustained devolutionary settlement in Northern Ireland with the working of the Assembly, to what extent is Northern Ireland overrepresented in Westminster compared with, say, England?

I thank the Minister for outlining this mostly non-controversial order. I join him in thanking the people who worked on the Boundary Commission for the good work that they did and the time they put in. I have a couple of questions. Is it possible to get the number of electors in constituencies; for example, Foyle, Newry and Armagh? The Minister referred to community identities as one consideration and numbers as another. Those are two very important considerations, but which has precedence? Is it community identities or numbers? It seems to me that some areas were taken out of Foyle because it was said to be too big but, if I read the matter correctly, areas were added to Newry and Armagh, which makes it considerably bigger. Is that issue being looked at under community identities because it makes that constituency disproportionately big? When were changes made previously? I listened very closely to what he said about whether Northern Ireland is over-represented in the House of Commons. If I understand the situation correctly, we now share equal representation with people in Scotland, who, as part of an agreement of 1801, were overrepresented even before they got their devolved Parliament. We broadly agree with the order.

I take this opportunity to congratulate the chief commissioner, Richard Mackenzie, and the other staff in the commission on their work in bringing forward the review of the parliamentary boundaries in Northern Ireland. Arriving at the final recommendations is an exhaustive process which takes considerable time, especially if you consider that the provisional recommendations were announced in April 2004 and the review was announced in 2003. During this exercise there has been good co-operation with the Electoral Office for Northern Ireland, the Valuation and Lands Agency, the Statistics and Research Agency and, of course, the Ordnance Survey. I particularly welcome the recommendation to retain the 18 parliamentary seats in Northern Ireland. Of course, some difficulties arose from the postponement in the appointment of a local government boundaries commissioner and the uncertainties about the proposed restructuring of local government in Northern Ireland. Therefore, I particularly welcome the Northern Ireland Assembly’s recent agreement to the review of public administration resulting in the rationalisation of the current 26 local councils to 11.

It is difficult to comment on the 12 constituencies in which the changes have been made. I do not intend to do that, but I refer to Belfast, which has undergone some demographic changes over a number of years. It is important, however, that the natural boundaries of Belfast are reflected in the boundaries of the constituency. I welcome the fact that the commissioner has taken into account that the system is to be built on the wards.

Finally, my noble friend Lord Morrow and I welcome the revisions, and so support the order.

I hesitate to take up 30 seconds of the Minister’s time, but will he be kind enough to confirm that there are no major changes to the particular geographical areas, or wards, in the schedules? I seem to remember when I served in what is now the Department for Environment, Food and Rural Affairs—in my time, it was called the Ministry of Agriculture, Fisheries and Food—that a matter of 100 metres or so of boundaries could affect the water supply and other aspects of the environment as well as restrictions on particular areas.

I draw the Minister’s attention to line 3 of paragraph 2 at the bottom of page 5. Am I right in thinking that Audley’s Acre in South Down, the county constituency, is not a complete island but is in the vicinity of a particular area, which I think was known as Audley’s Castle or Audley’s Point, at the south end of Strangford Loch by Strangford village? Will he confirm that it is there and not an island elsewhere? Certainly from my memory and from reading about these wards, I do not think that there should be any major differences or shake-up. I do not want to waste his time or that of the Committee. If he has the answer, wonderful: if not, perhaps he could write to me. I thank him.

On the latter point, before I receive any advice, we are talking about complete wards, so whatever the boundaries are, Audley’s Acre is a complete ward. It is what it says. The wards have boundaries. The order says,

“the following wards of Down local government district”,

and mentions the names of the wards. Audley’s Acre is therefore a complete ward. Whatever it is, it is already an electoral building block, as it were. There are no divided-up wards.

I hope that I can answer all the questions that I have been asked. I should add that we will have taken a number of these questions in the elected place. The commission was required to adjust the boundaries of between 16 and 18 constituencies, and it has chosen 18. The electoral quota is not being considered at present. The quota used in this review for Northern Ireland was 61,000—or 60,999, to be precise. The quota for England and Scotland is about 70,000, and the quota for Wales is 56,000. The boundaries are looked at every eight to 12 years. They are more or less within the quota—less than minus 10 per cent and no greater than plus 15 per cent. There will be big and small—that is unavoidable—but there must be a range. There is nothing way out.

I think that the noble Lord, Lord Glentoran, made a slip of the tongue. Some minor changes have been made to 12 of the 18 existing constituencies, but the number of constituencies has not changed; it remains at 18. In answer to another question, the constituencies were last reviewed in 1995.

There is no problem with coterminosity with the Assembly. There will be six Assembly seats per Westminster constituency, and they will be designed to fit into the arrangements there. There is therefore a degree of coterminosity. In other words, no Assembly Member will cover more than one Westminster constituency, which is quite important.

The noble Lord, Lord Laird, asked about Foyle. We can produce statistics for this. The electorate for Foyle will be 60,823, and the electorate for Newry and Armagh will be 68,730. So, the figure is just over 10 per cent greater, but it is not a massive difference—certainly not like the differences that there can be in England.

A local government review is underway and if ward boundaries change, there may be an interim review at some time to tweak them; but by and large, once agreed today, because the House of Commons has agreed the order, these will be the boundaries for the next general election to the Westminster Parliament. There is no equivocation whatever about that; everyone knows exactly where they stand, they know exactly what the electorates are, they know where the boundaries are and so they can go campaigning. There is always an uncertainty for Members of Parliament until the orders have been approved. I think that I have covered all the questions.

I am still trying to work something out. As I understand it, areas were taken out of Foyle, because it was seen to be too big. Areas were put into Newry and Mourne, which is now some 8,000 electors larger than Foyle. Obviously the areas were not moved from one to the other, because they are at different ends of the country. However, I return to the point on which the Minister may wish to comment—which is more important, numbers or community identities? I am trying to discover why areas were put into Newry and Armagh, while areas were taken out of Foyle. The reasons may not be the same in Foyle as those for Newry and Mourne.

I am not here to second-judge the independent Boundary Commission. Its report has been accepted without modification by the Secretary of State. The commission’s report and the public inquiries are a matter of record and they explain the position, on balance. It is not the case that a Minister or anyone else can argue that this was judged on numbers, rather than communities. One has to strike a balance between them and that is what the Boundary Commission has done. It can justify its decisions. Those decisions have been accepted by the Secretary of State and, I hope, by Parliament, so the electorate knows that it was not the politicians who fixed the boundaries—it was the independent parliamentary Boundary Commission.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Mutilations (Permitted Procedures) (England) (Amendment) Regulations 2008.

The noble Lord said: I am pleased to speak to the Grand Committee about the regulations which make important and necessary changes to the original Mutilations (Permitted Procedures) (England) Regulations 2007. The 2007 regulations provide exemptions to the general provision in Section 5 of the Animal Welfare Act 2006 that all mutilation of animals other than for medical treatment is prohibited. By “mutilation” I mean the carrying out of a procedure,

“which involves interference with the sensitive tissues or bone structure of the animal”.

Before making the 2007 regulations, we consulted stakeholders widely on any procedures that should or should not be allowed. When the regulations came into force, we believed that in most cases the status quo in common practice had been replicated where a procedure was felt to have a long-term welfare or management benefit.

However, after the 2007 regulations came into force, we were made aware of certain procedures that were in common practice before the Animal Welfare Act and the 2007 mutilations regulations came into force, but which were not highlighted by the relevant sectors during the original consultation. After consideration of the welfare costs and benefits of the procedures, it was judged that they were in the long-term welfare or management benefit of the animals involved and that they should, therefore, be added to the list of permitted procedures. It is to this end that these amending regulations have been produced.

In parenthesis, I should say that the same rules apply in Scotland and Wales, which will amend their regulations in due course. In other words, the relevant bodies and stakeholders did not come forward in any part of Great Britain to alert those who drafted the original regulations.

The amending regulations will have a number of beneficial effects on animal welfare and conservation. They will allow certain artificial insemination techniques to be used in sheep and goats for breed improvement programmes, which will facilitate the continued genetic development of the sheep and goat flocks, including in resistance to scrapie.

The regulations will allow the wing and web-tagging of birds to be used for conservation and research purposes, which will in particular aid certain wild bird reintroduction programmes. We also intend to introduce an exemption order under the Veterinary Surgeons Act 1966 to allow conservationists other than veterinary surgeons to perform those procedures. Initial informal consultation with officials at the royal college suggests that that would be uncontroversial, and we hope to have the exemption order in place by the autumn of this year. Lastly, the regulations will allow poultry and duck breeders to wing-tag, web-tag, neck-tag and web-notch birds involved in breed improvement programmes, therefore permitting breeders to use the most welfare-friendly forms of identification of breeding birds.

In conclusion, the mutilations listed in the amending regulations will have a positive effect on animal welfare, management and conservation. I regret that I have had to come forward with these amending regulations during the passage of the other regulations. Following widespread consultation, those techniques were not highlighted as being required for exemptions. Nevertheless, it is best that we do this as soon as possible. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Mutilations (Permitted Procedures) (England) (Amendment) Regulations 2008. 17th report from the Joint Committee on Statutory Instruments.—(Lord Rooker.)

I thank the Minister for his introduction of the regulations. It is better to get it right eventually than to allow it to remain wrong. Perhaps the focus on issues such as tail docking prevented us giving this issue proper evaluation in the 2007 regulations. We value the fact that the Government have reviewed the operation of the 2007 regulations and been prepared to revisit them to ensure that practices with long-term welfare management benefits for the animals involved will be permitted. They are later in being laid than the consultation paper intended. What does the Minister consider to be the consequences of that delay? As my honourable friend Mr Wiggin pointed out in another place, it has already resulted in a loss of income to the farm veterinary profession, which already has pressures on it and is short of recruits.

The danger with this sort of legislation is that, short of constant updating, procedures become outdated as new ideas and practices developed elsewhere. The failure to recognise sheep and goats in the first permitted procedures has disadvantaged British producers. One can see from the internet that this is a fast developing area of scientific advance. It would be a disservice to our livestock sector if those advances were prevented from being incorporated into our industry by an overly restrictive regime.

The Minister accepts that the consultation process held before the introduction of the 2007 regulations failed to pick up on these issues. He made it clear that he thought that the industry should have been able to present them to the Government at the time. Were the Government sufficiently practical in seeking advice on those issues? What were the Government's advisers saying on the inclusion of sheep and goats in the regulations, for example? What steps are the Government taking to ensure that when regulations of this type of consequence on primary legislation come into effect, we sweep up all the issues that are likely to be involved, so that we do not have to revisit regulations in so short a time?

There is in principle a danger in relying on a regulatory regime that defines in detail permitted procedures but which, by definition, excludes all others. If the permitted procedure is not defined, it is by definition not allowed. It can mean that progress is dependent on a new regulation coming in to permit the new scientific advance. Given the high animal welfare standards in this country—I am sure that the noble Lord agrees—the regulation could be amended to reflect the current animal health and welfare requirements, while retaining the flexibility to use new and innovative techniques as they become available. In other words, is a prescriptive regulatory regime the best way of dealing with such issues? The deficiency of playing catch-up is best demonstrated by the ovum transplantation and other artificial insemination methods being extended to include sheep and goats.

New techniques can be highly beneficial to animal welfare and good management. What about camelids, such as alpacas and llamas? In the US, the research into transplantation and embryo transfer is much more advanced than here and includes frozen blastocysts. That could have considerable advantages for breeders in this area of animal husbandry, particularly as artificial insemination in camelids is impracticable, the collection of semen from males is difficult and camelids are induced ovulators.

Schedule 4 concerns birds. How do the Government propose to ensure that the procedures in the proposed A2 and A3 in Schedule 4 may only be carried out within 36 hours of hatching? Is there some development that happens at 36 hours that provides an obvious watershed, or is it just an arbitrary time period?

We have received considerable concerns from the RSPCA on wing-tagging. I wonder what the Minister has to say about that and whether he can reassure Members of the Committee and the RSPCA on that issue.

I can but welcome the regulations, but I do so feeling that there may well have been a better way of combining the needs of animal welfare and the use of modern science.

We have no difficulty with the regulations. I have one question, since this provision has been updated to cover areas that were not formerly included. The Human Fertilisation and Embryology Bill is going through Parliament. Ova are collected from cattle, and human DNA is used with cattle ovum. Is the recovery of the ova from cattle covered by the regulations, or will we have to come back to that later?

If I may, I will speak seated. I want to speak briefly about wing-tagging. It is a good development in the law to permit it. Many years ago, I was concerned with some research looking at gulls and terns in East Anglia. There, the common method of tagging of chicks was with leg bands. The mortality from that was remarkable, simply because the rings caught on grass and debris on the ground, and the chicks died. Wing-tagging is very much more effective. Frankly, I cannot understand why the RSPCA should object to it. It is a very good development, which will result in much more effective information on a range of wild birds for research and breeding purposes, and it will be safer than leg tags.

Perhaps I may follow the comments made by my noble friend Lord Soulsby. If I heard correctly, the Minister said that a lot of wing-tagging may be done by conservation bodies and that he had not received representations from either the Royal College of Veterinary Surgeons or the BVA expressing any concerns. I should like to seek clarification on that point.

Secondly, my noble friend referred to alpacas and llamas. Have the Government changed their view on making a list of places where alpacas and llamas are actually being kept? Some of them are in quite big herds and clearly their welfare is a concern to us all. I should hate us to pass regulations and then say, “My goodness, why did we not think of that at the time?”. I should like a little more explanation on the position of alpacas and llamas.

Thirdly, going slightly wider and with no wish to be difficult, can the Minister bring me up to date on the question of the ear-tagging of sheep generally and what progress is or is not being made on electronic tagging?

I am grateful for the comments of noble Lords and I shall do my best to answer the questions put to me. On the consequences of delay and the resulting loss of income to vets raised by the noble Lord, Lord Taylor, there was an original plan that these regulations would come into force in April 2008, but the date was moved forward to June in order to allow the consultation period to be extended. The consultation was deemed necessary as the original consultation brought up too many issues which we felt that stakeholders should be given the opportunity to comment on. The regulations were changed to reflect those issues. Web-tagging was added to the list of permitted procedures and the purposes for which wing and web-tagging can be performed were extended to include breed improvement programmes. When making the decision to extend the consultation, stakeholders in the sheep and goat breeding industry were consulted, and we were informed that moving the coming-into-force date to June would have no significant effect.

We have had no information on the impact of the fact that these procedures have effectively been about since last year, or at least I do not have a note to that effect. I personally have heard nothing from the RSPCA. The department may have had something, but as a Peer you disappear off the radar when you are a Minister. Some of these organisations do not send you anything. I open my own post, so I know that I have had nothing about these regulations. I do not know why the RSPCA is upset, but frankly all the information we have is from welfare organisations. Moreover, as the noble Lord, Lord Soulsby, said and it has been explained to me, it is much more welfare-friendly to avoid having to ring the legs of chicks for breeding programmes. The chicks are so tiny that by definition the band has to be very small. It can restrict growth as well as risk causing damage if it snags. There are major issues of welfare improvement here.

The noble Lord asked about the reason for the 36-hour limit. This provision concerns welfare in a breed improvement programme, so it is quite specific about when neck-tagging or web-notching can be carried out since they are legally classified as mutilation procedures. It may be because the skin at that age is very loose so it is easy to insert a small tag into the chick’s neck. Later it becomes more difficult. We have been informed by the industry that it is not done any later, so the regulations are following advice.

Both the noble Baroness and the noble Lord asked about camelids, a question also raised in the other place. For a mutilation to be added to the list of permitted procedures, we consider that it needs to be shown that it has a welfare or management benefit, and that such a benefit could be weighed against any welfare costs. During the consultation, we were not presented with sufficient evidence to show that there are welfare or management benefits associated with the artificial insemination of any species other than sheep and goats. Several stakeholders did raise the issue of allowing certain artificial insemination techniques in camelids, but stated that research in this area is still at an early stage. We do not think that there is enough evidence to justify including camelids in the regulations. However, if in the future the artificial insemination of camelids or any other species can be shown to have a welfare or management benefit, the next time the regulations are reviewed, that certainly could be considered for inclusion.

We may have covered all the techniques currently in use—the regulations are bringing us up-to-date with techniques currently in use that were missed out of the exemptions. Other scientific research on new techniques—we can always improve and get new techniques—is likely to be covered by the Animals (Scientific Procedures) Act and a licence for research granted under that Act. That would alert us to possible new techniques, which we may want to cover in the permitted exemptions. So it is not as though some new technique will be invented and put into industrial use without our knowing about it, because a research licence must be issued in the first place and that will alert us to a new technique. As I said, the amendments are essentially covering existing techniques that were missed from the regulations when they were originally brought forward.

The noble Lord mentioned that wing-tagging was much improved. The type of tags vary according to the size of bird. I must tell the noble Baroness that I have nothing whatever to say about sheep identification—well, I have a lot to say, but I have no brief in front of me, and I am not going to speak off the top of my head.

The granddaddy of all questions, to which I have not had an answer, came from the noble Lord, Lord Redesdale. I did not expect to be discussing the embryology Bill currently being debated on the Floor in the other place this afternoon. All I can assume is that all the techniques covered by that Bill are fully regulated for all concerned, whether the animals or the humans, by the authority set up by Parliament to deal with that. I do not think it is a matter for Defra, but if I am wrong I will write to the noble Lord. I have to say: 10 out of 10 for the question.

The Minister did not answer my question about consultation on conservationists being able to do the procedure, rather than it being a veterinary procedure.

I said that we will come forward with another regulation. We have had a preliminary consultation with royal college officials, but we are not out on a consultation process at present. There will be a formal consultation before the exemption order under the Veterinary Surgeons Act is made, but the indications from our discussion with officials of the royal college is that it will be uncontroversial to allow non-vets to carry out some of these procedures, and we will need to change the law for that. That will require consultation, which will take place in autumn this year.

So they are not coming in yet.

No, they are not coming in with the regulations, there will be a separate consultation later in the year for that. That will be done quite separately and we will have them in force by the autumn, which is some months away.

I asked the noble Lord earlier about the consultation procedure and the degree to which it had dropped the catch. I am not seeking to apportion blame, but somehow something quite significant in ensuring that the regulations worked—we are now addressing the deficiency—went wrong. Has the department looked at that and should the department have a more proactive role in ensuring that it stimulates the necessary response?

That may be so, but the fact is that the industries concerned did not consider these to be mutilations in the sense discussed under the animal welfare legislation. That is why they did not respond. It is not that they were unaware when the Animal Welfare Bill was going through the House: it was of major concern to all keepers of animals. They simply did not consider this to be covered by the mutilation provisions for the exemption order. It was not a failure, because we had consulted. We have hundreds of consultees on the address list, it is amazing, but we do not know everything.

The fact is that, as I have discovered in other issues, especially with mercury in barometers, industry does not always respond. In this case, it was genuine in the sense that it did not think that it was covered and we did not know about that aspect. I am hopeful that there will be no more cases, that what is being done to bring these regulations to the House will have alerted anyone to any other issues. I know that the matter has been raised in the other place as well. It is something that we will have to watch for, because techniques are employed, and people bring new techniques in from abroad and think it is perfectly all right to do so. We need to know about these things. We will see whether we can redouble our efforts on consultation to spell things out. If people have a doubt about the technique, or about whether what they are doing is covered, they at least should be proactive and ask whether it is covered, so that we can take advice when we are drafting the regulations. It is a fair point, and we will see that it is followed through.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Financial Assistance Scheme (Miscellaneous Provisions) Regulations 2008.

The noble Lord said: As noble Lords will recall, the financial assistance scheme—FAS—offers help to certain people whose benefit occupational pension schemes have not provided them with the pension that they were expecting. The regulations present the first key steps towards the delivery of the full package of reforms to the FAS that we announced in December last year.

As noble Lords may be aware, the December announcement covered changes to the structure of the FAS as well as to the benefits that will be paid. Where schemes were not already committed to buying annuities from insurers, we announced that the Government would take in the residual assets of those schemes and make associated payments as they fell due. Taking in those assets helps finance greater benefits to existing FAS members, which will be broadly comparable to those provided by the Pension Protection Fund. The residual assets will also help provide for assistance to be extended to those members of schemes connected to solvent employers.

In December, we guaranteed that all members would receive 90 per cent of their accrued pension, subject to the cap, instead of 80 per cent as before. We also said that we would pay assistance from a member’s normal retirement age, or 60 if their normal retirement age was earlier, rather than from 65. We said that certain members would be able to apply for early reduced payments on ill health grounds. We also committed to indexing FAS assistance broadly in line with PPF rules. We said that we would ensure that members whose scheme assets were taken into the Government would not be denied the lump sum that they could otherwise have expected to receive from those assets.

While some of those changes are relatively simple to deliver, others are complex. Earlier this year, I wrote to the noble Lords, Lord Skelmersdale and Lord Oakeshott, detailing our plans to deliver the reforms in phases to help ensure that changes are made as quickly as possible. First, the regulations before us today will implement the first two cornerstones of the reforms: payment at the 90 per cent rate and payment from the NRA. It is important to realise that for many current FAS recipients those changes alone will make FAS assistance broadly comparable to PPF compensation, but there is still some way to go to deliver the full reform package for all beneficiaries.

Next, I expect to bring a further package of regulations to your Lordships before the Summer Recess. That package will allow early access to payments on ill health grounds, subject to actuarial reduction, extend the scheme to certain solvent employer schemes and prepare the ground for further PPF involvement in designing and implementing the reformed scheme. Finally, by the end of this year, we intend to consult on further regulations to deliver the full package of changes. In addition, to support the changes that we intend to make through regulations, we also plan some amendments to primary legislation through the Pensions Bill.

I thank the Minister for his introduction of these regulations. I welcome the order as an important step in a five-year battle by 125,000 of the earliest victims of the Prime Minister’s economic incompetence to get as much as possible of the pensions they were due. Let me remind the Committee that during that time some died, others had to work beyond normal retirement age, sometimes with serious medical conditions, and all faced the prospect of penury.

I would not usually rehearse the history of this unhappy matter, but the circumstances surrounding it are exceptional. The measures in the regulations could have happened much earlier if the Government had not chosen to reject out of hand the Conservatives’ lifeboat fund amendments to the Pensions Act 2007, which your Lordships supported. Those amendments could have raised the compensation by the FAS to the 90 per cent offered by the Pensions Protection Fund. The treasury would have immediately made a loan to ensure that higher payments could be distributed as soon as possible. That loan would then have been paid back fully out of unclaimed assets, ensuring no cost to taxpayers.

What happened instead was the Government’s hurried announcement that unclaimed assets should be spent on youth centres, and that our policy was an unfunded spending commitment. The Lords amendment was duly rejected by another place on the grounds of financial privilege, and we in this House could not push the issue further.

It has taken nearly a year to happen, but once again the Government have adopted a Conservative policy to repair the disastrous consequences of Labour financial mismanagement. It has taken constant pressure from my party, and even more from dedicated lobby groups, before the Government have finally realised the scale of the problem. They have still not accepted their own part in its creation. The Prime Minister’s tax rise on pension funds, the department’s misleading leaflets, the Government’s refusal to accept the independent ombudsman’s report—they have denied it all, delaying and quibbling over every solution that has eventually been forced on them. They have had to accept that they grossly underestimated the number of people affected by the crisis that they have created. They had to commit to funding the FAS properly, and now, finally, they admit that everyone else was right all along and that they must compensate these pensioners adequately.

It is imperative that there are no more delays. Prior to last year’s election that never was, my party promised that, if we won, we would ensure within three months of taking office that payments reached those who were waiting. Will the Minister give us a clear idea of when the Government will implement this U-turn and when the pensioners will finally get what is due to them?

During the consultation on the regulations, questions were asked as to whether the Government would continue to hold the view that the FAS payments relate only to periods after the date on which the FAS was first announced. Although it has previously been made clear that enhanced payments would be made only for the period from 14 May 2004, the consultation document disclosed that the Government would continue to consider this point. Will the Minister expand on the department’s current thinking?

A number of respondents were also concerned about the implications of maintaining the existing definition of the normal retirement age in the draft regulations. It is possible that doing so will enable the enhanced payments to be delivered more quickly, easing the administrative burden. However, does the department have plans to alter the definition of the normal retirement age? If so, will the Minister elaborate on the process?

It is also worth taking a moment to consider the wider pensions picture. Although today’s measures repair the damage caused to individual families, the lasting impact of this sorry story on confidence in the pensions system still remains unknown. Years of headlines detailing pensioners battling with the Government to receive compensation will undoubtedly have influence on a younger generation’s investment habits. I fear that the consequences of the Government’s resistance to compensate these victims of the pensions crisis are far from over. It is therefore essential that we rebuild confidence in our pensions system and restore the prospect of security in retirement to millions of people.

Finally, I once more pay my respects to all the campaigners who have spent their time and money trying to get this Government to right their pension wrongs. For most, there will be few victory celebrations, but there will at least be the welcome satisfaction of at last receiving the compensation that they deserve.

I am grateful to the Minister for his clear and comprehensive introduction to these extremely technical but very important regulations, and indeed to the noble Lord, Lord Taylor of Holbeach, for reminding us of the long and tortuous history that has led to them being prepared.

I think I can say that I feel fortunate not to have had to take part in all the debates in the past five years that finally led to the Statement on 17 December 2007. We on these Benches felt, as did the noble Lord, Lord Taylor, that the Government took a very long time to reach a sensible position. They have finally done so. The regulations and their provisions are long overdue, so we welcome them.

I thank the Members who have welcomed the order, although that was wrapped around by some criticism and a review of the history as the noble Lord, Lord Taylor, saw it. I, too, acknowledge the effort that campaigners have put into what has been a very solid campaign, and I hope that, however we see the history of this matter, we agree that we have ended up in a good place. One of the challenges of government is dealing with public finances. The cash cost of where we ended up is some £12.5 billion and the net present value is around £2.9 billion, so this is a significant use of public resources.

The noble Lord, Lord Taylor, referred to financial mismanagement and economic incompetence. I reject those charges, of course. We have had debates in the past, particularly around these regulations, against the pensions backdrop. A good starting point for an objective and proper analysis of that are the reports of the noble Lord, Lord Turner, and his commission, which set out the real reasoning behind the challenges that the pensions industry has faced and faces in the future, such as issues of longevity and overestimating the long-term financial returns from investments. Those are the root causes of the situation we face.

There is a statistic, and if I can remember it rightly I will bore the Committee with it. I think it comes from Department for Work and Pensions statisticians, who estimated a possibility, or maybe a probability, that there is a person alive today aged 59, likely to be a woman, who could live to be 120.

It is me.

I hope the noble Baroness will live well beyond 120. Next year, that person would be entitled to their old-age pension halfway through their life. That starkly illustrates the challenges that not only state pension provision but private sector provision faces. Broadly, on the legislation that we debated last year, and we will shortly be debating the second Pensions Bill, there is a broad consensus underlying where we are heading on these matters.

The noble Lord, Lord Taylor, referred to the lifeboat fund. We do not resile from the criticism that we made at the time that, due to a technical matter, it was a rather leaky lifeboat. We went the right way to seeing how we could make better use of the assets in those schemes, and Andy Young’s report was helpful in enabling us to improve the package that we have reflected in part in these regulations.

The noble Lord asked about the timetable. I can best illustrate it as follows. In June this year, we hope to have these first regulations in force and the first payments at 90 per cent, and first payments from NRA or 60 rather than 65, will start to flow. By the end of July we expect the second regulations package to come into force, which will cover ill-health payments, certain solvent schemes being included in FAS and the groundwork for greater PPF involvement and speeding up payments. In August, we hope that the first of those ill-health payments will be flowing. By the end of the year, we propose to consult on further regulations to deliver the full December package. That will include the post-1997 indexation payment of FAS lump sums and the bringing of assets into government to enable these wider benefits to be provided. From April 2009, there will be a phased implementation of the full package. There is a lot of technical stuff that has to be addressed between now and getting that full package implemented, which is why we wanted to get these regulations under way as quickly as possible.

Is the Minister happy that that is the tightest possible timetable for implementation? It means, effectively, that there will be a 12-month delay before many people are fully in the scheme.

As I indicated earlier, there is the prospect of several thousand people coming into the scheme much more quickly than that, because the 90 per cent payment and the NRA change will be important. This is a realistic and effective way to proceed. I stress that there are quite a lot of technical and operational issues here, and we need to make sure that we get it right. That is why it is right that we invested in setting up the FAS effectively right from the start. We were criticised at one stage about the funding that had gone in, in relation to the payments that were then flowing. Our point then—which is valid and important now—was that if we had not put that infrastructure in place, it would be even more challenging to get some of the subsequent improvements to the scheme properly in place. That is an effective timetable, and we are working to it.

The noble Lord asked about the May 2004 cut-off point. I touched on that in my opening remarks. It is right to retain it, because it is the date that the FAS was announced, but we will continue to consult. As I outlined, we have a number of consultations lined up for the future, and we will keep that under review. At the moment, we are sticking to that date. Similarly, in relation to the NRA, it is right to keep the definition that we have but to keep it under review to make sure that we have effectively covered all the reasonable and appropriate circumstances that exist. The challenges around those two areas emphasise how complex some of this is and why we need to take the appropriate time to make sure that it is absolutely right. I hope that I have dealt with the questions that have been raised. I am grateful for the support that the two opposition parties have given to the regulations.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Building Societies (Financial Assistance) Order 2008.

The noble Lord said: The order derives from the Banking (Special Provisions) Act 2008 which contains powers that enable the Government, by way of an order, to remove existing statutory barriers that may prevent building societies from accessing emergency financial assistance from the Bank of England.

The building society sector continues to provide highly regarded services to members and customers throughout the United Kingdom. During the passage of the Bill, the Government promised, as a precaution, to put such an order before Parliament as soon as possible. I am pleased that we are fulfilling that promise and that Members of the Committee have an opportunity to debate the order. I remind the Committee that the Government are fully committed to legislative reforms that will improve financial stability and depositor protection generally. Global financial markets remain turbulent, and it is important that we have a strengthened framework in place both for now and for the future. The order forms a part of that programme of reform.

In January, the Government’s proposals were published. They included measures to improve building societies’ access to emergency financial assistance from the Bank of England, both in the range of methods that the Bank can use and the amount of assistance that building societies can potentially draw on. I should make it clear that in this regard the proposals are purely precautionary. They are intended to place building societies on a similar footing to banks, not single them out for special treatment. We regard the order before the Committee as sensible and prudent contingency planning on the part of the authorities, and it would be relied on only where there was a serious threat to the financial stability of the United Kingdom.

The Committee will also be interested to know that in response to consultation on the policy that this order will enact, the overwhelming majority was supportive. The Building Societies Association has made it clear that it welcomes steps to put building societies in the same position as banks. Improving building societies’ access to emergency funding from the Bank of England strengthens the resilience of an institution against failure, and thus protects against the consequent distress and hardship that this might bring to depositors and members.

The key elements of the order are as follows: under the Building Societies Act 1986, at least 75 per cent of the business assets of a building society must be residential mortgage loans. The order, if passed, will suspend this lending limit where the consequences of financial assistance from the Bank of England would cause the building society to be in breach of this requirement. The lending limit is restored after one year or, if later, once the financial assistance from the Bank of England has ended. Every building society is currently required by the Building Societies Act 1986 to ensure that at least 50 per cent of its funding is from its own members’ deposits. This is referred to as the “funding limit”. Certain items may be disregarded from the funding limit and the order will add financial assistance provided by the Bank of England to that list. Of course, building societies can and do take part in the Bank of England’s lending facilities during the course of normal business, and the normal funding limit in these circumstances will continue to apply.

Suspending the lending limit and excluding financial assistance from the Bank of England from the funding limit apply only in the case where there is a threat to financial stability. In these circumstances, the nature and extent of the financial assistance will differ from that of the usual money market operations that the Bank of England conducts. As I have said, suspending the lending limit and adding to the items that are excluded from the funding limit will allow building societies to be placed on a similar footing to that of banks.

The Bank of England, like a commercial bank, has a responsibility to ensure that its lending is prudent, especially where there is a risk to financial stability. Accordingly, in order for the Bank of England to provide emergency financial assistance to either a bank or a building society, it needs to ensure that its position as a creditor is not jeopardised. It does this by taking effective security. The order will remove statutory barriers that could jeopardise the Bank’s position as a creditor of a building society and therefore constrain speedy action in a crisis. I will explain a little more about these barriers. They include Section 9B of the Building Societies Act 1986, under which a building society may not create a floating charge, and Schedule 15A to that Act, which effectively prevents the appointment of an administrative receiver under a floating charge.

When providing financial assistance, the Bank of England needs to be able to secure its lending against the assets and undertakings of the bank or building society. This is wholly consistent with the Bank’s policy for lending in circumstances where there may be a threat to financial stability. This order will modify the restriction in Section 9B to allow a building society to grant a floating charge to the Bank of England over its assets. Again, I stress that a building society would be able to do this only where the Bank had provided financial assistance in extreme circumstances. There is no change to the restrictions on the normal business of a building society. It will remain impossible for a building society to create a floating charge in favour of other creditors.

The order applies the law on administrative receivers to building societies so that, should a building society to which the Bank of England has provided emergency financial assistance secured by a floating charge default, the Bank could appoint an administrative receiver. I should stress that in the circumstances we are debating, it is highly unlikely that the Bank would need to appoint an administrative receiver, but the Government believe it is sensible that the Bank, which would become a major creditor of a troubled building society for reasons of maintaining financial stability, should have the additional safeguards provided by this right.

Finally, a number of technical and consequential provisions will ensure that various other provisions of the Building Societies Act 1986 are consistent with this order. The Government believe that the order represents sensible contingency planning by the authorities, improves the position of building societies and puts them on a similar footing to that of banks with regard to financial assistance from the Bank of England. This has been widely supported by stakeholders, including the building societies. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Building Societies (Financial Assistance) Order 2008. 17th report from the Joint Committee on Statutory Instruments.—(Lord Davies of Oldham.)

I thank the Minister for introducing the order. Given the sweeping powers that the Government took in the Banking (Special Provisions) Act earlier this year, the activation of the building society powers in this order, under Section 11 of that Act, should not delay us long. However the Minister would not expect me to let anything connected with the Northern Rock debacle pass through this Grand Committee without some further comment.

I start with the timing of the order. When the Banking (Special Provisions) Bill was considered by your Lordships’ House, the Treasury submitted a memorandum to the Delegated Powers and Regulatory Reform Committee in relation to Clause 11. The Treasury stated that it intended to make an order under this power “as soon as possible” after the passing of the Bill. It received Royal Assent on 21 February—some three months ago. Can the Minister explain why the Treasury has taken so long to do something that it asserted it would do as soon as possible? We are all accustomed to the peculiar use that the Government put to words such as “shortly” or “very soon”. I venture to suggest that no ordinary person, let alone an ordinary parliamentarian, would think that three months to produce an order that was to be made “as soon as possible” was reasonable. That is especially the case in the context of a Bill that was passed through both Houses of Parliament using the urgent and accelerated procedure. Can the Minister explain the reason for the delay?

Why has the order been produced without consultation? Once the heat of Northern Rock had passed in February, it seemed that the sense of urgency dissipated. I can understand why the Treasury would want to draw up a draft order for building societies, but I cannot understand how, given that the urgency has passed, it thought it appropriate to dispense with consultation. The Minister referred to consultation in his opening remarks, and I may have got this wrong, but paragraph 7.5 of the Explanatory Memorandum to the order states:

“There was no public consultation on the Order”.

Why have the Government bypassed the normal processes of consultation? That leads me to suppose that there may be something specific—perhaps a specific building society—behind this order. Is this order being rushed through because the Treasury thinks that one or more building societies may need to rely on the provisions of the order? If that is not the case, it is clear that the Treasury should follow the normal consultation provisions. Either way, we should be told.

Can the Minister comment on the contents of the banking reform Bill announced last week in the draft Queen’s Speech? The commentary on the Ministry of Justice’s website refers to that Bill as covering only banks. The Treasury’s website, as far as I could see, contained absolutely nothing about the Bill. Will it apply to building societies as well or do the Government intend for all time to rely on secondary legislation powers in the Banking (Special Provisions) Act or perhaps the banking reform Bill? It will take a lot to persuade us that relying on secondary legislation as the long-term way of legislating for building societies is the correct way to proceed.

Finally, will the Minister update noble Lords on the implementation of the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007? It allows, inter alia, for the proportion of wholesale finance that building societies can accept on a routine basis—not the Bank of England facilities but ordinary facilities— to rise from 50 per cent to 75 per cent. In a sense, this is intimately related to the order.

I am sure that the Minister will recall the passage of that Act. It originated as a Private Member’s Bill introduced in another place by my honourable friend Sir John Butterfill and was passed at a time of turmoil in the credit markets, so much so that the Minister made a quite extraordinary statement from the Dispatch Box on the debate on Bill do now Pass on 12 October 2007. Perhaps I may remind him that he said:

“The Bill allows flexibility for the future in relation to wholesale funding as the Treasury would be able to use the power in Clause 1 to increase by order the maximum level which building societies can borrow from wholesale markets to 75 per cent. Clearly, in the light of recent events in the wider financial markets, we will want to consider carefully whether such a power should be used”.—[Official Report, 12/10/07; col. 457.]

As I understand it, there has been no implementation yet of that Act. It remains in limbo waiting to be brought to life by the Government. What is the Government’s thinking on this? Will the Act be activated, and if not, why not?

My questions on the order which—as both the noble Baroness and the noble Lord said—was predicted, again largely relate to timing. Indeed, the noble Baroness has asked most of the questions, so I will not repeat them. The phrasing of the Explanatory Memorandum is slightly alarming in that it states that the order has to be introduced as soon as possible as an important contingency measure, so there has been no time for consultation. As the noble Baroness said, it should, first, have been possible to start a consultation considerably sooner than today, because it is not a particularly long order.

Secondly, that raises the spectre that one of the major building societies might be in difficulty. Because the terms of the order are such that only those building societies which, if they got into real difficulties, might have an effect on the financial system as a whole, are covered, the number of building societies that are in fact potential beneficiaries of this provision is small. The inevitable conclusion, on reading the terms of the order, is that the Government, the Bank, or both, are worried about one or more of the societies. So, as the noble Baroness said, it would be extremely helpful to have some clarity on that, if only in the form of reassurance. I suspect that this is one of those cases where, had there been consultation, given the nature of the order, there would not have been a huge raft of criticism. However, the way in which the consultation, or lack of it, has been dealt with is a cause for concern.

The other point that I wish to raise was also mentioned by the noble Baroness and concerns the banking reform Bill. My understanding three months ago, when we were discussing Northern Rock, was that the Bill was going to be brought forward significantly sooner than is now the case. I thought that the Government had said that it would be brought forward in this Session. Can the Minister explain why there has been such a delay that it is possible that the Bill will not be brought forward until at least 12 months from now? Certainly all the language used by Ministers implied that we could expect it before the summer.

As usual, I am grateful to the two noble Lords who have spoken, and I shall do my best to answer their questions. However, there is a hare being set to run that ought not to be released. No building society is in trouble. We are not bringing forward this order because of any anxiety or emergency. Indeed, I do not see that I can be chided by the noble Baroness on the one hand for being a little tardy in bringing forward the order, while on the other hand she is suggesting that it has been prompted by anxieties that a building society will need to avail itself of these provisions, and that is why the order is before us at all.

Neither of those positions is sustainable. The Government said during the passage of the Banking (Special Provisions) Act that it provided for us also to address protection for building societies in circumstances about which we all know. The noble Baroness has been kind enough to keep her remarks about Northern Rock to the absolute minimum, so I shall produce my riposte in minimalist terms. The Government acted effectively under that Act against a background where, we all recognise, the credit crunch is producing an enormous crisis for the financial sector. The Government have put in place the necessary protections against outstanding difficulties for institutions, of which Northern Rock was clearly one that required immediate action.

That is not so with other banks, nor with building societies. The Government made a facility available to the banks to increase liquidity—a position that did not draw much criticism from elsewhere. When we passed the Act, we said that we would extend its provisions on access to credit from the Bank of England to the building society sector. Did we consult? We did not go through a widespread public consultation, because it was a specific objective derivative from the Act, but we did talk to the Building Societies Association. That is why, in my opening speech, I was able to indicate its support for the order.

We have brought the measure forward at the proper point. I might be a little more concerned about the timing if I did not think that the noble Baroness had advanced a totally contradictory position on it. It is either too early or too late; that is dear old Morton’s fork, by which I am bound to be impaled on one spike on the other. I do not think that Morton’s fork exists here; this is a proper derivative from the Act that we introduced in January, which received Royal Assent in February. We have brought forward an order that the main representative body of the societies affected is entirely happy with.

Neither on timing, nor on the nature of the consultation, are the Government open to criticism. It is clear—as we recognised in the passing of the Act—that the building societies have a different legal framework. We had to have due regard to that, and we are producing an order that responds to it. I take criticism in good part, because I know that it is always constructive criticism from the noble Lord and, even more so, from the noble Baroness, but I am not going to let the canard flourish—I started off with a hare running, so I am getting my animal and bird metaphors mixed—that this is an emergency provision just before some institution declares that it is in great difficulty. Not so; this is an orderly process that we had foreseen and a protective process.

It is necessary, as I was forced to declare to the House earlier today in answer to a Question, because there is an international crisis in the financial sector unprecedented since the Great Depression. We are all facing challenges of whether our legal and institutional provision can cope with the difficulties. I reassure the Committee that this is a modest building block in that necessary rampart of support addressed to the building societies, and there is nothing more sinister in it.

I thank the Minister for giving way. He is being very interesting on the subject of the next banking reform Bill. May I take him through the timing? The powers in the 2008 Act relating to a failing bank expire on 21 February 2009. That is why everyone believed that the next Bill to replace the special provisions on a longer-term basis would be introduced before the beginning of the next Session, because in practical terms, especially given the likely timing of the Queen’s Speech, it is not possible to get through such a potentially contentious Act—it is certainly significant—any other way. Will the Minister clarify when the legislation is expected to see the light of day?

That is a good try, but I am not going to be drawn into detail about a Bill that is still being prepared. The noble Baroness, with her usual accuracy, has identified when the provisions of the Act will conclude. The Government, having proposed that timescale, are mindful of it, and that is why the Bill has been promised for this year and will be produced this year for consideration.

I would be the last member of the Government to be presumptuous about how rapidly we could get through a financial measure of such significance; unless the noble Baroness is offering on behalf of her party a level of co-operation unparalleled in the past so that we can see the Bill rapidly translated into legislation. The timing is an unknown factor as far as I am concerned and, in all honesty, it is probably an unknown factor as far as she is concerned. She cannot tie me down to dates regarding Royal Assent to a Bill that is still at the stage of consultation and preparation.

On the Butterfill changes and the Bill that her honourable friend in the other place introduced, the proposed changes to the funding limits for building societies form an integral part of the Butterfill Bill, and during debates in that House we promised to offer MPs and Peers the opportunity to comment further. We will do so at a later date, when we seek to finalise the rest of the provisions before we implement the provisions of the Butterfill Bill. There is unfinished business here, but we indicated that we would offer further opportunities for consultation, and we intend to do so as far as that measure is concerned. In the mean time, I think it might be regarded by the rather more neutral observers of our exchanges that we have strayed quite a long way from the order before us.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Building Societies Act 1986 (Accounts, Audit and EEA State Amendments) Order 2008.

The noble Lord said: I bring forward this order with a certain degree of trembling apprehension. If we could extend the last order to quite a significant debate, this order deals both with issues related to building societies and European directives. I see that my noble friend is already present for the next business, but I can only say to him that it may be a little delayed if every opportunity to extend the implications of this order is taken up. However, it may be that we stick fairly close to the terms of the order, which is quite limited in its objectives. It will form part of the UK’s implementation of two EC directives, namely directives 2006/43 on the statutory audit directive and 2006/46 on amending the EC accounting directives.

The overall objectives of these directives are to help to improve the credibility of financial statements provided by businesses in the EU, establish some basic sets of principles for the conduct of statutory audits and to engender good corporate governance practice. Before I move on to the substantive issues included in the order, it may be useful for me to explain the background to the directives. They have their genesis in the European Commission’s broader programme of company law reform aimed at enhancing the credibility of financial statements and annual accounts published by European businesses and, more significantly, in the need for accurate, reliable information in the aftermath of certain corporate financial scandals in the EU such as Parmalat. The directives focus on the linked objectives of increasing confidence in corporate governance frameworks, improving investor confidence through increased transparency and requiring better information from businesses. The measures contained in them are consistent with Government policy and contribute to several of the aims that this Government believe are important to UK industry such as stability, market confidence, better information and improved access to capital.

I must stress the obvious in that UK legislation is already in place for a significant proportion of the areas covered by the directives. However there are some areas where specific provision needs to be made in the legislative framework for UK entities. The Department for Business Enterprise and Regulatory Reform has made specific statutory instruments to give full effect to the requirements of these directives in so far as they relate to companies. The Treasury has been working closely with BERR to implement the directives’ provisions for mutual societies for which it has policy responsibility; namely, for building societies and friendly societies. This order relates only to building societies.

I must explain that in relation to these directives a total of four orders have been laid by the Treasury, two for friendly societies and two for building societies. Three of the orders are by the negative resolution procedure. However, this order related to building societies is required to be dealt with under the affirmative resolution procedure, which is why we are considering it today. The power allows the Treasury to modify the Building Societies Act 1986 to reflect changes in company law.

The order makes appropriate amendments to the 1986 Act concerning disclosures relating to off-balance sheet arrangements, disclosure of auditor remuneration, certain safeguards for auditor independence and security, and procedures for the removal and resignation of auditors. Many of these changes simply bring building societies legislation into line with companies legislation. In addition, the order makes an amendment to the definition of EEA state in the 1986 Act.

I shall explain briefly which changes the order will make and what they are intended to achieve. the order includes a requirement for building societies to give certain information on off-balance sheet arrangements in the notes to their annual accounts. At present, they are not required by law to give this information. The Committee will agree that this is a helpful addition to building society legislation. It will increase transparency and the information provided to members, as well as to other interested parties, will help them to take more informed decisions.

The order updates the current requirements on the disclosure of auditor remuneration. Under these changes, building societies will have to specify separately in the notes to the accounts the fees paid to the statutory auditor for several categories of services, such as tax and internal audit services, in addition to the fees for the statutory audit. This will show at a glance what other services the auditor has performed for the client and will alert interested stakeholders to any possible conflicts of interest.

It is clear that auditor independence, and indeed the security of the audit, is paramount to the provision of reliable information. The order includes safeguards for auditor independence and security. Accordingly, it requires the auditor’s report to be signed by the senior statutory auditor in his own name, but provides exemptions to the requirement on security grounds. It amends the rules on the removal and resignation of auditors, requiring the building society and the auditor to notify the audit authority of any removal or resignation and to give reasons. It also gives building society members and the Financial Services Authority a right to apply to court for an order under which an auditor was dismissed on improper grounds. These changes implement various requirements of the audit directive, and whenever possible bring building society law into line with company law.

Finally, the order will amend the definition of a European economic area state in the Building Societies Act 1986. The current definition excludes Bulgaria and Romania, which became Community member states on 1 January 2007. The new definition includes all Community members.

I am sure the Committee will agree that the proposed changes are necessary and proportionate. They will help further to enhance confidence in the financial statements and annual reports published by building societies and to engender good corporate governance standards. They will help to protect the rights and the independence of auditors and ensure that they are not unduly coerced into giving favourable, or indeed misleading, accounts. I commend the proposals to the Committee, and I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Building Societies Act 1986 (Accounts, Audit and EEA State Amendments) Order 2008. 17th report from the Joint Committee on Statutory Instruments.—(Lord Davies of Oldham.)

The Minister will be relieved to hear that I shall not detain the Committee for long on this order, which is pretty unremarkable. He explained that the order largely follows the Companies Act in its audit and accounting requirements. He did not have the joy of the passage of the Companies Act 2006, as some of us did, but I make it clear that I shall not re-run any of the arguments that I lost during the passage of that Act.

Building society accounting legislation does not always exactly mirror company legislation; we found that when we debated an order last year. Will the Minister therefore confirm that the order does nothing to building society accounts and audit arrangements that is not also found in the arrangements for companies? I had a quick look, and so far as I can see they are pretty much the same, but can the Minister answer for the detail? In addition, will he say whether there will be any further building-society catching-up, if I can put it that way, with Companies Act legislation? It would be helpful to know whether we should expect any more.

The Minister said that there were four bits of secondary legislation relating to building societies in this area, three of which were going through under the negative resolution arrangements while this one is under the affirmative procedure. It is not immediately obvious why this needed an affirmative resolution because it does not appear to have any major issues of principle within it and has no significant cost involvement. I was amused to see in the impact assessment that the cost of these provisions was estimated in the range of £14,080 to £44,600. Spread over the whole raft of building societies that will have to implement the legislation, that is as near to zero as makes no difference. Here we have a modest set of provisions that bring building societies, as the Minister says, into line with banks and other companies at a modest cost, so I am happy to support them.

I am grateful to both noble Lords. The reason that this is modest is that what the directive seeks to deal with across Europe, British law already largely covers. We therefore have to make more modest adjustments.

The noble Baroness asked whether there is any difference between the requirements so far as building societies and companies are concerned. There is a technicality in that respect, which I will spell out as accurately as I can. The audit directive requires member states to ensure that auditors shall not be dismissed on improper grounds. For companies, that requirement is implemented by an amendment to provisions of company law on petitions brought by company members. There is no equivalent of these provisions for building societies, so the order creates a new right for members or the Financial Services Authority to apply to the High Court where an auditor has been dismissed on improper grounds. That is the only differential.

I do not think I have anything else to add on the question of catching up on legislation in this matter. As I say, we are reflecting directives that have definite implications for member states. I end on the fact that I am grateful for the succinctness of the comments on this matter. I say to the noble Baroness that, as much as she missed me on the Companies Act, that was nothing to my loss when we did the Banking (Special Provisions) Act and she was unfortunately detained when we most needed her.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Cash Ratio Deposits (Value Bands and Ratios) Order 2008.

The noble Lord said: The purpose of the order is to reduce from 0.15 per cent to 0.11 per cent the ratio that is applied within the cash ratio deposit scheme, which is itself defined in the Bank of England Act 1998. In so doing, it will revoke the Cash Ratio Deposits (Value Bands and Ratios) Order 2004. The ratio applies to eligible liabilities above the £500 million minimum threshold, and this change will benefit all institutions that make such deposits with the Bank. It is estimated that the change will result in a one-off reduction in the amount of cash ratio deposits held of around £700 million.

It may help the Committee if I briefly outline what the cash ratio deposit scheme is. Before 1998, banks maintained cash ratio deposits at the Bank of England on a voluntary basis. As part of the 1998 reforms of the Bank of England, the Government confirmed that they believed it was right that those who benefited from the relevant operations of the Bank should make a financial contribution to its costs. They therefore placed the cash ratio deposit scheme on a statutory footing.

Under Schedule 2 to the Bank of England Act 1998, eligible institutions—broadly, banks and building societies—may be required to place non-interest bearing deposits, known as cash ratio deposits, with the Bank of England. The Bank then invests these deposits and the income earned on them is used to fund its monetary policy and financial stability policy functions. Under Schedule 2(4) the amount that an eligible institution must deposit with the Bank is calculated by multiplying so much of its average liability base as falls into each of the different value bands of the scheme by the ratio applicable to that band, and then taking the sum of those amounts.

The scheme was last reviewed in 2003, and at that time the minimum threshold of the scheme was increased from the figure of £400 million that was set in 1998 to £500 million. This change to the scheme was enacted through the Cash Ratio Deposits (Value Bands and Ratios) Order 2004. As part of the 2003 review, the Government committed to conducting a further review by 2008 at the latest.

The review was conducted last year in consultation with the Bank of England. As part of the review, the Treasury conducted an informal consultation with all institutions currently eligible for the scheme and a formal 12-week consultation. To the former it received 66 responses and to the latter four responses, two of which were from the British Bankers’ Association and the Building Societies Association.

The review reached the following conclusions. The cash ratio deposit scheme continues to be a suitable method of funding the Bank of England’s monetary policy and financial stability operations. The ratio applied to those eligible liabilities above the £500 million threshold should be changed from 0.15 per cent to 0.11 per cent but all other variables should stay the same. As an input to reaching this conclusion, the Court of the Bank of England, which is responsible for ensuring the most efficient use of the Bank’s resources, endorsed as a working assumption for the review an estimate of the costs of the Bank’s policy functions of £563 million over the five-year period, which is based on 2 per cent annual spending growth. The investment yield has been forecast to average 5 per cent over this timeframe, and the future growth of eligible liabilities has been assumed to be 4.5 per cent. Under these assumptions, changing the ratio to 0.11 per cent, while maintaining the minimum threshold at £500 million, would result in forecast income from the CRD scheme of £575 million, which is very close to the £563 million required.

A number of the assumptions made in reaching this conclusion are subject to uncertainty, which is why the Government have committed to keeping the parameters of the scheme under active review. This uncertainty is in part reflected through the outcome of the previous five-year period. The previous review projected that £575 million would be required to fund the policy functions of the Bank but the outcome was only £531 million. This is principally attributable to the Bank of England taking steps to focus on core activities and improve efficiency. In addition, the cash ratio deposit income for the same period was higher than expected, in the region of £613 million, which is mainly as a result of the growth in eligible liabilities being higher than expected.

In the published response to the consultation the Government stated that, subject to parliamentary approval, which this order seeks, they would aim for the change to the ratio to come into force on 2 June this year. Not to meet this date would mean delaying the implementation of this change and for the Bank of England to continue holding a higher level of deposits than it requires. Therefore, I hope that noble Lords will see the merit of the order. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Cash Ratio Deposits (Value Bands and Ratios) Order 2008. 17th report from the Joint Committee on Statutory Instruments.—(Lord Davies of Oldham.)

I thank the Minister for introducing the order. I will not give him a lot of trouble on it but I have one or two questions. I was grateful for his clear explanation of cash ratio deposits which are one of the more arcane bits of the Bank of England’s arrangements, representing a compulsory, interest-free deposit by the banking community with the Bank. If CRDs did not exist, clearly the Bank would have to be funded in some other way and since it is not selling any service that anyone would voluntarily buy, the only likely alternatives would be a statutory levy or grant in aid. The rather convenient argument for CRDs is that they enhance the independence of the Bank but the truth is that they avoid explicit and doubtless controversial charging mechanisms or, alternatively, increasing public expenditure.

It is also an especially convenient outcome from CRDs that if they are set at a level which produces a surplus, which they have, the Treasury gets to grab half the surplus as a dividend. The Minister did not mention that in his explanation of the financial system which applies in the Bank of England. So the Treasury has an incentive to set CRD levels at too high a level in order to create a surplus. Indeed, the Bank may well have an incentive to maintain the CRD level because it avoids getting into all those messy discussions with the financial community about what the level of costs should be. The Minister explained that the Treasury did some kind of consultation on the CRD system.

A Division has been called. The Committee stands adjourned for 10 minutes.

[The Sitting was suspended for a Division in the House from 5.24 until 5.34 pm.]

Before I was interrupted, I was talking about the consultation that the Treasury has been carrying out and I was about to remark that there was unsurprising support in that consultation for reducing the ratio to 0.11 per cent because of course any reduction was bound to be supported by the financial community. The summary of responses produced by the Treasury also noted that respondents advocated that either changes should be made to other parameters of the scheme or the CRD scheme should be replaced by alternative arrangements. But it was clear from the consultation document that other changes and alternatives were not at all to the Treasury’s taste and were not pursued. So much for consultation.

I have mentioned that the Bank has achieved surpluses of income over expenditure. As the Minister mentioned, that was due in part to overachievement against the forecasts that were produced when CRDs were last set. The total of the surplus, which I do not think the Minister mentioned, was £100 million. Even after paying quasi-dividends to the Treasury, the Bank increased its retained earnings by around £50 million, which is not a small sum. The Bank’s reserves in its most recent audited accounts to the end of March 2007 stood at around £1.7 billion, and there have to be questions asked about whether the Bank needs to be in such a comfortable financial position. My question, therefore, is: have the Government looked at whether the Bank could operate on a leaner financial basis and reduce the annual call it makes on the financial community via CRDs? I am conscious, however, that the Bank may well have to adjust its activities upwards as a consequence of the Northern Rock failures, where we are clear that the tripartite arrangements, which included the Bank of England, failed at their first real test. While most of the opprobrium is aimed at the FSA, who by the account of its own internal audit department handled Northern Rock very badly, I do not think anyone would pretend that the Bank’s procedures were perfect.

The Treasury’s plans were set out in the financial stability consultation document in January. They included strengthening the Bank of England, although it was not clear precisely what that would involve in practice. To me it is clear that it will not involve doing less and spending less; it is likely to involve doing more and spending more. In addition, the Treasury Select Committee in another place was clear that the Bank rather than the FSA should be in charge of the special resolution regime for failing banks. That is the regime proposed in the document which came out in January. If the Government accept that, it would potentially increase the Bank’s costs still further. Perhaps the Minister would share with the Committee the Government’s current thinking on how the special resolution regime will operate and, indeed, how it will be funded.

Does the Minister believe that the CRD funding scheme is robust enough to cope with future scope changes in the Bank’s activities? Do the Government expect to look again at funding mechanisms or indeed the quantum in the light of the emerging financial stability proposals? If they are doing that, it is rather odd that we are bothering with the order before us.

I am grateful to the noble Baroness and for the benefit informally of the comments of the noble Lord, Lord Newby, on this order, which he is not able to present since he has to be elsewhere. I know that he shares some of the anxieties of the noble Baroness about it. Perhaps I may make the obvious point that of course there is more than one way of funding the Bank of England. Central banks are funded in different ways in different administrations. However, we are basically of the view that the main beneficiaries of the monetary policy and financial stability functions of the Bank should continue to contribute towards it. So we are broadly in favour of the present scheme.

I marked carefully what the noble Baroness had to say. Last time round, the Bank’s actual costs were lower than predicted—the take was higher, as it were, the product was higher—after it had limited its activities more to core activities and improved efficiency. But we live in different times. As the noble Baroness rightly suggested, the Bank may have a more intensive and extensive role to play, which could involve higher costs. Any significant change to the scheme will certainly be considered within the framework of the consultation and the work being done on the banking reform Bill, which is in process, but at this stage, we have had a review of the mechanism, which clearly indicated that the Bank could be operated on a lower impost than had obtained before, which is what the order involves.

Will the forecast position be better then it was last time? Forecasting in this area is always hazardous, as the noble Baroness will recognise. In any case, we have a second all-encompassing and comprehensive look at the role of the Bank and regulation of financial institutions to be contained in the Bill, so those issues will be considered within that framework. For the moment, it is clear that there is a case for adjustment, which is all that the order proposes.

I hear what the noble Baroness says: that the Treasury may have an interest in the surplus, because it receives a percentage of it. The mechanism was not designed to yield surplus but to meet necessary costs. This reduction is against that background. She herself has suggested that that may be an underestimate of the amount of work that the Bank of England has to do. If it were, she would then be saying that the Treasury had made a proposal that was not directly in its interest by being overgenerous about the potential gap between the two. If the Bank of England's costs increase, there will be a reduction for the institutions paying. By definition, the surplus is likely to be more limited.

This is a modest adjustment to a scheme which is viable, which works and which gets the necessary functions of the Bank of England paid for in a way that avoids exactly the issues that the noble Baroness rightly identified would come from any other funding. We propose to continue with the scheme. Of course she is right that there may be a much more extensive revision of the position of the Bank of England in the Bill, on which the Government's conclusions are not yet ready to be made public, which may change the framework of the scheme. For the time being, we must work with the certainties we have, which are that we do not need the same amount of resources from the institutions for the work of the Bank of England as we thought that we did four years ago. That is why the order is here to reduce the levy.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Land Registration (Network Access) Rules 2008.

The noble Lord said: These draft rules are an important building block in creating a system of electronic conveyancing in England and Wales, as envisaged by the Land Registration Act 2002. The creation of a legal framework for electronic conveyancing was perhaps the most important single purpose of the Land Registration Act 2002. In a joint consultation by the Law Commission and the Land Registry, which preceded the drafting of that Act, the concept was supported in principle by almost 80 per cent of respondents. The Act enables the Land Registry to set up a land registry network to be used for electronic conveyancing. It provides that a person who is not a member of the Land Registry staff may have access to the network only if authorised by a network access agreement entered into with the Chief Land Registrar. These draft rules make provision about those network access agreements.

The Information Commissioner’s Office has been consulted on the rules and is comfortable with the measures that are being made at this stage of design and development to minimise the data protection risks. The office is pleased that the Land Registry has attached importance to data protection compliance in the development of this work, and it will continue to provide advice and guidance as it progresses. A draft of these rules was the subject of a public consultation in the first half of last year. Amendments have been made to the rules to take account of concerns expressed by respondents. Further details are given in the report on the responses to the consultation paper. Copies of this report have been placed in the Library, and an electronic copy is available on the Land Registry’s website.

The most common concern expressed by respondents related to the proposed provisions for the limitation and exclusion of liability which the rules required to be included in network access agreements. As well as making some modifications to the draft rules to meet many of these concerns, the Land Registry proposes to set up a scheme under which ex gratia payments would be made to people, other than professional conveyancers, who suffer loss in the event of problems with the network caused by an error or fault on the Land Registry’s part. It will therefore benefit the conveyancers’ clients—the actual sellers or buyers, mortgagers and so forth.

Once these rules are in force and the network is in place, electronic conveyancing by way of the network will be introduced in stages and will be piloted on a voluntary basis. These rules need to be in place before the first of these stages, so that professional conveyancers can enter into network access agreements in readiness for undertaking transactions on the network.

If this draft is approved by Parliament, it is planned that, from later this summer, certain applications will be able to be made by way of the network. The first stage of electronic conveyancing, which is currently planned to start by the end of this year, will involve electronic charges for use in remortgages and second mortgages of registered land. Rules, subject to the negative procedure, will make provision that allows these charges to be created in electronic form using the network. They will also make provision as to how to go about transactions carried on by means of the network. Further rules, subject to the negative procedure, will deal with the procedure for appealing against a decision by the registrar on entry into, or termination of, a network access agreement. Both these sets of rules were the subject of a public consultation in the latter part of last year. In the second stage, which is due to begin in 2009-10, the intention is to introduce transfers of registered land. Again, secondary legislation, under the negative procedure, will be required to allow for these dispositions to be effected electronically.

These draft rules are essential first steps in establishing a Land Registry network to enable electronic conveyancing to move forward and I commend them to the Committee. I beg to move.

Moved, That the Grand Committee has considered the Land Registration (Network Access) Rules 2008. 13th report from the Joint Committee on Statutory Instruments.—(Lord Hunt of Kings Heath.)

I thank the Minister for his explanation of the order, which is quite straightforward. I do, however, have a number of questions to put to him that I hope he will be able to answer.

First, we have some concern about security, but I am grateful for the fact that he has already consulted the Information Commissioner, who is satisfied with the position. As I understand it, the only people who can get themselves registered are those listed somewhere in the order. They would be solicitors, barristers, or whatever—the appropriate person. We have to go to Schedule 1(2):

“For the purposes of this paragraph, ‘qualified person’ means … a solicitor … a licensed conveyancer … a barrister … a duly certificated notary public”.

What is the current position on access to the Land Register, particularly access by people such as the press? If the press have a tame barrister, can he apply for access and then make use of that information in whatever way the press often want to make use of such information? I hope the Minister will be able to deal with that question.

My next question relates to cost. I am grateful that it is made clear there will be no charge for entering into such an agreement, but does the Minister think that in due course it will bring down the fairly considerable cost of registering land with the Land Registry? Does he think—it is obviously not necessarily the Government who should answer this question—that it might have an effect on what solicitors would charge the individual who has to register land? The Minister will be aware that it costs a considerable amount of money to register land.

My third question regards timing, which I think the Minister touched on in his explanation. We have been registering land for some time now, and it is envisaged that a lot more will be on the register by 2012. When these rules come into effect, that will all be done electronically. At the same time, will the Land Registry be putting all the old paper stuff on to the electronic network? If so, when, and when will those who will be entitled to have access to the Land Registry get the chance to go back and look at the old stuff that was registered in a paper manner?

The noble Lord, Lord Henley, makes a good point about the electronic registration of existing entries on the register. I think that registration was introduced in 1925; certainly it was operative on a voluntary basis when I was engaged in conveyancing in the 1960s, and it was extended gradually over the country. I note that, even now, not all interests have to be registered. Presumably there are some areas of land that do not require registration now. Accordingly, it will be a very big job to cover the existing records. I imagine that it will happen as it did with registered land originally: registration will take place electronically only when there is some disposition of the property in question.

Electronic conveyancing sounds very good, but what happens if the system crashes? I have been trying to find out where the liability lies from Schedule 2 of the agreement. The Monitor in this Room has failed at least twice today, and that is a good warning about what can go wrong. If there is no absolutely failsafe procedure as a backup to the electronic registration of land, all I can say is that future lawyers are going to make a fortune and I wish I could be there to see it.

My next question to the Minister is about the voluntary nature of registration. It says in the Explanatory Notes that the intention is to have pilot schemes on a voluntary basis. Is it envisaged that at some point it will become compulsory to work through electronic conveyancing? I was at a breakfast meeting this morning at the Law Society, where the noble and learned Lord, Lord Falconer, was promising us a technological future that will greatly increase the profits of lawyers; or was it that it would help consumers? I cannot quite remember. Something along those lines was said. The noble Lord, Lord Henley, raised the issue of whether it will be less expensive to convey property in the future.

One other area of interest is the position of people who wish to do their own conveyancing. I have done so myself. I do not see any provision in the rules that deals with the position of a person who says, “I think it is a very simple procedure now that it is being done electronically. I am a whizz with the computer. I can do it myself and avoid having to pay the expenses of a solicitor”. It is a considerable temptation to people in this day and age to do precisely that. Again, that is usually profitable to the legal profession, but still people should have the choice.

Finally, it is all very well to have an electronic system, but a piece of paper in the hand is valuable and makes you think that you actually own the property. The deeds of my house in Gresford go back to 1805 and there are some wonderful parchments from that date that are prized. It makes you think that you own the place. I recall when I started in the 1950s and 1960s, the managing clerk had beautiful copperplate handwriting to engross conveyances. That gave a sense of ownership.

However, there is a practical side to it. When one has a dispute with a neighbour about who must repair a fence that has blown down, it is handy to have immediate access to a piece of paper with a plan attached either to a land certificate or to a conveyance and to look at what exactly is there. Under the electronic conveyancing provisions, it looks as though one will have to go to a lawyer to get access to the system, so the lawyer can look and tell you, and he will charge you for that privilege. All sorts of practical questions arise when we come to dealing with the rules. They are only paving the way for more regulations in the future. Subject to that, we do not intend to object to the passing of the rules, but we would like clarification on my points.

I am grateful for those comments and for the general welcome for the rules, although I sense that the noble Lord, Lord Thomas of Gresford, is rather suspicious of these modern methods. He prayed in aid the collapse of our system earlier this afternoon, which meant that we could not see the results of the Division in the Chamber.

The development of electronic conveyancing, none the less, has many advantages for customers, and I hope that we are first and foremost thinking of the public. A paper will still be kept, so I do not think that the parchment is under threat. I think that the noble Lord, Lord Thomas, accepts that the parchments will continue to be there, but he was arguing that if anyone wanted to get hold of them they would have to go through a process in parallel to the electronic system. We have to accept that. Overall, there surely are advantages to be had in electronic conveyancing.

While the noble Lord was talking, a suspicion grew in my mind that the whole of this exercise may be funded by fees as opposed to general taxation. What is the intention here? Will it be the consumers who bear the cost?

The Land Registry organisation requires fees to be paid, and I do not see why that is a problem. The registry is self-funding and makes no call on public funds to carry out its core business. The fees charged to customers prescribed by an order made by the Lord Chancellor with the consent of the Treasury are regularly reviewed. As the new system, e-conveyancing, will enable a more efficient service to be provided to customers, it is not unreasonable to ask them to pay for it.

The costs of introducing something of this sort will be huge. Is that really a burden to be carried forward by fees to infinity?

No. Capital and development costs, which are expected to total between £270 million and £310 million, will be met from the Land Registry’s reserves. However, the operational costs once the network is up and running will be recovered from fee income. I think that that is a very reasonable way to approach it.

Does the noble Lord think that the Land Registry might in due course be able to reduce its fees by providing what he claims will be a more efficient service?

The noble Lord is not going to tempt me down that route. What I will say is that it is clearly very important that a careful eye is kept on the costs of the Land Registry, for all the reasons that both noble Lords have given. I assure him that my department will do that. We want an efficient system and we want fees to be kept as low as possible.

On Question, Motion agreed to.

rose to move, That the Grand Committee do report to the House that it has considered the Compensation (Claims Management Services) (Amendment) Regulations 2008.

The noble Lord said: This statutory instrument expands on two specific areas of the regulatory framework established to regulate claims management services under Part 2 of the Compensation Act 2006. The first area relates to professional indemnity insurance as a condition of authorisation and the second relates to the power to take possession of written or electronic records found pursuant to a search authorised by a search warrant.

The Compensation Act received Royal Assent in July 2006. The regulatory framework came fully into force in April 2007, when it became an offence to provide regulated claims management services without authorisation or exemption. The Compensation (Claims Management Services) Regulations 2006 provide further details of the regulatory arrangements.

The regulatory regime brought previously unregulated claims management businesses within the regulatory net and requires that they comply with rules of conduct. I am delighted to say that good progress has been made in the first year of regulation. Activities previously associated with some of these businesses, such as leaflet-dropping in medical facilities and cold-calling in person, have been virtually eradicated. The regulation has helped to raise the standards of services in the industry.

Later this week, the department will publish a review of the first year of regulation and an evaluation of its impact. This will be placed in the Library. One of the general points this evaluation will highlight is that, despite introducing this new regulatory regime at some speed, the department has adhered closely to the principles of better regulation, and in particular those contained in the statutory code of practice for regulators. For example, our enforcement policy reflects the principles of the Macrory and Hampton reviews and has guided enforcement actions to ensure that they are proportionate and risk-based.

We have been careful to minimise the regulatory burdens on businesses, and adjusted the fee scales for claims management regulation after one year of operation by reducing the fees payable for businesses with a very low turnover. This addressed specific concerns that had been raised predominantly by sole traders and helped ensure that the fee levels were proportionate. The same principles were applied to the development of the professional indemnity insurance requirement.

The annual review also sets out the priorities for the second year of claims management regulation. One of these will be to tackle unauthorised trading—in other words, businesses that are providing claims management services without authorisation, either knowingly or unknowingly. The consumer, however, remains at the heart of regulation and we will also be continuing our efforts to ensure that client contracts are fair.

These regulations are made under the power in Sections 8(8), 9 and 15 of the schedule to the Compensation Act. Regulation 21 of the Compensation (Claims Management Services) Regulations 2006 provides that the regulator may require an authorised person to take out a policy of professional indemnity insurance. However, we did not insist on professional indemnity insurance for authorised persons at the outset. It was clear from a previous consultation undertaken during the summer of 2006 that, although there was general support for this requirement, there were also concerns, particularly about the difficulties in obtaining cover at a reasonable cost in such a short timeframe.

It was necessary to ensure that the requirement was appropriately introduced and that there was sufficient market capacity to provide the relevant insurance. We specifically consulted on this requirement in February 2007 and commissioned an independent insurance expert to advise and produce a report on the insurance market for professional indemnity insurance. This helped determine that it would not be appropriate to impose this requirement on all claims management businesses. Authorised businesses and insurers had also expressed concern at the levels of cover required. We also sought the views of the regulatory consultative group, which includes representatives from the key industry interests, the Association of British Insurers, the Financial Services Authority and the Claims Standards Council, as well as of individual insurers, to address their concerns about the sector. The final requirement was adjusted to take account of the views and comments received and was published in November 2007.

The requirement has been restricted to those businesses that represent clients in the personal injury sector because this is where the greatest risk to consumers has been identified. An authorised business would therefore need to have professional indemnity insurance if it represented a client in relation to a claim for compensation. For example, if an authorised business deals directly with the insurance company of the person the client was claiming from and agrees a settlement, professional indemnity insurance would be needed in case the business were negligent. We believe that limiting the requirement in this way balances appropriate consumer protection with a proportionate impact on businesses. This is a carefully considered decision, based on a thorough consultation and supported by an independent insurance report and views from key stakeholders, including those likely to be affected by this requirement. If an authorised business is unable to meet its liabilities, the provisions will ensure that appropriate compensation is available where, for example, claims have been lost as a result of negligence.

The draft regulations introduce minimum terms to ensure that authorised claims management businesses have a minimum level of professional indemnity insurance. The minimum terms include a minimum level of indemnity of £250,000, a maximum level of excess of £10,000 for a single claim and cover for legal defence costs. Discussions with insurers and insurance brokers over the months since the 2007 consultation have indicated that a number of insurers will be able to provide cover exceeding the minimum terms. The minimum terms covering the levels of excess and indemnity were adjusted in light of the conclusions of the independent insurance report and the consultation exercise to make sure the requirement did not impact disproportionately on small businesses.

Insurers wishing to provide professional indemnity insurance to claims management businesses must be based within a “Zone A” country, if outside the UK or its dependencies. This means a country that is either a European economic area state, a full member of the Organisation for Economic Co-operation and Development or a country that has concluded special arrangements with the International Monetary Fund’s general arrangements to borrow. We have issued draft guidance which provides more detail for businesses on how to identify a country that falls within the definition. The department will review the professional indemnity requirement after one year to evaluate its impact and consider whether it should be extended to other regulated claims management sectors, reduced in scope or left unchanged.

As regards the power to seize records, under the Compensation Act, the regulator has various investigative powers to review compliance with the regulatory regime. The 2006 regulations make provision for warrants for entry and search of premises in limited circumstances to ensure that claims management regulation can effectively be enforced. These powers are modelled on those in the Police and Criminal Evidence Act 1984 and the relevant codes of practice under that Act. The draft regulations build upon the powers by enabling officers acting on behalf of the regulator to take possession of written and electronic records found pursuant to a search warrant for the purposes of taking copies.

The power to take possession of records may be necessary when a large amount of relevant records is found during an authorised search of premises. The power will enable officers to take possession of relevant records for the purpose of photocopying, which will reduce the amount of time that officers spend on the premises that are being searched. However, we recognise that powers of entry and seizure must always be fully and clearly justified before they are used because they may interfere with an occupier’s privacy or personal property. The exercise of the power to take possession of records is therefore subject to certain safeguards, including the relevant codes of practice issued by the Home Secretary under the PACE legislation. This will help to ensure that officers acting on behalf of the regulator act reasonably and proportionately in all circumstances.

The regulations expand on the regulatory framework that we have already put into place to regulate the provision of claims management services, and I commend them to the Committee. I beg to move.

Moved, That the Grand Committee has considered the Compensation (Claims Management Services) (Amendment) Regulations 2008. 17th report from the Joint Committee on Statutory Instruments.—(Lord Hunt of Kings Heath.)

Again, I am grateful to the Minister for explaining the regulations. I hope that I can be fairly brief, but as I saw the large team of officials that came in to offer him assistance, I was reminded of a Permanent Secretary in a department in which I served some time ago who, on seeing a similar sight, said, “Ah, large team, weak case”. I just hope that the case is not weak on this occasion.

First, the Minister actually gave a firm time when he said that the department will publish its review into these matters later this week. I look forward to that coming out before we break up on Thursday. I hope he will ensure that a copy is sent to me as speedily as possible, and that the department will manage to produce other items that it has promised on time and when it says that it will.

Secondly, will the Minister say a word or two about the regulatory impact assessment? The Explanatory Memorandum made it clear that a regulatory impact assessment of this statutory instrument has not been produced. A full regulatory impact assessment for claims management regulation was published to accompany the Compensation Bill, details of which are given on the website. I looked at it on the website. It was signed off by the Minister’s predecessor, the noble Baroness, Lady Ashton, who is now the Leader of the House, in late 2005, and it put forward various options that imposed quite high costs on the claims management companies. No doubt that has all been dealt with. Am I right that no further costs are being added under the regulations, and that the costs referred to in the 2005-06 regulatory impact assessment are already there?

Thirdly, and briefly, is the Minister happy about the £250,000 for a single claim and £500,000 for aggregated claims in new Regulation 21B, “Minimum terms of professional indemnity insurance”? Will he say a little more about what consultation the Government had and whom they consulted to reach those figures?

Finally, on the power in the final regulation to seize records, I take it that no power of entry is being granted to officials at this stage and that it is merely a power to seize records where necessary and to return them in due course, as set out in the regulations. I have no further questions.

The Liberal Democrats have supported the principle of the regulation of the claims management services. It is a very good thing, and we are very pleased that compulsory insurance is being introduced—a necessary corollary of that regulation. I have nothing to add. We welcome these regulations.

I thank both noble Lords for the general welcome they have given to these regulations. I agree with the noble Lord, Lord Thomas, that this provision was much needed, and the indications are that it has been effective. I know I was not present during the debate, but I was part of the ministerial group considering what is loosely called the “compensation culture” issue. The Committee will know that during the work undertaken by central government it was difficult to find absolute proof of a compensation culture, but the problem is that there is such a perception. I hope that the necessary regulation of the services is but one element in changing that general perception.

I always welcome the pithy comments of the noble Lord, Lord Henley. I have noted what he said about large teams and weak cases. I am glad to have the support of my colleagues behind me, but I think the case is pretty strong. He pressed me to define what “later this week” means in Ministry of Justice terms. He knows that this is a matter that I have resisted and will continue to resist, but I will ensure that both noble Lords receive the report as soon as it is published. Should we be so unkind as to publish it on Friday, if he lets me know where his holiday home is, we will guarantee to send it to him so that he can thoroughly enjoy his holiday.

Regarding the minimum terms, in my opening remarks I read out—or at least referred to—the list of organisations that have been consulted. The general view is that the minimum terms are satisfactory. There was always a balance here between increasing cost and better regulation. That is why a proportionate approach has been taken and the decision was made to identify only part of the business that is to be covered by the current provisions. The other point to make to the noble Lord is that discussions with insurers and insurance brokers have indicated that a number of insurers will be able to provide cover exceeding the minimum terms as well. Those terms were adjusted in the light of the conclusions of the independent insurance report and the consultation exercise to make sure that the requirement does not impact disproportionately on small businesses. We have attempted to strike the right balance.

The noble Lord is right about the power of entry. The power under the current law enables records to be taken, photocopied and returned. It does not advance the law further than that.

Regarding professional indemnity and the RIA, the provisions before the Committee do not go outwith the original work that was undertaken under the RIA. The RIA did not cover a detailed cost-benefit analysis of this requirement, but what is being done is entirely consistent with the conclusions of that RIA.

On Question, Motion agreed to.

Committee adjourned at 6.29 pm.