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Lords Chamber

Volume 705: debated on Wednesday 19 November 2008

House of Lords

Wednesday, 19 November 2008.

The House met at three o'clock: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Exeter.

Prisons: Drugs

asked Her Majesty’s Government:

Further to the answer by Lord Hunt of Kings Heath on 10 June (HL Deb, cols. 473-75), what discussions they have had with the British Medical Association about drug dependency in prisons.

My Lords, since late 2002, officials in the Prison Service (pre-2005), the National Offender Management Service and the Department of Health have chaired regular meetings with the British Medical Association to discuss the implementation of prison doctors’ and pharmacists’ working party reports. These meetings have allowed discussion on a broad range of subjects including the management of substance misuse. I myself will be speaking at the BMA’s prison health conference on 1 December.

My Lords, I thank the Minister for that encouraging reply. I also welcome the fact that, despite the budget cuts to the Prison Service, the Government will be trebling the amount of money spent on drug programmes in the next three years. However, can he update the House on the progress of the integrated drug treatment system, which is an absolutely integral intervention in dealing with drug abuse in prisons?

My Lords, I pay tribute to the right reverend Prelate; since he became Bishop for prisons last year he has become a powerful advocate, both inside this House and outside it, for more and better drug treatment in prisons and elsewhere. The integrated drug treatment scheme, as he knows, draws together drug treatment systems which have hitherto been commissioned and delivered quite separately, involving the Department of Health, the Ministry of Justice and several regional and local organisations. So far in 2008-09 the scheme has been rolled out in 91 prisons. It is in its second year and certainly has increased funding this year. It has already been shown that it will bring considerable improvements to the quality of prison treatment, allowing treatment to be better targeted at individuals’ needs.

My Lords, the last time this subject was discussed the noble Lord’s predecessor assured the House that inmates were tested for drug use when they went into prison but not when they came out. Why are the Government continuing to try to hide the increase in drug use in prison by refusing to test prisoners when they come out?

My Lords, we are not trying to hide anything. The amount of money that the Government have spent on drug treatment in prison—ranging from £7 million when we took office to £92 million now, a 12-fold increase—should make the noble Lord consider, first, whether his Government did enough in this field and, secondly, whether what he suggests is very sensible. When people go into prison they are of course tested for drugs. A large amount of money, and the time and effort of very dedicated people, is spent trying to wean them off drugs in various ways. You cannot be sure when they leave prison—I think that this is the question which the noble Lord asked last time—whether they have finally been taken off drugs. You cannot be sure until they have been in the community for some time.

My Lords, will the Government meet the minimum staffing needs for their Titan prison programme of two whole-time equivalent general practitioners plus community psychiatric nurses, given the complex diverse health and other needs of the population that will be in those prisons and the multiple opportunities that the Titan prisons will pose for illicit drug sharing?

My Lords, I pay tribute to the staff that the noble Baroness mentions and can answer her question in the affirmative.

My Lords, would the Minister be surprised to know that during the course of my review of women in prisons I came across almost universal appreciation of the fact that drug detoxification treatment in women’s prisons has improved so dramatically under this Government from what was previously a pretty poor programme? Indeed, this treatment allows some women coming out of prison to remain drug-free. The tragedy, of course, is that so many women prisoners are drug-dependent, but at least they get good detoxification now.

My Lords, I am grateful to my noble friend. What she says is true: there has, thankfully, been some improvement; but that there is still a huge problem with men and women prisoners, and with young persons in prison, is clear. Too many people go into prison with a huge drug problem and too many still come out with one as well. This is a complicated and difficult issue, but the Government are doing their very best to deal with it. The problem was here before this Government and it will be here after this Government. If the party opposite ever regains power, it will have to deal with this problem, so its members should be quite careful what they ask.

My Lords, I welcome the Government’s acceptance of all 10 major recommendations of the Blakey review as well as their suggestions on good practice regarding different methods of entry of drugs into prisons, but why have they decided to postpone the introduction of the BOSS chair for non-invasive searching of body orifices for drugs and mobile phones? Have they done a comparative study of the effectiveness of the BOSS chair as compared with passive drugs searches by dogs?

My Lords, I am afraid that I am not in a position to answer the noble Lord’s fairly specific question but I will write to him.

My Lords, what progress has been made with the various initiatives for prisoners with alcohol dependency problems, as flagged up in the review of the national alcohol strategy in June 2007?

My Lords, we know that many prisoners have alcohol as well as drug problems. We have made it a priority to tackle the harms caused to the public by acquisitive crime that is committed to fund drug and alcohol misuse. Consequently, funding for addressing drug misuse has grown at a greater pace than that for alcohol misuse. The needs of prisoners with an alcohol problem are important. As the noble Baroness will know, the alcohol strategy for prisoners was introduced four years ago. It provides a framework for addressing prisoners’ alcohol-related problems and balances treatment and support with supply reduction, but I have to say that we have a long way to go.

My Lords, would the Minister be kind enough to answer the question that my noble friend Lord Henley asked? Why do the Government not test people on leaving prison so that they can see the effects of prison on people’s drug-taking habits?

My Lords, getting people off drugs is not something that happens just in prison. It happens in prison, but it continues when they are in the community.

Prisoners: Indeterminate Sentences

asked Her Majesty’s Government:

What is their response to the report of the Chief Inspector of Prisons, The Indeterminate Sentence for Public Protection: A Thematic Review.

My Lords, we welcome the thematic review, although we note that the fieldwork for the report was undertaken before a number of important initiatives were introduced that have significantly improved the management of prisoners serving an indeterminate sentence of imprisonment for public protection. We believe that many of the criticisms contained in the report have been addressed, but there are some outstanding issues of importance in relation to parole, risk assessment and access to interventions, on which we continue to work.

My Lords, I thank the Minister for that reply and for his recognition of the trenchant criticisms made by Her Majesty’s Inspectorate of Prisons of IPPs. Given that the legislation introduced earlier this year to raise the minimum tariff for people on IPPs to two years is not retrospective, are the Government prepared to review the sentences of those thousands of prisoners who were already on IPPs, in particular the 800 or so who had already gone beyond their tariff? Many of those prisoners have been unable to complete the required courses designed to prove that they are safe to be released because those courses are simply not available, creating a situation that the Court of Appeal has found to be unlawful.

My Lords, some outstanding cases are to be heard very shortly and I do not want to comment on them. We do not intend retrospectively to change the sentence, because that would be wrong, but we accept that there are problems in exactly the field that the noble Baroness suggested. Among the changes that we have made, including that to the law, we have undertaken the complete redesign of the processes and procedures for assessing and managing such prisoners. The noble Baroness will understand that the resultant changes run concurrently with the rollout of phase III of offender management. That means that it will be easier for these prisoners to gain access to courses and other work to address their offending. We also need to do something about the parole position.

My Lords, should there not be a moratorium on these sentences until all the disquiet expressed has been addressed?

My Lords, we do not think so. The prime task of any Government is to protect the public. We need to have that in mind at all times. It is important to learn lessons from the past and to make sure that this system works better in the interests both of the public and of those who are sentenced.

My Lords, has the Minister read the disturbing report by the Sainsbury Centre for Mental Health, In the Dark, which describes the serious amount of mental disorder among prisoners awarded IPPs and the implications for increased mental health disorder on prisoners so sentenced? What action are the Government taking to improve and increase the amount of mental health treatment available to prisoners on this sentence?

My Lords, it is clear that many of those who receive this sentence have mental health problems. The changes that we are making to the way in which the sentence is carried out will undoubtedly include an element of looking after those with mental health problems and making sure that such problems, as part of the way in which we consider the risk involved in a prisoner’s release and its timing, are seen to be of great importance.

My Lords, will the Minister say what is being done to ensure that clear information about the operation of IPP sentences is given both to prisoners and to their families? Will he also indicate what support is given to interventions that are aimed at strengthening family relationships? That was touched on in the thematic report and can be important in helping prisoners to address their offending behaviour.

My Lords, the right reverend Prelate makes an important point. It may well be that sometimes prisoners do not understand exactly what they have been sentenced to. Having read the report, I can see case histories in which that has occurred. More effort must be made to ensure that what he suggests happens. It is also essential that courses of varying kinds, under the generic title of dealing with offences, are available to these prisoners better than they have been in the past. Among the courses will be those assisting them in their relationships afterwards.

My Lords, the Minister will be aware of the disproportionate number of female IPP prisoners suffering from mental health problems. The report flagged up something like 75 per cent of the sample. Have adequate measures been put in place since then to address these needs, particularly formal in-reach programmes on the estate?

I note that the report suggests that a large number of the women prisoners under these sentences—it should be said that 97 per cent of the total are men and 3 per cent are women—have considerable mental health problems. That is one matter that we are looking at in response to the report.

My Lords, it was of interest that on the DPP side for the younger generation there was a recommendation that these young offenders should be kept in a separate establishment. Is it the Government’s intention to follow that pattern? Would they like then to apply the same Corston-like approach to women in this position?

My Lords, I am not in a position to say whether that is the policy that we will adopt as a consequence of the report, but I shall certainly take back that idea and write to the noble Baroness with our response.

Higher Education: Student Funding

asked Her Majesty’s Government:

Whether they plan to change the funding arrangements for students pursuing a course in higher education which is lower than or equivalent to their existing qualification.

My Lords, the funding arrangements incentivise institutions to recruit more of the millions of adults without a higher education qualification. The ELQ policy unlocks talent and widens participation. While the details might be fine-tuned over time, if we are convinced by new evidence that changes are needed, the principle behind the policy that first-time students should come first is the right one.

My Lords, I thank the Minister for that very disappointing reply. At a time of very high unemployment, when many of the people now being made unemployed are professionally qualified or graduates, it will be vital for them to be able to retrain in new skills. Universities are being discouraged, not encouraged, with that particular group, who are very important in their contribution to the economy. Is it not time that the Government rethought this policy?

My Lords, we are putting in place other measures to help people who have been made redundant, including special funds for retraining and reskilling. I return to the original point, however: this policy is about social mobility, fairness and increasing higher-level skills in the workforce to internationally competitive standards. We still believe that our policy is right. We are not taking away from the point on whether we need to review it. There are a number of exemptions to the policy, such as foundation degrees, employer co-funded courses and strategically important subjects such as medicine and stem science. We are going to review that exemptions list in December.

My Lords, is the Minister aware that all those exemptions are currently subject to an annual review, which creates very considerable uncertainty and problems for the universities concerned? Could not the Government consider giving them the three-year guarantee that they get for general funding in universities?

My Lords, in September 2007 HEFCE was asked to redistribute £100 million by 2010-11 to provide 20,000 full-time equivalent extra opportunities for newcomers to higher education. It is a phased change—£25 million in 2008-09 and £60 million in 2009-10.

My Lords, with the economic problems we face and the prospect of an increasing number of people becoming unemployed, should not the Government’s focus be on the poor and people on low wages who are being made unemployed or who are likely to be made unemployed? What additional work is being prepared to try to assist those people?

My Lords, certainly that is the focus of our attention. I give the House some further figures. There is a significant demand for higher education and something like 100,000 applicants fail to get a place every year. Twenty million people, 70 per cent of the workforce, have no first degree, compared to only 60 per cent in USA and Japan. Our student finance funding is focused on those most in need. Something like 40 per cent of students in the lower income group will receive a full grant. We believe that we have got the focus of our policy right.

My Lords, I declare an interest in that theological education is one of the areas likely to be most affected by these funding changes. I am grateful for the opportunity to express gratitude to HEFCE and the Government for the way they have worked with us to try to ensure that the unintended consequences of the changed financial arrangements do not impact disproportionately on those training for the ministry. It would be helpful if the Minister could reinforce his commitment that foundation degrees will continue to attract HEFCE funding for those who already have a degree. As the noble Baroness said, at a time when social capital is all the more important, I do not see, unless the Minister can help and explain, how these proposals will help to get back into work in mid-career those who already have a degree but need to be retrained and reskilled to degree level.

My Lords, I can certainly give the right reverend Prelate an assurance on foundation degrees. We regard them as an important route to higher education. Certainly, I do not see them at risk in any review. Again, I think we are doing the right thing in focusing on people going for first-time degrees. A separate amount of money has been allocated to help people who are made redundant in the current circumstances to retrain and reskill.

My Lords, I declare my interest as chief executive of Universities UK. Given that a thorough review of policy in 2010 is promised, will the Government confirm that the review will be comprehensive and that it will take into account the very different effects on different institutions, particularly the impact on different types of provision, given, as other noble Lords have mentioned, the downturn in the economy? Will he assure me that all institutions, however affected, will be consulted during the review?

My Lords, I can certainly assure my noble friend that all institutions will be consulted. We have taken some special steps for specialist institutions. Safety net funding on the Open University’s budget was increased by £4 million and on Birkbeck College’s by £5 million. Universities generally can recoup their money by recruiting more first-time students.

National Probation Service: Budget

asked Her Majesty’s Government:

Whether they propose to reduce the budget of the Probation Service.

My Lords, the Ministry of Justice is seeking efficiency savings over the next three years as set out in the department’s annual report. Budgets have not yet been fixed but, as is the case across government, the Probation Service will need to make efficiency savings of about 2.5 per cent in the next financial year. This will involve difficult decisions but the NOMS agency is working to determine how the saving can be achieved in ways that protect front-line services. The aim is to reduce overheads, remove administration and drive improvement in underperforming or expensive services.

My Lords, I thank the Minister for that somewhat disappointing and disarming reply. As we all know, there is not only overcrowding in prisons but a large increase in the number of prisoners and offenders requiring supervision in the community. If we are to reduce the use of imprisonment, we also need to have confidence in the community sentencing process. I recently saw an organisation diagram for the National Offender Management Service but I looked in vain, first, for the National Probation Service and, secondly, for the director of the service. In addition to managing offenders, you have to manage the staff of these services. Can the Minister tell the House who is the professional appointed to be responsible for the Probation Service in the administration of probation services in this country?

My Lords, the Secretary of State, of course, has a statutory duty to ensure that probation services are carried out. Although I understand the noble Lord’s disappointment, I hope I have just clearly expressed that the changes which must take place have to address unexplained variations in cost and performance between similar services provided elsewhere. Some probation boards do much better than others with the same resources, but that is true of organisations across the board. What matters is that any changes that have to take place—and they have been much exaggerated—aim first to reduce overheads and secondly to simplify processes so that scarce resources can be targeted effectively at front-line work with offenders.

My Lords, given the enormous pressure that the Probation Service is already under in coping with its existing workload, can the Minister explain how the Government will support the service when it must deal with the explosion of prisoners on IPPs, who will be subject to licensed supervision for at least 10 years and possibly for life?

My Lords, we are not going to attack the front-line work that the Probation Service does so brilliantly across the country. There are administrative changes and savings that can be made. As I have said before, in this organisation as in others, benchmarking and evidence-gathering have shown great variations in the cost and performance of similar services being delivered in similar probation areas. This will not be easy but it has to be done.

My Lords, in the report referred to by the noble Baroness, Lady Linklater, in her earlier Question—a report that was co-written by the Chief Inspector of Probation—there was, as the Minister will remember, a general request for the Secretary of State to ensure an increased allocation of resources. The Minister is now talking about a saving of some 2.5 per cent. How will he bring those two factors together?

My Lords, we would very much like to be able to spend more on a whole range of issues but, being a responsible Government, we know something that the other side seems to have forgotten—you can only spend within your means.

My Lords, I am afraid that the business of government is hard, and it is about priorities. What we will not sacrifice is the front-line work being effectively done with offenders. I remind the noble Lord, Lord Henley, that since 1997, staffing numbers in the Probation Service have increased by over 7,000 and the probation resource budget has increased by nearly 70 per cent in real terms. Only in March of this year my right honourable friend the Secretary of State committed an additional £40 million to ensure that magistrates had tough community sentences at their disposal, and an additional £17 million was found for the Probation Service for this year. So I do not think that we will take lessons on this subject from the noble Lord.

My Lords, of course it is right that the Government should seek to make efficiency savings across all expenditure. Can my noble friend provide an assurance that the efficiency savings demanded of the Probation Service will be no greater than those demanded of the Prison Service?

My Lords, I cannot give my noble friend an assurance on the exact amounts because we do not know exactly what the figures will be. However, as I said in my first Answer, we are seeking efficiency savings over the next three years, as set out in the annual report. We want to be fair to every part of the Ministry of Justice.

My Lords, does the noble Lord agree that an across-the-board, unimaginative reduction of one-fortieth could be extremely counterproductive and could, indeed, foreclose the prospect of a non-custodial disposal in many appropriate cases, leading to a critical situation in relation to prison overcrowding?

My Lords, I agree absolutely with the noble Lord. If it were just done across the board and without any imagination at all, it would be an absurd thing to do. We have to concentrate on where savings can be made—and savings can be made in almost every organisation—while ensuring that we focus on dealing with offenders who have been in prison or been given community sentences. As the noble Lord will know, in February this year we announced a further investment, in addition to the investment that I mentioned, of £13.9 million over the next three years to fund six new intensive alternatives to custody projects. I hope that that is something that the House will support.

My Lords, when we fought through the Offender Management Bill last year the Government made it clear that they wanted offender management to be a seamless exercise both in prison and out of prison, which would require more resources for those out of prison. Have the Government now abandoned that objective?

No, my Lords, we certainly have not. Those who are out of prison on community sentences are the front-line people we are determined to ensure do not suffer as a result of any cuts which we have to make. We will concentrate on them as it is essential to go on helping them. The noble Lord heard me mention figures a few minutes ago. The amount of money that the Government have put in over a number of years, and the number of extra probation officers, is a good record.

European Communities (Definition of Treaties) (2006 International Tropical Timber Agreement) Order 2008

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

Moved, That the draft order laid before the House on 23 October be approved. 30th Report from the Joint Committee on Statutory Instruments, Considered in Grand Committee on 17 November.—(Lord Tunnicliffe.)

On Question, Motion agreed to.

International Organization for Migration (Immunities and Privileges) Order 2008

Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2008

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

Moved, That the draft orders laid before the House on 23 and 29 October be approved. 30th Report from the Joint Committee on Statutory Instruments, Considered in Grand Committee on 17 November.—(Lord Bach.)

On Question, Motions agreed to.

Youth Justice Board for England and Wales (Amendment) Order 2008

Legal Services Act 2007 (Functions of a Designated Regulator) Order 2008

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

Moved, That the draft orders laid before the House on 22 October be approved. 29th Report from the Joint Committee on Statutory Instruments, Considered in Grand Committee on 17 November.—(Lord Patel of Bradford.)

On Question, Motions agreed to.

Pensions Bill

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Pensions Bill, has consented to place her Prerogative and Interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Before the House begins Third Reading on the Pensions Bill, it may be helpful for me to say a few words about the Third Reading amendments. In line with the guidance recommended by the Procedure Committee and agreed by the House, the Public Bill Office has advised the usual channels that one amendment on the Marshalled List for Third Reading today falls outside the guidance given in the Companion and set out by the Procedure Committee. This is Amendment No. 17 in the names of the noble Lords, Lord Judd and Lord Joffe.

On the basis of the Public Bill Office’s advice, the usual channels have agreed to recommend to the House that the amendment should not be moved. As ever, this is ultimately a matter for the House as a whole to decide.

My Lords, that is helpful, but it would help us if the noble Baroness were to explain the reason for that.

My Lords, the subject of the amendment has already been dealt with on the Floor of the House twice and, therefore, it is not appropriate for it to be debated again today.

Bill read a third time.

1: Clause 8, page 6, line 1, at end insert “or in respect”

The noble Lord said: My Lords, I shall speak also to Amendments Nos. 2, 3, 6 to 9, 20, 24 to 29 and 32.

We wish to ensure that the Bill is as clear and as error-free as possible before we send it back to the Commons. Therefore, as is normal at this stage, parliamentary draftsmen have suggested a number of minor and technical amendments designed to correct inconsistencies and improve drafting. I will take each of the amendments in turn.

On Amendment No. 1, if a jobholder opts out of pension saving under Clause 8, the jobholder and the employer get their contributions refunded. As drafted, the wording suggests that the regulations on refunds made under Clause 8(2)(b) should deal only with “jobholder” contributions. The amendment is intended to make clear that the clause covers employer and employee contributions and brings the drafting into line with other clauses that refer to contributions.

Amendments Nos. 2 and 3 are designed to clarify the drafting of the clause that introduces the test scheme standard for defined benefit schemes. The amendments confirm that the terms “such persons” and “J” refer to scheme members.

On Amendment No. 6, Clause 37(3) allows the Secretary of State to make regulations about the way in which the regulator can estimate the amount of contributions that an employer has failed to pay. Amendment No. 6 is intended to make clear that regulations can be made covering how the regulator can estimate contributions paid by the employer on behalf of the worker, as well as contributions paid on the employer’s account in respect of that worker. The amendment will also bring parity with Clause 38(2), where the same terms are used.

On Amendments Nos. 7, 8 and 9, Clause 60 currently gives the regulator power to inspect employers’ premises where it has reason to believe that documents relevant to the administration of a qualifying scheme are being kept. However, an employer’s scheme would not be a qualifying scheme in relation to workers without qualifying earnings under Clause 9. It is also possible that an employer might declare his pension scheme to be a qualifying scheme when, in fact, it does not satisfy the requirements as set out in Clause 16. Amendments Nos. 7, 8 and 9 replace the reference to a “qualifying scheme” with a reference to a,

“pension scheme that is relevant to the discharge of those duties”,

of the employer, and will therefore ensure that the regulator’s powers of inspection would apply in all relevant circumstances.

Amendment No. 20 amends the interpretation clause for Part 1 to make clear that people without qualifying earnings who opt into a workplace personal pension under Clause 9 are active members of their scheme, just as jobholders who opt in are active members.

I shall now speak to Amendments Nos. 24 to 29 and 32. The amendments to Clauses 132 and 133 clarify two things. First, any conditions associated with the purchase of additional voluntary class 3 national insurance contributions under Clause 132 must be prescribed in regulations by the Treasury. Secondly, the clause requires that an eligible person must have 20 qualifying years or 20 full years of home responsibilities protection in order to buy the additional contributions. This amendment clarifies that we are referring to a qualifying year for the purposes of entitlement to certain social security benefits.

The amendment to Clause 146 clarifies that an order is not required for the commencement of the extension to the rules on the purchase of voluntary class 3 national insurance contributions. The right to buy additional years for eligible people will take effect automatically on 6 April 2009, and this is specified in the Bill at Clause 146(4).

I hope that noble Lords will agree that these amendments are straightforward but necessary to ensure that the Bill leaves this House in the best state possible. I beg to move.

My Lords, we are generally happier with these amendments today. The way in which the Minister and the department have tidied up and brought forward the amendments is a credit to them. We had vigorous discussions at earlier stages of the Bill, and on these amendments today the noble Lord has generally shown himself to be a listening Minister, which is not something that I would say about every Minister in this Government.

On Question, amendment agreed to.

Clause 22 [Test scheme standard]:

2: Clause 22, page 11, line 12, leave out “such persons” and insert “them”

3: Clause 22, page 11, line 14, at end insert “J and”

On Question, amendments agreed to.

4: After Clause 27, insert the following new Clause—

“Sections 20, 24 and 26: certification that quality requirement is satisfied

(1) The Secretary of State may by regulations provide that, subject to provision within subsection (6)(f), a scheme to which this section applies is to be taken to satisfy the relevant quality requirement in relation to any jobholder of an employer if a certificate given in accordance with the regulations is in force in relation to the employer.

(2) The certificate must state that, in relation to the jobholders of the employer who are active members of the scheme, the scheme is in the opinion of the person giving the certificate able to satisfy the relevant quality requirement throughout the certification period.

(3) This section applies to—

(a) a money purchase scheme to which section 20 applies;(b) a personal pension scheme to which section 26 applies;(c) a hybrid scheme, to the extent that requirements within section 24(1)(a) apply.(4) The “relevant quality requirement”—

(a) for a scheme within subsection (3)(a), means the quality requirement under section 20;(b) for a scheme within subsection (3)(b), means the quality requirement under section 26;(c) for a scheme within paragraph (c) of subsection (3), means the requirements mentioned in that paragraph.(5) Regulations may make further provision in relation to certification under this section.

(6) Regulations may in particular make provision—

(a) as to the period for which a certificate is in force (the “certification period”);(b) as to the persons by whom a certificate may be given;(c) as to procedures in connection with certification or where a certificate has been given;(d) requiring persons to have regard to guidance issued by the Secretary of State;(e) requiring an employer to calculate the amount of contributions that a scheme, and any section 26 agreements, required to be paid by or in respect of any jobholder in the certification period;(f) as to cases where the requirements of a scheme, and any section 26 agreements, as to payment of contributions by or in respect of jobholders of an employer did not satisfy prescribed conditions.(7) Provision within subsection (6)(f) includes in particular provision for a scheme not to be treated by virtue of regulations under this section as having satisfied the relevant quality requirement unless prescribed steps are taken (which may include the making of prescribed payments).

(8) In subsection (6) “section 26 agreements” means the agreement required, in the case of a scheme within subsection (3)(b), by section 26(4) and any agreement required, in the case of such a scheme, by section 26(6).

(9) The Secretary of State may by order repeal this section.”

The noble Lord said: My Lords, I shall speak also to the other government amendments in this group.

I now return to qualifying earnings, which we discussed in earlier debates. On Report, we amended the Bill to confirm that employers may assess whether their arrangements meet the new quality standard over the course of a year and not just pay period by pay period.

Following further detailed discussions with stakeholders, Amendments Nos. 4, 30 and 31 now go one step further. They will enable employers or a designated person connected to them to certify that their scheme meets the forthcoming quality standard.

Our intention throughout the passage of the Bill has been to make it as easy as possible for employers who offer generous pension contributions today to continue to do so under the employer duty. The trick has been to find a way to achieve this without opening up the unacceptable risk that some individuals might routinely or materially save at levels below the minimum standard.

I believe that the certification procedure provided for in the amendments strikes the appropriate balance. Certification will be based on three principles, which I agreed last month with the employer and industry stakeholder group.

The first is that, if employers or a connected person are confident that each worker in their scheme is on course to receive the new minimum level of pension saving, they will be able to certify that their arrangements meet the new quality standard. The second principle deals with cases where a member’s contributions unexpectedly fall short of the minimum during the certified period. In such cases, employers will not be required to make retrospective reconciliation payments unless the detriment to an individual exceeds certain minimum levels. The third principle is that the minimum levels for reconciliation will be set in such a way as to protect individuals from significant, systematic or persistent detriment.

Certification on the basis of these principles should provide greater certainty to employers and some key administrative easements around reconciliation payments, while at the same time protecting the savings outcomes for individuals that are fundamental to the success of the reforms.

I shall now give way to the noble Baroness, Lady Noakes, who has tabled an amendment to Amendment No. 4, and I shall have an opportunity to respond to that. I beg to move.

5: After Clause 27, line 10, leave out subsection (2)

The noble Baroness said: My Lords, we congratulate the Government on bringing forward their amendment to the qualifying earnings test. This is one of the issues that have been with us throughout our consideration of the Bill, and at times I wondered whether we would ever get to this stage.

We have made it clear from the outset—not least to the organisations that have provided briefing to us—that the best outcome would be a government amendment. A victory in the Division Lobby may have given us a passing thrill in this House but a solution embraced by the Government gives hope for auto-enrolment arrangements which will work well in practice.

Amendment No. 4 offers the possibility that existing private sector provision may be preserved and not levelled down. If Amendment No. 4 avoids levelling down by existing employers, it would, in turn, help to maintain a body of pension provision which was above the minimum and, if that were the case, it would set a market level which may encourage new employers in the market to offer more than the minimum. What is at stake is potentially important. As we know, levelling down could take the form of rewriting an existing pension scheme to meet the formula in the Bill or, more plausibly, would result in employers just saying that they are not prepared to continue with their own scheme and defaulting to personal accounts. Either way, it would result in less pension saving. At present, employers contribute more than 6 per cent to defined contribution schemes, which compares with the Bill’s 3 per cent. Admittedly, the bases are different, but I would guess that on average the difference is slightly more than 3 per cent, which, over a working lifetime, is a lot in pension provision.

My probing amendment deletes subsection (2) of the new clause. At the heart of whether this new clause will do the trick is whether the regulations made under it will allow the calculations to be made at the level of the whole active membership of the scheme or whether they will directly, or indirectly, force the calculations to be made at the level of the individual. The question posed by my amendment is whether subsection (2) allows the certificate to be given at the level of the active member jobholders as a whole. I am aware that the Government changed the drafting of subsection (2) at a late stage before tabling in order to clarify its meaning, but I believe that the version in Amendment No. 4 can still be read either way. My request to the Minister is to clarify the Government’s intention of what subsection (2) is intended to mean in practice.

The Minister will also be aware that the provisions in subsection (6)(e) and (f) and subsection (7) cause some concern because those provisions would allow the Government to produce regulations which were onerous in both administrative and financial terms. I have to put the Government on notice that if they produce regulations which are onerous in administrative and financial terms, the likely outcome will be the levelling down, which this clause is intended to avoid. In particular, the tolerance levels of employers for sticking with their own schemes may well be tested if, by virtue of subsection (7), significant payments are required by the regulations.

The Bill does not require the Government to draft the regulations in a way that results in levelling down, but the danger is there and it is entirely in the Government’s hands. The groups with which we have discussed these issues are keen to work closely with the Government on the content of the detailed regulations so that they achieve the aim, which I think is shared by all parties, of keeping private provision going. I hope that the Government will work closely and constructively with those groups. I would be grateful for the Minister's comments on that.

Lastly, I must mention subsection (9), which seems to be a rather unnecessary act of aggression. Subsection (9) contains the unusual power for the Secretary of State to repeal the whole section and, with it, the hope that levelling down might be avoided. That is unorthodox drafting. Most Bills are not drafted with such provisions. Admittedly, this Bill contains another example in Clause 69. The Minister never satisfactorily explained that one, but I invite him to explain why it is appropriate for this new clause. I even harbour a faint hope that the Minister will say that subsection (9) is a big mistake and that, if we pass this amendment today, as I hope we shall, the Government will amend it in another place. I beg to move.

My Lords, inevitably we cannot be sure how this will work in practice, but it seems to us on these Benches a sensible compromise, following the discussions which we had on Report. As the Pensions Policy Institute, in its characteristically helpful and thorough note, said, there has to be a trade-off. A trade-off has to be made between a lower burden on employers with a small minority of individuals receiving less than the minimum but the majority of individuals receiving the minimum and higher, and ensuring that every individual receives at least the minimum but, as we know, with a potentially much higher administrative burden on employers. From the discussions I have had—I particularly pay tribute to Tim Breedon and his colleagues at Legal & General, who took me through it very carefully and discussed how their discussions with the ministry were going—I am satisfied that this is a sensible compromise. The right trade-off has been made, and we look forward to seeing how it works in practice.

My Lords, I am grateful to both noble Lords for their support for the thrust of this amendment. I am particularly grateful to the noble Baroness for providing me with an opportunity to explain the significance of subsection (2) of the government amendment, which sets out what the certificate must state.

Subsection (2) requires a certificate to state that in the opinion of the person giving the certificate the scheme is able to meet the minimum contributions standard for all its active members throughout the certification period. This subsection effectively achieves in the legislation the first of the policy principles I set out earlier; namely, that an employer must be confident at the point of certification that the scheme will provide minimum contributions for everyone participating under the duty. This is crucial if we are to ensure that certification may be used by employers with good schemes only. We do not want to leave open a risk that some individuals could be enrolled in schemes where it was clear that from the outset they would persistently save below the minimum level. I am sure we have common cause on that issue.

The noble Baroness indicated—I accept that her amendment is a probing amendment—some concern that subsection (2) could drive employers to undertake individualised checks of their membership in the same way as they would under the existing test. Let me reassure her on this matter. Certification enables an employer to look at its scheme once a year and, provided it is confident that it meets the minimum standard at that point, to proceed for the coming year in the knowledge that it will remain compliant even if individuals go on to experience minor or sporadic shortfalls. In that sense, certification reduces the need for an employer to consider whether to future-proof an existing scheme in case of unexpected changes to an individual’s pay.

While the standard that must be met at the start of each certification period relates to all members, we envisage the process in part being a matter for regulations. I accept that some of the important detail is yet to come through in those regulations, particularly what de minimis will mean in this context. We anticipate that the process will include scope for discretion on the part of the employer or connected person; for example, in relation to the extent of the analysis he must undertake before signing a certificate. In that way, employers or connected persons who are confident of the quality of the scheme could elect not to conduct fully individualised checks. It will depend on the circumstances of the individual scheme and in part on the level of contributions that are paid under the existing scheme and on the number of employees whose pay is comprised of components that are not covered by the existing scheme arrangements and perhaps on how sensitive outturn pay is to the varying business levels that are undertaken.

Although there will probably be a degree of prescription in the regulations, it will be important for employers to have discretion about the extent of the work they need to do to gain the assurance that they believe is necessary to go through that certification process. I hope that on that basis the noble Baroness will feel that she need not press her amendment. There is still some detail to be worked out. We want continued engagement with stakeholders. It has been important in taking us from where we were to where we are.

In relation to subsection (9) and the opportunity to repeal, it was put in place, at least in part, because we believe that there is a reasonable prospect that, once auto-enrolment gets under way, employers will be less inclined to follow this route, and it will be easier for them down the track to establish that their schemes are compliant.

From another point of view, if, in the event, the certification process is not working satisfactorily and is throwing up persistent undersaving by people, we would not want to proceed with it, but we want to give it a fair wind and work with stakeholders to see whether we can complete the detail. As the noble Lord, Lord Oakeshott, said, it is important to strike the right balance. This is part of the arrangement that we are putting in place to avoid levelling down, which is crucial, especially at the current time.

My Lords, I thank the Minister for that reply and I shall not prolong the debate. We share the same aims. From our perspective, some of the language in the subsection could be used in a way that does not achieve the right result; that is the point that I was trying to make. Much will depend on how the Government implement this in practice in whether they achieve the agreed outcome, which is to maintain private provision at a higher level than the basic required under the Bill. As we share that aim, we will just have to see how things turn out, but I just record that if the Government do not implement it with sensitivity, levelling down will follow. I beg leave to withdraw the amendment.

Amendment No. 5, as an amendment to Amendment No. 4, by leave, withdrawn.

On Question, Amendment No. 4 agreed to.

Clause 37 [Calculation and payment of contributions]:

6: Clause 37, page 18, line 44, after “pay” insert “on behalf or”

On Question, amendment agreed to.

Clause 60 [Powers to require information and to enter premises]:

7: Clause 60, page 33, line 5, leave out “qualifying scheme” and insert “pension scheme that is relevant to the discharge of those duties”

8: Clause 60, page 33, leave out lines 11 and 12

9: Clause 60, page 33, line 16, leave out ““worker” or “qualifying scheme”” and insert “or “worker””

On Question, amendments agreed to.

Clause 66 [Duty to establish a pension scheme]:

10: Clause 66, page 36, line 24, leave out “powers conferred by subsection (1) are” and insert “power to make provision in pursuance of subsection (1) is”

The noble Lord said: My Lords, I shall speak also to the other government amendments in the group. As noble Lords will recall, during Committee, the noble Baroness, Lady Noakes, successfully moved an amendment that resulted in a duty on the Secretary of State to set up the scheme, rather than providing a power to do so. There was a clear feeling in the Committee that there should be no ambiguity in the drafting. The need for clarity on such a crucial issue is understandable, which is why we will not seek to overturn that amendment.

However, I want to introduce these amendments to ensure that we do not inadvertently restrict the Government's ability to make future changes to the scheme order. As I explained during Committee, the details of the scheme will be set out in the scheme order and it may be either desirable or necessary at some time in future—we are potentially looking at a long time here—to amend the scheme order.

In accordance with the provisions of the Interpretation Act 1978—much maligned last time that I used that expression—we would have been able to use the power in the clause as drafted to do so. These technical amendments to Clauses 66 and 67 will ensure that the duty remains without unintentionally harming the objectives or technical workings of the Bill.

Amendment No. 10 amends Clause 66(8) and will put beyond doubt that the scheme order could be amended under Section 14 of the Interpretation Act if that proves necessary. Amendments Nos. 11 to 15 then amend each of the subsections in Clause 67. The amendments will make clear that subsections (2) to (5) of that clause refer to any order under Clause 66, not just an establishing order. So they would, for example, apply to an amending order also.

I hope that noble Lords will agree that, in addition to the amendment moved by the noble Baroness, Lady Noakes, in Committee, these amendments will provide absolute clarity about the duty to establish a scheme. I beg to move.

My Lords, taking it on trust that the effect of the amendments is what the noble Lord says, we have no objection to them.

On Question, amendment agreed to.

Clause 67 [Scheme orders: general]:

11: Clause 67, page 37, line 2, after “order” insert “under section 66”

12: Clause 67, page 37, line 5, after “order” insert “under section 66”

13: Clause 67, page 37, line 7, after “order” insert “under section 66”

14: Clause 67, page 37, line 9, after “order” insert “under section 66”

15: Clause 67, page 37, line 15, after “order” insert “under section 66”

On Question, amendments agreed to.

16: After Clause 72, insert the following new Clause—


(1) The Secretary of State must appoint a person to review in relation to a scheme established under section 66—

(a) the effect of provision made under section 69 (maximum amount of contributions),(b) the effect of any restrictions on rights to transfer into the scheme or transfer out to another pension scheme, and(c) such other matters as the Secretary of State may direct.(2) The appointment under subsection (1) must be made on or after the later of—

(a) 1 January 2017;(b) the end of five years beginning with the first day on which contributions are paid to the scheme by or in respect of members.(3) The person appointed under subsection (1) must—

(a) prepare a report of the review, and(b) send a copy of the report to the Secretary of State.(4) The Secretary of State must lay before Parliament a copy of the report.

(5) The Secretary of State may pay to the person appointed under subsection (1) such remuneration and expenses as the Secretary of State may determine.”

The noble Lord said: My Lords, as noble Lords will be aware, we are committed to a review of all aspects of the personal account scheme in 2017. When we debated this issue on Report, my noble friend agreed to consider putting that commitment in the Bill. Following this consideration, the amendment puts into the Bill a requirement for the Secretary of State to commission an independent review of the features of the personal accounts scheme that are designed to focus it on the target market; specifically, the annual contribution limit and the prohibition of pension fund transfers to and from the scheme. As my noble friend explained, the review will consider these policies and gauge whether they have been effective in focusing the scheme on its target market without detriment either to the scheme or to its members.

We also debated whether the scope of the 2017 review should be extended to include other issues. My noble friend Lady Hollis, for example, suggested that it should consider voluntary contributions on earnings below the contributions bands. We agree that it might be right to include other issues in the review. We have therefore included in the amendment scope for a future Government to decide the exact remit of the review. This is not something that we can or should decide so far in advance. Other issues may arise between now and 2017 that are more appropriate to include in the review. It will be up to the Government at the time to consider what, if anything, in addition to the contribution limit and the transfers ban the review should cover.

We have always been clear that it is our aim to have a review in 2017; that is, five years after the scheme became operational. We see no reason why the scheme would not become operational as planned, but the amendment, in line with the spirit of the amendment tabled by the noble Lord, Lord Skelmersdale, and the noble Baroness, Lady Noakes, on day one of Report allows us to ensure that there will be a gap of five years between the scheme becoming operational and the date of the review.

On Report, the noble Lord, Lord Skelmersdale, expressed interest in how we would define “operational”. The amendment makes it clear that it means the first day on which contributions are paid to the scheme by or for members. This ensures that the timing of the review is tied to when the scheme starts to act in its capacity to accept contributions and invest them for its members.

Our approach, on both the scope and the timing of the review, is to make clear our intentions but to allow for all eventualities. We believe that this is the right approach when developing pensions policy for the long term without the benefit of hindsight. I beg to move.

My Lords, I must first express my gratitude to Ministers for accepting that it would be right to put the review into a formal setting in the Bill. However, the amendment is a lot more definite than mine was. For one thing, the word “must” appears four times in it. I have never, in all my time in your Lordships’ House, seen any Act of Parliament, which this Bill will become, with the word “must” in it four times.

The Government are still maintaining what my noble friend and I believe is a fiction—that personal accounts will start on or about 1 January 2012. I do not think that they will, so I was surprised to see in proposed new subsection (2) that the appointment of the individual to conduct the review, and the review itself,

“must be made on or after the later of (a) 1 January 2017”—

in other words, five years after the beginning of personal accounts—or at,

“(b) the end of five years beginning with the first day on which contributions are paid”.

I suggest that proposed new paragraph (b) is a lot more likely than (a). However, having teased the Government slightly on this, I must say that I am more than content with the amendment.

My Lords, I obviously welcome this amendment. I, too, am puzzled at the use of the word “must” rather than “shall”, which is conventional parliamentary counsel language, but no doubt it is desirable if it adds extra emphasis. Subsection (1)(b) of the proposed new clause refers to,

“the effect of any restrictions on rights to transfer into the scheme or transfer out to another pension scheme”.

Does that mean that, despite my understanding of the assurances from the Minister about the department’s approach to stranded pots, nothing will be done before 2017 and only then will it be reviewed; therefore, any action may take until one or two years after that? People may find that any money they put into a personal account between 2012 and 2017 could end up being a stranded pot because they cannot move it into another pot that they already hold. I should like some assurances that stranded pots will be dealt with as of now and not postponed to 2017. It is an injustice. It is institutional theft of money and should not happen.

All this is on the accountability of the Secretary of State to Parliament once the report has been completed. Will my noble friend assure me that, as regards the scope of such a report, there will be either a letter to which we can respond or, better still, a debate or some other format so that Members of your Lordships’ House can add to the shopping list of issues to be reviewed in the report and not merely depend on such other matters as the Secretary of State may direct? I could conceive that the views of the Secretary of State as to what should be reviewed could be at odds with what many of your Lordships might wish to see reviewed. I do not want to see those issues missed because the power lies exclusively with the Secretary of State to determine the report’s content. I ask my noble friend to assure us that vehicles will be devised, of whatever form, for this House and, no doubt, the other place, as well as other stakeholders and players in the field of pensions, to have input on the issues of concern to the person handling this report, back to the Secretary of State and then on to Parliament.

My Lords, I shall, rather than must, speak on this amendment, which we on these Benches support, as we supported with our votes the original amendment tabled by the noble Lord, Lord Skelmersdale. I also strongly support what the noble Baroness, Lady Hollis, has just said about stranded pots. That has been one of the cop-outs—I hope that I can put it that way—in this Bill. It is very unsatisfactory that it has not been dealt with and I hope that we do not have to wait for five years or, if the crystal ball of the noble Lord, Lord Skelmersdale, is right, even longer, before action is taken to rectify this, as the noble Baroness puts it, serious injustice.

My Lords, I thank the noble Lord, Lord Skelmersdale, for counting the “musts”. Apparently we are at a watershed and parliamentary counsel has changed its general view from the word “shall” to “must”. Noble Lords here are the first to note it. I hope that I do not have to withdraw any of these words, but that is what my note says. I understand that our commitment is not to 1 January 2012 but to “during” 2012. We continue with confidence that we will achieve that.

We have given a series of assurances during the passage of this Bill on stranded pots and other matters. This amendment in no way modifies those assurances. This is an enabling amendment and does not in any way limit the commitments we have already given. I am not willing to give a specific assurance about how we will handle the scope. That will be for 2017. But our record to date, and I believe any Government’s record on this important issue, will inevitably and quite properly involve close liaison with stakeholders and all groups in establishing the scope. It is inconceivable that there will not be a process by which the House will be able to express its views.

On Question, amendment agreed to.

[Amendment No. 17 not moved.]

Clause 80 [Finance]:

18: Clause 80, page 41, line 31, after “may” insert “, with the consent of the Treasury,”

The noble Lord said: My Lords, I shall also speak to the other amendments in this group. They have similar wording and intent, but the amendments to Clause 80 apply to financial provisions for the delivery authority while those to Schedule 1 are to provisions for the trustee corporation.

There has been considerable interest in the financial arrangements for the personal accounts scheme during the passage of the Bill through the House. I recognise the legitimate concerns raised by a number of noble Lords, particularly the noble Baroness, Lady Noakes, that there must be adequate protection for the taxpayer. That is the Government’s intention but I accept that there is scope to make that clearer on the face of the Bill. On Report I undertook to look again at the financial provisions in Clause 80 and Schedule 1, and as a result I have tabled these amendments to the finance provisions in the Bill to make clear that any financial assistance that the Secretary of State may make to the delivery authority or the trustee corporation will be consistent with general rules on government lending. In particular, the amendments specify that any loans must attract an interest rate consistent with the conditions that would apply under Section 5 of the National Loans Act 1968; that is to say, at a minimum they must cover the Government’s cost of borrowing. The amendments therefore reinforce our policy commitment to delivery the scheme at nil cost to taxpayers and that the scheme should be self-financing over the longer term. These amendments give Parliament further reassurance of the Government’s intentions with regard to funding the personal accounts scheme. I beg to move.

My Lords, I thank the Minister for bringing forward these amendments, and in particular for clarifying the basis on which loans should be made, which follows in part a suggestion I made in one of my amendments on Report. The Bill still allows non-commercial terms to grants to be made to either the delivery authority or the trustee corporation when that is up and running. I simply note for the record that we on these Benches do not accept the concept of a universal service obligation necessitating long-term subsidy for the personal accounts scheme, but we are grateful for these amendments.

My Lords, I am grateful for that support. I note that the noble Baroness has not changed her position on the universal service obligation that we believe these provisions imply, but that is a debate that will doubtless continue.

On Question, amendment agreed to.

19: Clause 80, page 41, line 35, leave out from first “conditions” to end of line 36 and insert—

“(c) in the case of a loan, must be given on a condition requiring the loan to be repaid with interest at a rate approved by the Treasury.(3) Section 5 of the National Loans Act 1968 (rates of interest on certain loans out of the National Loans Fund) has effect as respects the rate of interest on a loan under this paragraph as it has effect as respects a rate of interest within subsection (1) of that section.””

On Question, amendment agreed to.

Clause 97 [Interpretation of Part]:

20: Clause 97, page 50, line 9, at end insert “or (where section 9 applies) a worker in relation to whom there are direct payment arrangements (within the meaning of section 111A of the Pension Schemes Act 1993 (c. 48)) between the worker and the employer;”

On Question, amendment agreed to.

21: After Clause 124, insert the following new Clause—

“Review of the initial operation of sections 38A and 38B of the Pensions Act 2004

(1) The Secretary of State must carry out a review of the operation of sections 38A and 38B of the Pensions Act 2004 (c. 35) (which were inserted into that Act by paragraph 2 of Schedule 9 to this Act) during the period of 4 years beginning with the day on which that paragraph fully comes into force (“the commencement date”).

(2) The Secretary of State must set out the conclusions of the review in a report and lay the report before Parliament.

(3) The report must be laid before the end of the period of 5 years beginning with the commencement date.”

The noble Baroness said: My Lords, this amendment would introduce a new clause after Clause 124. I should state at the outset that I am quietly confident that the Minister will look kindly on it, not least because I accepted all the Government’s helpful drafting amendments. Clause 124 and the associated Schedule 9 introduce amendments to the Pensions Act 2004, the most significant of which is the new material detriment test for contribution notices in Section 38A and its associated due diligence defence in Section 38B. I will not go over the history of this; suffice it to say that we welcomed on Report that the Government had rethought this approach, and in broad terms we supported what is now in Schedule 9.

On Report, however, my noble friend Lord Lucas and I raised a number of specific concerns with the Minister, based largely on concerns raised with us by organisations such as the Confederation of British Industry, the British Venture Capital Association and several professional advisers. The Minister gave a number of helpful replies, which was appreciated by both the House and those outside who follow our proceedings. There remain some concerns in the business community, though, about how these new provisions will work in practice. I shall list a few.

The provisions can apply to individuals. Will they be used in that way in practice? Will directors and others start to behave in a risk-averse way against that possibility? We are promised that there will be guidance to cover the concepts of likelihood and materiality, which are an integral part of the material detriment test. Will that guidance in practice prove satisfactory and easy to apply? The statutory code of practice contains a list of circumstances in which contribution notices might be issued but does not preclude the regulator from issuing contribution notices in other circumstances. Will that happen in practice, thus undermining the usefulness of a code? The defence in Section 38B is not framed as an objective test but rests on the regulator’s judgment. Will it in fact protect those whom it is intended to protect?

There is also an overarching issue in that several of the concerns we aired were met by a ministerial response that the regulator had to act reasonably. We need to see what that means in practice because one man’s reasonableness can be another’s irrationality. We also had a debate about what “reasonably” actually means in practice. Is it reasonableness in the context of the regulator’s own duties or is it set in a broader context? Our advisers say that there is no settled case law on this, so we need to see how the regulator will in fact behave.

In the light of all this and some other detailed points, I felt that a review of the workings of the new sections was not an unreasonable thing to put in the Bill. A review would need to establish whether the new sections did in fact help to protect pension funds and the PPF from the unreasonable acts of employers in the areas set out in the code, but there is the other side of the coin in the impact that the new sections will have on commercial life. Will, as some suggest, the new provisions stop beneficial corporate transactions from happening where a defined benefit scheme is involved? Are there any unintended consequences such as exponential growth in indemnities and warranties with associated complexity and cost? Will the volume of clearance applications be high or low? Will they be handled expeditiously, and will they cost a lot or very little?

The amendment does not require it, but I hope that the DWP would consult broadly in carrying out the review required by this amendment. It may be that the fears expressed to us will prove completely unfounded, but it is no bad thing to search for that answer.

On timing, the new clause asks for the review to be carried out after four years, with a report available within 12 months from that. I confess that I would have liked a review to start sooner, but I have accepted the Government’s opinion that a meaningful review would need the time-frame set out in this amendment. I look forward to the Minister’s response and I beg to move.

My Lords, this allows what seems to be a reasonable time to elapse before the review is carried out, and when all is sweetness and light in this way between the Government and the Official Opposition Front Bench, far be it from us to interfere.

My Lords, I thank the noble Baroness for tabling the amendment and I thank the noble Lord, Lord Oakeshott, for his support. I shall start by saying that the Government accept the principle that the operation of new Sections 38A and 38B should be kept under review. These are new provisions and we want to ensure that they operate as intended, which is to provide adequate protection for members and the PPF, and that they do not have unforeseen consequences for business. Under current arrangements, these provisions will be monitored by the regulator and the department. The regulator will want to keep the operation of the anti-avoidance measures under regular review, as they have an important role in encouraging appropriate behaviours. These powers will also be overseen and evaluated by the department as part of the regular liaison between the department’s officials and the regulator. This regular review will assess and evaluate the operation of policy and legislation alongside formal performance reviews and liaison at senior official and ministerial levels.

The Government recognise that stakeholders and the Opposition have raised a number of concerns about the operation of these provisions. Unless the noble Baroness presses me to do so, I will not go back through them, as they are on the record, but I would be happy to try again if she so wishes. However, concerns have been raised about the operation of these provisions in respect of whether there will be any unintended consequences, in particular that, while deterring what we would all agree is bad practice, they should not operate unreasonably to deter genuine and desirable corporate activity. I appreciate that there may be a desire for a commitment in the Bill for the department to carry out a review to ensure that the policy is operating as intended. Therefore, we are content to agree to the noble Baroness’s amendment seeking a formal review with a report to Parliament. This will put beyond doubt our commitment to evaluate the operation of these provisions.

On the time period, two years is too short; four years is a more realistic and appropriate timeframe for a review. It is important to allow time for the legislation, the regulator’s code of practice and its guidance to bed in and for these to be tested in operation. A period of four years will provide the regulator with an opportunity to properly implement the amended powers and for employers and those who advise them to become more familiar with the regulator’s approach. A four-year timeframe will ensure that the immediate and longer-term impacts can be properly considered, based on a robust and substantial body of evidence.

Following the introduction of the 2004 Act moral hazard provisions, there was a period during which the market adapted to the legislation. It is important to note that the regulator experienced an initial high volume of clearance inquiries as the market responded to the 2004 Act changes. This has since stabilised and there has been a decline in clearance inquiries since 2005. Similarly, there may be an initial increase in inquiries relating to the amended powers, but we expect that this will decline over the longer term. We therefore believe that a review after four years would better ensure that the business community has had sufficient opportunity to understand the new powers and that we are past any initial learning curve as experienced in 2004. We are pleased to accept the amendment and thank the noble Baroness for tabling it.

My Lords, I thank the Minister for his response.

On Question, amendment agreed to.

Clause 130 [Delegation of powers by the Regulator]:

22: Clause 130, page 66, line 17, leave out from “functions),” to end of line 21 and insert “the existing provision becomes sub-paragraph (1).

(2A) For paragraph (e) of that sub-paragraph substitute—

“(e) permitting the Regulator to authorise such persons, in such circumstances and under such arrangements, as the Regulator may determine, to exercise on behalf of the Regulator—(i) the power to determine whether to exercise any of the functions listed in sub-paragraph (2);(ii) the power to exercise any of the functions listed in sub-paragraph (2) or such other functions as may be prescribed.”(2B) After that sub-paragraph insert—

“(2) The functions mentioned in sub-paragraph (1)(e) are—

(a) the power to issue an improvement notice under section 13;(b) the power to issue a third party notice under section 14;(c) the power to recover unpaid contributions under section 17;(d) the power to require information under section 72;(e) the power to vary or revoke a determination, order, notice or direction under section 101;(f) the power to require payment of a penalty under section 10 of the Pensions Act 1995;(g) the power to issue a compliance notice under section 34 of the Pensions Act 2008;(h) the power to issue a third party compliance notice under section 35 of that Act;(i) the power to issue an unpaid contributions notice under section 36 of that Act;(j) the power to issue a fixed penalty notice under section 39 of that Act;(k) the power to issue an escalating penalty notice under section 40 of that Act;(l) the power to recover penalties under section 41 of that Act;(m) the power to review a notice under section 42 of that Act;(n) the power to issue a compliance notice in respect of prohibited recruitment conduct under section 50 of that Act;(o) the power to issue a penalty notice in respect of prohibited recruitment conduct under section 51 of that Act.””

The noble Lord said: My Lords, these technical amendments are designed to ensure that there is no confusion about the regulator’s ability to contract out its functions. Paragraph 21 of Schedule 1 to the Pensions Act 2004 enables regulations to be made permitting the regulator to contract out its regulatory functions. Through the introduction of Clause 130 of this Bill, we amended Schedule 1 in Committee to facilitate the regulator’s ability to contract out its functions by removing the requirement to specify the identity of the contractor in regulations.

As I said at the time, it is important that the regulator has the ability to contract out the functions associated with the compliance regime to ensure that it can fulfil this new role in the most efficient and cost-effective way. However, as the Bill is currently drafted, there remains some doubt as to whether the regulator will be able to deliver through contractors. Our intention in delivering the compliance regime is that the regulator will be able to delegate both the power to determine whether to exercise its functions and its power to actually exercise those functions.

This distinction is made in other parts of the Pensions Act 2004 but not in paragraph 21 as amended by Clause 130. Without this distinction, there is a risk that the regulator would not be able to delegate decision-making relating to a function. In the case of compliance notices, for example, this could mean that, every time a contractor wanted to issue a notice to an employer who had failed to auto-enrol a jobholder, it would need to pass this information back to the regulator for a formal decision and therefore, potentially, significantly increase the time for processing the notice and the potential for bottlenecks. We are therefore seeking to introduce technical amendments to Clause 130 that would ensure absolute clarity by referring to both exercise and determination.

However, we do not want this power to allow the regulator to delegate both the exercise and determination for the whole range of its functions. We want to explicitly limit the ability to contract out determination to the regulator’s activities to enforce the new compliance regime. The regulator has done further design work over the summer on operational models and has identified the range of functions, both in this Bill and the 2004 Act, to enable it to deliver the compliance regime. The amendment therefore explicitly limits the power to delegate the determination to those functions. The Secretary of State will retain his existing power, as amended in Committee, to enable the regulator to contract out the exercise, but not the determination, of functions that are prescribed in regulations.

Finally, Amendment No. 23 ensures that any regulations that have already been made under the contracting-out powers in Schedule 1 to the 2004 Act remain in force and may be amended for consolidation purposes only.

It is worth stressing that these amendments relate to an existing regulation-making power. To enable the regulator to contract out any of its functions, regulations will have to be laid before the House. In relation to the functions that the regulator is seeking to contract out to deliver the compliance regime, we will be publishing regulations next year for consultation.

I hope that noble Lords agree that it is important to ensure absolute clarity around the regulator’s ability to contract out and that they are reassured by our efforts to limit this power as far as possible. I beg to move.

On Question, amendment agreed to.

23: Clause 130, page 66, line 22, at end insert—

“(4) Subsections (2) to (2B)—

(a) do not affect any regulations made under paragraph 21(e) of Schedule 1 to the Pensions Act 2004 before the coming into force of this section, and(b) do not affect the powers conferred by that paragraph, so far as exercisable for the purpose of making, by way of consolidation, provision having the same effect as any provision of those regulations.”

On Question, amendment agreed to.

Clause 132 [Additional Class 3 contributions]:

24: Clause 132, page 67, line 4, leave out “prescribed conditions” and insert “conditions prescribed by regulations made by the Treasury”

25: Clause 132, page 67, line 24, leave out “of a relevant class” and insert “that are of a relevant class for the purposes of paragraph 5 or 5A of Schedule 3”

26: Clause 132, page 68, line 5, leave out “of a relevant class” and insert “that are of a relevant class for the purposes of paragraph 5 of Schedule 3”

On Question, amendments agreed to.

Clause 133 [Additional Class 3 contributions (Northern Ireland)]:

27: Clause 133, page 68, line 29, leave out “prescribed conditions” and insert “conditions prescribed by regulations made by the Treasury”

28: Clause 133, page 69, line 5, leave out “of a relevant class” and insert “that are of a relevant class for the purposes of paragraph 5 or 5A of Schedule 3”

29: Clause 133, page 69, line 31, leave out “of a relevant class” and insert “that are of a relevant class for the purposes of paragraph 5 of Schedule 3”

On Question, amendments agreed to.

Clause 140 [Orders and regulations]:

30: Clause 140, page 74, line 19, after “17(1)(c),” insert “(Sections 20, 24 and 26: certification that quality requirement is satisfied),”

31: Clause 140, page 74, line 22, after “section” insert “(Sections 20, 24 and 26: certification that quality requirement is satisfied)(9),”

On Question, amendments agreed to.

Clause 146 [Commencement]:

32: Clause 146, page 76, line 22, leave out paragraphs (g) and (h) and insert—

“( ) sections 130 to 133;”

On Question, amendment agreed to.

Schedule 1 [The trustee corporation]:

33: Schedule 1, page 78, line 11, at end insert—

“(1A) Subject to sub-paragraph (1B), the Secretary of State must consult the chair of the corporation before appointing an ordinary member (that is, a member who is not, on appointment, also appointed as chair).

(1B) A vacancy in the office of chair does not prevent the appointment of an ordinary member.”

The noble Lord said: My Lords, we had a discussion on Report about the role of the chair of the trustee corporation. The noble Baroness, Lady Noakes, and the noble Lord, Lord Oakeshott, gave the House the benefit of their extensive boardroom experience, in particular on the distinct role of the chair. Their argument on the need for the chair to be involved in the appointment process of other members was entirely sensible and we committed to bringing back an amendment that would confirm this. Amendment No. 33 requires the Secretary of State to consult the chair before appointing any other members of the trustee corporation. Proposed new sub-paragraph (1B) ensures that, if the chair is vacant, that will not prevent another member of the trustee corporation from being appointed. It also allows for a group of inaugural members to be appointed, along with the inaugural chair. I beg to move.

My Lords, I am grateful to the Government for bringing this back to respond to an issue that we raised.

34: Schedule 1, page 84, line 8, after “may” insert “, with the consent of the Treasury,”

35: Schedule 1, page 84, line 12, leave out from first “conditions” to end of line 13 and insert—

“(c) in the case of a loan, must be given on a condition requiring the loan to be repaid with interest at a rate approved by the Treasury.(3) Section 5 of the National Loans Act 1968 (c.13) (rates of interest on certain loans out of the National Loans Fund) has effect as respects the rate of interest on a loan under this paragraph as it has effect as respects a rate of interest within subsection (1) of that section.”

On Question, amendments agreed to.

Schedule 9 [Contribution notices and financial support directions under Pensions Act 2004]:

36: Schedule 9, page 131, line 26, at end insert—

“3A In section 90(3) (revision of codes of practice), at the end insert “except that the Regulator may not revise the whole or any part of a code issued under subsection (2)(aa) before the expiry of 2 years from the first issuance of a code under that paragraph.””

The noble Baroness said: My Lords, Amendment No. 36 would insert a new paragraph into Schedule 9, which, in turn, amends Section 90 of the Pensions Act 2004 on statutory codes of practice. Paragraph 3 of Schedule 9 introduces the welcome requirement for a code of practice for the circumstances in which the regulator expects to issue a material detriment contribution notice under the provisions introduced by the Bill. The draft code of practice has already been issued by the regulator and that, too, has been useful. I do not know when the code will be issued in its final form. Presumably it will be early next year, as it is retrospective to April this year. Perhaps the Minister can update the House on the likely timing.

My amendment says that, once the code has been issued, it should not be revised for two years. The aim is to provide some stability for those who need to navigate commercial transactions so that they do not run on to the rocks of the contribution notice regime. I am sure that the Minister will be aware that a contribution notice is regarded by companies and their advisers as something to be avoided if at all possible.

The commercial world hates uncertainty and wants a reasonable understanding of what the rules are so that business can be planned and executed in a reasonably secure way. There is quite enough change and uncertainty in markets and in commercial life in general without their having to cope with a constantly shifting regulatory environment. I think that that is a commonplace in terms of what constitutes better regulation, to which the Government are, of course, signed up.

I am aware that the existence of a code of practice does not the prohibit the regulator from issuing a contribution notice under new Section 38A but, as the Minister has reminded us on several occasions, the regulator must act reasonably and should therefore depart from the code only in unusual circumstances. That is why certainty as to the code is important in its own right.

I was prompted to table the amendment by the Government’s recent consultation on Section 75 and employer debt, which was announced by a DWP Minister at a CBI breakfast a week or so ago. Its contents have been made available to a number of organisations, but it is has not been made available publicly, even to the Official Opposition. However, we are resourceful people in the Opposition and we have got a copy.

The consultation document makes the point that any change to the employer debt regime would be targeted at those who provide a strong covenant. It goes on to say that the regulator would use its anti-avoidance powers, including the new material detriment powers, to protect members’ benefits and the PPF. So far, so good.

The following sentence in paragraph 14 of the consultation document caught the eye of one of my contacts:

“Indeed the Government considers that such regulatory intervention may be appropriate when a reorganisation would have a detrimental impact on the pension scheme (for example such as a weakening of the employer covenant or the employer’s obligations to the scheme)”.

This reference to simple “weakening” of the covenant seems to be at odds with the quite clear sets of circumstances set out in the code of practice. The nearest equivalent in the code of practice is about the,

“severing of employer support for the scheme so that employer support is removed, substantially reduced or becomes nominal”.

It has been generally understood that “severing” is much more dramatic than “weakening” and certainly more than we would expect to find in most routine company reorganisations, which is where the employer debt provisions have caused a problem and led to the consultation under Section 75.

Will the Minister confirm that the consultation document does not represent a shift in thinking on the use of the material detriment provisions? Alternatively, are we expecting the code to say that company reorganisations more generally that involve a weakening will be included within the code? Either way, certainty is required. When the Minister responds, perhaps he will comment on why the Section 75 consultation is such a big secret. I hope that he will recognise the business community’s legitimate concerns for certainty and stability that lie behind the amendment. I beg to move.

My Lords, the noble Baroness, Lady Noakes, has been more resourceful than I have, as I have not yet got hold of a copy of the document. However, I have been rather puzzled by the purpose and the timing of the consultation, as it seems that the right honourable Rosie Winterton had hardly got her feet under the desk before it was issued. I wonder whether it is in some way to do with the arrival of the noble Lord, Lord Mandelson, and whether it is all part of a great deregulatory agenda. However, it is surprising that the consultation has suddenly been announced and not made public. A number of individuals, including people in the pensions regulatory area, have expressed serious concerns to me about what is going on. At the very least, will the Minister send noble Lords a copy of the document—and if not, why not? Will he please put a copy in the Libraries of the Houses? Is there any secrecy or problem about it, given that a very short timescale is involved? I would welcome reassurances on those points.

My Lords, I was not sure that our discussion would go in this direction, but I am happy to try to deal with the points raised in relation to Section 75. I stress that an informal consultation is under way in advance of what might be the usual formal consultation. It has been driven because the Section 75 issue has been around for a little while. I am certain from the meetings that I have attended that the CBI would maintain that it is the number one issue for it so far as pension provision is concerned. That is why we have gone down the path of kick-starting the informal consultation, with the intent, depending on where that heads, to go through the more formal consultation processes in due course.

There is absolutely no reason why noble Lords should not see a copy of the consultation document; I shall make sure that they are sent one straightaway. Indeed, noble Lords’ input would be welcome. I attended the first stakeholder group meeting, which began to exchange hints and views on this matter. We need to see where it goes and whether the various propositions set down in this informal consultation are the right way forward. There were four propositions, one of which was to have no change. Another was to switch the process of triggering the debt and apportionment, so that apportionment goes first and the trigger of the debt follows that.

My Lords, I thank the Minister for that assurance. However, it makes me wonder when a consultation is not a consultation. How many people or bodies are being informally consulted at the moment?

My Lords, on the number of bodies being informally consulted, I think that the interests around the table included the Pensions Regulator—this is not a state secret—as well as the CBI, the Association of Pension Lawyers and the actuaries.

Indeed, my Lords—a nice summary. But I shall resist trying to give a definition as to when an informal consultation becomes a formal one.

My Lords, indeed, it was.

There is nothing sinister about this. The issue is a serious one; we are trying to understand the scale of the issue and how it might be addressed, if it warrants a change in the current position. I stress that there is no shift in relation to the position so far as we have discussed the material detriment test and the code of practice.

As for the consultation on the code that we refer to here, it cannot start until Royal Assent, which we hope will be imminent. We hope that the code will be in place in the first half of 2009—obviously, after being laid before Parliament.

Noble Lords will recall that, as part of the package of amendments on the Pensions Regulator’s anti-avoidance powers, we introduced a requirement on the regulator to publish a code of practice. This code would set out the circumstances in which the regulator expects to issue a contribution notice under the material detriment test, as the noble Baroness explained. The Government concluded, in consultation with key stakeholders, including the CBI, that setting out these circumstances in a code was the most appropriate approach. This approach would allow the regulator, in consultation with stakeholders, to update the code in light of its operation while giving employers and trustees a degree of certainty on the application of the law.

Section 91 of the 2004 Act allows for codes of practice to be updated, but such changes have to be consulted on and are subject to the Secretary of State’s approval. The Secretary of State is required to lay the draft code in Parliament for a period of 40 days and either House may resolve that no further proceedings be taken on the draft code.

Amendment No. 36 would remove the regulator’s discretion to modify the code of practice in the light of its operation during the first two years of its introduction. It would not be right to prevent the regulator being able to update the code to deal with new risks to members’ benefits in this fast-developing and innovative market. We cannot rule out that certain parties may see the definitions in the code as a challenge to design structures not falling within these definitions, which may still cause unacceptable risks to pension scheme members and the PPF. However, I understand that employers and the pensions industry require as much certainty as possible.

As I said at Report, officials worked closely with the regulator and key stakeholders during the summer to prepare the contents of the draft code, which was published on 20 October. In drafting the code, the regulator and stakeholders started from a consideration of new business models and the risks that these represented to members’ benefits. They considered a range of circumstances where it could be appropriate to use the material detriment test. For example, most routine corporate activities, such as routine dividend payments, are excluded from the code; whereas other non-routine events, such as the severance of the operating company from its pension scheme which may substantially increase risk to members benefits, would be in scope.

Following this development work, the regulator is confident that the draft code sets out the right circumstances. Therefore, I should like to offer my assurance that the regulator cannot currently envisage any other circumstances which it would need to add to the code in the next two years. As a precautionary measure, however, we could not preclude that if circumstances arose. On that basis, I ask the noble Baroness not to press the amendment.

My Lords, I thank the Minister for that reply and for confirming that there is currently no intention shortly to change the code and that, in particular, the Section 75 consultation document does not imply any change of view at this stage. I am grateful for those assurances. I apologise to the Minister for bowling a fast ball on the Section 75 consultation but I could not resist as this is the last amendment that we will be debating on this Bill. However, the Minister showed his usual, excellent skill and batted my ball away. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

My Lords, I beg to move that this Bill do now pass. Although I would like to say a few words to reflect on the progress made, perhaps I can simply thank all noble Lords who engaged with the Bill and, in particular, the Bill team for their excellent work.

Moved accordingly, and, on Question, Bill passed, and returned to the Commons with amendments.

Dormant Bank and Building Society Accounts Bill [HL]

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

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

commons amendments

[The page and line references are to Bill 80 as first printed for the Commons.]

Amendment No. 1

1: Page 1, line 15, at end insert-

“( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.

In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed.”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 1. I shall also speak to the other amendments in this group.

I begin by setting out what it means for an account to be dormant and exactly what the definition must achieve. It is vital that the definition is completely clear so that no institution can be in any doubt when it transfers an account to the scheme about whether the account qualifies as dormant. The definition must be able to be applied simply and effectively by over 200 institutions, each with a wide range of accounts with differing features, customer bases and usage profiles.

At the same time, we are committed to doing the utmost to ensure that only truly dormant accounts are transferred into the scheme. However, the available information which could be used to identify whether an account is active varies enormously between institutions, and even between different accounts in the same institution. We are confident that with the refinements in the definition produced by the Bill’s passage through both Houses, we now have a definition that is both clear enough to provide a simple and effective test and flexible enough to allow the institutions to take into account the information available to them

The key condition of no customer-initiated transactions in relation to the account for 15 years is both simple and universally applicable. Yet there is flexibility for an institution to refer to any consumer activity of which it has knowledge in deciding whether an account is genuinely dormant. That could include, for example, correspondence, telephone calls, emails or voting at AGMs. Under the Banking Code, each institution is required to publish clearly, for all their customers to see, the criteria it will use to decide the issue of account dormancy. With that in mind, I turn specifically to the amendments before us.

The Government’s intention is that all bank and building society accounts based on the definition of dormancy in the Bill are eligible for transfer into the scheme. Naturally, this includes accounts that could have been opened a very long time ago. When we first debated the Bill in this House, we were asked to clarify the position for accounts owned by deceased persons. It is of course unlikely that banks and building societies will know whether account holders are living or deceased. Unless they have very good reason not to, we would expect them to transfer into the scheme all accounts that fit within the 15-year qualification period. However, we understand that institutions wish to have certainty on this point so that they are not constrained in their ability to participate in the scheme. We have therefore introduced this amendment, which is a technical clarification confirming that accounts owned by deceased persons are indeed eligible for transfer into the scheme.

Amendment No. 8 also is a technical amendment. It ensures that notice accounts, where a short notice period is required before a withdrawal can be made, are not excluded from the scheme under the provision that was made for fixed-term accounts. Amendment No. 9 covers our intention to ensure that genuinely dormant bank and building society accounts lost by the account holder will be transferred into the scheme, and not those accounts which are simply rarely used but of which the account holder is still aware. This will minimise unnecessary costs associated with returning accounts to customers after transfer. We want, of course, to keep the necessity for any return transfer to an absolute minimum.

Our scheme provides a definition of dormancy that is simple, clear and straightforward. It is an account open throughout a period of 15 years with no customer-initiated transactions. However, the scheme is also sophisticated. It allows banks and building societies the flexibility to refer to customer-initiated activities which may indicate that an account is not in fact dormant even where there have been no transactions on it. Of course in those circumstances the account would not fall within the framework of the scheme.

If the institution is aware of activity—the request of periodic statements, for example—we would fully expect institutions not to transfer such accounts. Furthermore, those with particularly strong or individualised systems will be able take this into account in their individual policies. This flexibility is one of the great strengths of our scheme. Institutions will be expected to use their knowledge. That was indicated in our consultation and is clearly set out in the Explanatory Notes.

The Building Societies Association has said that the ability to take account of other forms of customer contact is “particularly important” to it, and that it supports the Bill as it is. The British Bankers’ Association has also welcomed,

“The ability to take into account other indications of whether an account is genuinely dormant”.

Furthermore, it is simply not in the interests of any institution to transfer an account to the scheme unless the deposit-taker and the customer have genuinely lost touch. This would add to the administration of the scheme, a substantial proportion of which will be borne by those institutions themselves. Requiring institutions to use all their knowledge in legislation is unnecessary, as it adds nothing to the scheme. On the contrary, it would have a detrimental impact on the clarity of the definition.

It is immediately apparent in the Bill when the minimum definition of dormancy has been achieved. If there has been a transaction in the last 15 years, the account cannot be considered dormant. If there has not been a transaction in that time, it can be considered so. Most importantly, however, the consumer will have a full right to repayment in all circumstances through the bank or building society where they held the account, whether or not it is transferred under the scheme. The consumer experience will not even differ. The process of recovering their account will be the same to them. All they will have to do once they identify that they have an account with the institution is to present suitable proof of identity and of account ownership. Once their identity has been established, the bank or building society will reinstate their account or pay them the balance. The only difference if the new account has been transferred under the scheme will be that the bank or building society will subsequently recover the balance from the reclaim fund. We therefore oppose any change to the definition of “dormancy” in the original draft of the Bill.

As regards Amendments Nos. 10, 10A and 10B and the period of 15 years, we recognise that there is considerable debate over the suitable length of the period for the purpose of defining dormant accounts. We believe that 15 years’ customer inactivity is the most appropriate time to determine whether an account is truly dormant. That figure was arrived at after considerable discussion with industry and consultation. It is also the figure that other countries, including Ireland, have adopted in legislation.

Industry has estimated that 80 per cent of accounts that have had no customer initiated activity for 15 years are truly dormant. Adopting a lower dormancy period runs the risk of a higher reclaim rate, with a corresponding inevitable increase in costs. In any case, any accounts which are truly dormant will still be dormant when they reach the 15-year mark, and will come into the scheme then. However, we have listened carefully to the arguments for a shorter period, which have been put on a number of occasions. We accept that, in the future, the experience of the operation of the scheme and of industry could suggest that there should be an alternative figure to that in the Bill. Accordingly, the Commons amendment brings forward a reserve power for the Treasury to amend the dormancy period. The amendment was drafted with a negative resolution procedure. However, the Delegated Powers and Regulatory Reform Committee considered this power and recommended that, since the definition of a “dormant account” is central to the purpose of the Bill, the power to amend the 15-year period should be subject to the affirmative procedure. We have, of course, respected its conclusions and representations and are happy to bring forward Amendment No. 10B for inclusion in the Bill. Accordingly, I will move that amendment when we get to it. I beg to move.

Moved, That the House do agree with the Commons in their Amendment No. 1.—(Lord Davies of Oldham.)

My Lords, we on these Benches are content with the package of changes that the Minister has put before us. We might regret that some of our pride of authorship has disappeared as regards some of these amendments, but the overall package is acceptable.

On Question, Motion agreed to.


2: Page 2, line 1, leave out “building society or a smaller bank” and insert “smaller bank or building society”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 2. I wish to speak also to Amendment No. 2A and to the other amendments in the group. I remind noble Lords of the objective of this Bill. I am not unmindful of the fact that the noble Lord, Lord Shutt of Greetland, holds a somewhat different view from the Government on this. I shall in no way, shape or form attempt to pre-empt his arguments. I will, of course, bend the ever-listening ear to what he has to say, but wish to indicate the strength of the Government’s position as we see it.

The Bill sets out to facilitate fair and efficient distribution of funds in dormant accounts for the benefit of the wider society. Small banks and building societies often play a key role in supporting and engaging with their local communities. For this reason, the Government have always been clear that small, locally based institutions would be able to focus dormant account assets on real needs in their local communities. Of course, the Government recognise the value of “small and local”.

We consulted with the bank and building society sector, and the Government identified a £7 billion turnover as a credible threshold to define small and locally based institutions. The Building Societies Association advised us that more than 90 per cent of building societies with less than £7 billion total assets have all their branches within 70 miles of their head office. Thus “small” also means reasonably local.

By contrast, the big building societies are, by definition, not small and are not local. The noble Lord, Lord Shutt, will forgive me if I draw attention to a building society based in Yorkshire, as he is likely to quote Yorkshire-based examples back to me. The Leeds Building Society, which is the smallest of those that will be above the £7 billion threshold, with assets of £9.2 billion, has branches the length and breadth of the country, from Aberdeen to Southampton and from Belfast to Braintree.

We are confident that the asset limit that we have identified enables genuinely small and local institutions to provide support for their local communities, while ensuring that funds from institutions that operate on a national scale are distributed towards the agreed national spending priorities in a co-ordinated fashion.

Let us be clear: the Government are of course committed to supporting mutual organisations and recognise the many benefits that they bring to society and communities across the UK. If I had any doubts about this matter, my recollection of exchanges with the noble Lord, Lord Shutt, and other noble Lords in the House earlier in the year would have convinced me of the virtues of the mutuals. We recently introduced new legislation to support the mutuals sector, including improving rights relating to members’ shares and improving the procedures involved in transferring business to the subsidiary of another mutual.

Let us also be clear that the vast majority of building societies will be eligible for the alternative scheme. According to the BSA’s November 2008 statistics, 50 of its 59 members, nearly 85 percent, will meet the “small and local” definition and the distribution of resources within that framework.

It was pointed out at Second Reading that the building societies that will not be eligible hold the vast majority of the dormant account funds in the sector. That is correct. To be precise, the BSA estimated that of the £130 million in dormant accounts in the sector, £100 million lay in the larger institutions.

Much has been said of the great need in the areas to which the spending priorities of this scheme have been directed. The noble Lord, Lord Shutt, will take solace in knowing that this was a subject of considerable debate in the other place. It was hardly likely that Members of Parliament, with their representative role in their constituencies, would miss the opportunity of emphasising the local good that this dormant accounts scheme could provide from the institutions that would contribute to it. However, MPs emphasised also, with great force, the advantages to their communities of the priorities to which the major resources from the big building societies and banks would be directed: youth facilities, a social investment wholesaler and improving financial capability and inclusion. On the latter point, we are all too well aware that the more difficult the economic circumstances, the greater the need for people to be able to manage their affairs effectively.

If the largest building societies do not take part in the main scheme, quite simply we undermine our ability to fund these very important initiatives for the wider society. The Government are aware that banks and building societies already support a variety of good causes in different communities, and we applaud those initiatives, but are they really in the best position consistently to consider the needs of wider communities throughout the UK? If we allow dormant account money to be administered through multiple individual foundations, that will inevitably lead to significant overlaps and to possible gaps in provision.

In the interests of the fair and efficient distribution of substantial funds, it is right that we concentrate on establishing centralised, national distribution. With respect to the main scheme, the Big Lottery Fund has a track record of ensuring that all communities benefit from its funding. At this point, I should say that I am all too well aware that for every success in relation to National Lottery allocation, there will be attendant disappointments, and that therefore Big’s record will be subject to criticism. However, given the forebodings expressed during the passage of the Bill about the arrangements for the National Lottery and the distribution of its funds, and given the flurry of questions that were asked shortly after it began to operate, it is markedly the case that the lottery’s distribution work is subject to much less criticism than was foreshadowed. That suggests that the Big Lottery Fund is doing its job ably and reflects the fact that it is well placed to do so. It has a track record of ensuring that all communities benefit from its funding; it has used, and will be expected to use in relation to dormant accounts assets, a variety of methods to achieve a fair regional and local spread of funding; and it already has a comprehensive infrastructure in place for distributing funds on a national level, in line with spending directions. Therefore, here is an institution with considerable knowledge of, and experience in, fielding grant applications and in administering the volumes of money that the dormant accounts scheme will be expected to generate.

We welcome the October statement from the Building Societies Association supporting the Bill and the Government’s proposals for an alternative scheme for smaller financial institutions. We also welcome the statement of the coalition of building societies expressing its members’ commitment to making the scheme a success and its intention to participate in it. Likewise, the British Bankers’ Association offered a statement confirming commitment to participate from banking groups which represent 90 per cent of the UK retail banking market.

The proposed scheme is designed to be simple and efficient to minimise costs to institutions and the scheme overall, and to maximise funds for distribution. The asset limit provides a balance between giving small, locally based banks and building societies the flexibility to directly benefit their local communities against maximising assets for the main scheme.

The government amendments are designed to create an alternative scheme for small, locally based institutions. Those require a definition, which is given accurately in the Bill, and I therefore hope that the House will support Commons Amendment No. 2 and the other government amendments when they are brought forward.

Moved, That the House do agree with the Commons in their Amendment No. 2.—(Lord Davies of Oldham.)

Lord Shutt of Greetland moved, as an amendment to the Motion that this House do agree with the Commons in their Amendment No. 2, leave out “agree” and insert “disagree”.

The noble Lord said: My Lords, this issue is about the best way to dispense moneys when we all agree that the beneficiaries should be good causes. Perhaps I should declare an interest as a grant-maker. For nearly 35 years, I have been a trustee, particularly with the Joseph Rowntree Charitable Trust and the JRSST Charitable Trust, and I am a vice-president of the Community Foundation for Calderdale.

In our previous discussions, we have resolved that all building societies should be encompassed in the scheme for the smaller banks and building societies. That was the position when the Bill left this place on 31 January. At that time, there were 59 building societies, 51 of which were regarded as small and eight of which were regarded as large. I want to recap the case that was made then.

First, the big eight wanted to be included in the smaller banks scheme. They did not want to be volunteered into the bank scheme; we are told that it is a voluntary scheme. Secondly, seven out of eight of those big building societies have in place their own building society foundations. They are experienced grant-makers and they have independent trustees who are at arm’s length from the institutions. Thirdly, we believed then, and the House agreed, that it was invidious to exclude them on the basis of 51 to eight. The Nationwide, as a big society, is an exception. I still do not accept that the others are big societies in the same way as are those that demutualised, which were much bigger. Surely the aims of the Nationwide are splendid in terms of its foundation and the good that it is doing throughout the land. Fourthly, decision-making by those building societies and their foundations is often speedy and in many cases the members are involved. Fifthly, grants are made to local and regional groups, away from the centralised position that we are offered with the National Lottery.

Since the Bill left this place in January, it has been dormant for 10 and a half months, but quite a bit has happened in the banking and building society world. Let us look at building societies. We had the big eight but, as the noble Lord, Lord Davies, has indicated, we have the November list, in which we find that we now have the big nine. The Derbyshire has passed the threshold and gone over the £7 billion level. However, because of difficulties in the building society movement, the Derbyshire and the Cheshire are to be taken over by the Nationwide; furthermore, the Scarborough is to be taken over by the Skipton; the Barnsley is to be taken over by the Yorkshire; and the Catholic is to be taken over by the Chelsea. That means that the assets in the smaller societies are now £43.2 billion rather than £58.5 billion. Similarly, 16.5 per cent of the building society movement was in the smaller societies but, after the mergers take place, the figure will be 12.2 per cent. A quarter of the funds that would have been distributed to local and regional causes will now be distributed by the National Lottery.

Next, we have the credit crunch. Regardless of the views of noble Lords on banks and the way in which they behave, the banks have had a good record on grant-making and on their social responsibilities. The financial sector has been a good donor. Indeed, many years ago, this House saw to it that one such bank was a good donor. When the TSB was privatised, the late Lord Taylor of Gryfe inserted an amendment requiring 1 per cent of its profits to go to good causes. When Lloyds took over the TSB, it had to be a reverse takeover and the 1 per cent still followed.

What is going to happen to grant-making by financial institutions in the current climate? Grant-seekers who have been looking in the financial services area could be in some difficulties because the way in which the banks are functioning after the bail-out and the restriction on dividends may make the institutions feel that they cannot be as generous. I hope that they do not take that view, but I can see circumstances in which they will not be able to be as generous. Members of this House know about grant-giving and grant-seeking, but I hope that that point will be pondered.

The mergers that I mentioned have not yet taken place, although we have every expectation that they will in the next few months. However, there is another. The Britannia Building Society, the second largest building society, has announced that it is in exploratory talks with Co-operative Financial Services, including over a possible future merger. It said:

“This would be enabled through the introduction of measures contained in the Building Societies (Funding) & Mutual Societies (Transfers) Act—known as the Butterfill bill … A merger would also have to be approved in a vote by Britannia's members … The organisations … have similar values and share a mutual ethos, so there would be a strong cultural fit”.

If that merger takes place, what sort of animal does the Britannia become? Does it become part of the Co-op? If it does, is it not covered by the Bill? Many of us argued that the definition of dormant assets was far too tight and that we should be looking at insurance and so forth. We found that in one of the American states there are more than 100 definitions of dormancy, but we were told that we had to be tight and consider banks and building societies only. Will the Britannia escape because it becomes a different being?

The amendment that I was able to persuade the House to accept meant that people believed that resources would be available to communities, localities and regions. Communities in Derbyshire, Cheshire, Barnsley and Scarborough certainly have every expectation that that is the case, yet if the Minister has his way the resources will go into the large scheme and those places will not share on a local basis.

Three points were raised by the Minister. He mentioned that the Building Societies Association suggested that the Bill is the right way forward. The Building Societies Association seems to be a strange outfit. It may be good in many respects, but it seems strange for an association to say that it supports a position while 83.5 per cent of its members by financial weight think rather differently. However, that is its affair; perhaps it is good at doing other things.

It was interesting that the Minister mentioned the Leeds Building Society. Back in 1959, as an articled clerk, I was involved in auditing it. In those days, it was the Leeds and Holbeck. It may have branches based substantially in Leeds—when I was there, it had eight or nine branches in the city and it certainly has branches throughout Yorkshire—but, like many others, it has put its tentacles a little further. Look at the board; you will find that it is based in Leeds.

Thirdly, the Minister talked about undermining the scheme for youth. In my view, there is plenty to go at with the resources that will be available from the larger banks. The amazing thing about the Bill is that, regardless of the credit crunch and other financial problems, cash is cash. What we are talking about today are the same resources that we talked about 10 and a half months ago. It is not some stock that has fallen in value and is now worth a quarter of what it was; it is exactly the same. If noble Lords would like to see diversity in grant-making and support for localities and regions, they should support the amendment.

My Lords, I listened carefully to the noble Lord, Lord Shutt, presenting what I can only call well rehearsed arguments. We last heard them in February, not as far back as January, but I freely confess that that is a long way back. I remember the force with which he presented the argument then, which is why I have prepared with considerable care for the issue today.

The noble Lord must accept that, if there is a merger between two societies that takes them significantly past the line that we draw, they have moved from one category into another. It will not do for him to say that that is a pity because one of them, at least, was small. All banks and building societies started small, especially building societies. It may be a long time back for him to remember—it takes him back past his Leeds and Holbeck days—but all banks and building societies started small. No one would suggest that our major banks are small, local institutions.

That is the logic behind the Bill: there is a difference between institutions that are small and local and those that are not. We consulted widely on where the line should be drawn. The noble Lord knows that the institutions have offered broad approval to the proposal. There have been recent changes of some significance, but he will have to accept that this will always be the case when we draw up a set of criteria and institutions change through mergers. He cannot sustain much of a case on that.

The noble Lord is right to say that large institutions are experienced grant-makers; of course they are. We could have proposed that the whole of the fund was left in the hands of those institutions. However, the banks do not own the funds. The people who have the accounts own these resources, which is why those people have the right at any stage to claim from the reclaim fund if their resources have been transferred to it. It is their money, not the banks’ money. It is a chance feature of banking activity that there are dormant accounts, which add up to a considerable sum of money.

Institutions have signed up to the concept that these resources should not lie dormant—they are of no use to the individual, who, by definition, is not taking any advantage of them—but should be put to community use until someone lays claim to them, when they will get their full reparation. Where the institutions are small enough to be defined as local, they will take responsibility for distributing these resources in their localities. In the case of large institutions, which we have defined in the Bill, it is right that the objectives should be defined as nationwide objectives in principle but that the distribution should be effected through a guaranteed distribution mechanism. As I said earlier—I do not want to repeat myself—that is the role of the Big Lottery Fund.

The noble Lord has fought his corner well and strongly. I know that he feels deeply about these issues, but I think that a great deal of his commitment is about the small and the local, the force of which the Bill recognises. Of course the Government recognise the strength of the small, mutual society, but we must make provision for a different world. Nine of our building societies—eight now, through the changes—are very large indeed and it is right that we have a different strategy for them. I therefore hope that the House will not accept the noble Lord’s amendment and will agree to the government amendment.

My Lords, without a wide-ranging debate, I shall respond to the Minister on only two points. First, we talked about small and large. When we met 10 months ago, the Derbyshire Building Society was small, regardless of the changes of the potential takeover. Today, it is large, according to these rules. The Minister, one believes, knew what he was doing 10 months ago. Would he do the same thing today as far as the Derbyshire Building Society is concerned? The cliff edge is there; you are either over it or you are not. The Government have now jumped over it, to the detriment of the localities, and it is the same for everyone else.

Secondly, the Minister acknowledged that the institutions, including the banks and the building societies, are experienced grant-makers. However, the banks did not make contact with us at any point. I found that thoroughly disappointing, quite frankly—clearly, they were not that interested—but the building societies did, which is why the amendment was tabled and why I press it today. I wish to test the opinion of the House.

On Question, Motion agreed to.

Amendment No. 3

3: Page 2, line 19, at end insert-

“( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.

In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed.”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 3.

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

Amendments Nos. 4 to 6

4: Page 2, line 27, after “bank” insert “or building society”

5: Page 2, line 43, after “bank” insert “or building society”

6: Page 2, line 46, after “bank” insert “or building society”

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 4 to 6.

Moved, That the House do agree with the Commons in their Amendments Nos. 4 to 6.—(Lord Davies of Oldham.)

[Amendments Nos. 4A to 6A not moved.]

On Question, Motion agreed to.

Amendment No. 7

7: Leave out Clause 6

7B: Page 4, line 32, at end insert-

“( ) The Treasury shall lay before Parliament a copy of any direction given under subsection (4).”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 7 and do propose Amendment No. 7B in lieu of the words so left out of the Bill. I shall speak also to the other amendments in this group. I hope that the House will agree that these amendments show that the Government have listened to the debates held both in this House and in the other place, and are seeking to reinforce the principle of transparency in the Bill. This is an issue that has been advanced on all sides, and I pay tribute to the noble Baroness, Lady Noakes, for the force with which she has presented her case. I hope, too, that she will see that we have moved to meet the arguments made.

We regard transparency as crucial for the scheme. I remind noble Lords that Schedule 1 already requires the reclaim fund to publish an annual list of institutions participating in the scheme, the amounts of money transferred into the scheme—at individual institution level, the amounts of money reclaimed by consumers—and the aggregate amount passed to the Big Lottery Fund. This information will be available for public scrutiny.

As a result of being formed as a company under the Companies Act, the reclaim fund will be required to prepare annual accounts and reports each year. Government Amendments Nos. 15 to 19 require the reclaim fund to publish this information as soon as possible after the end of each financial year so that it is available for all to see, including noble Lords. Visibility of the reclaim fund’s accounts and report was a matter of concern and lengthy debate in this House and, I believe, a key concern behind the tabling of what was the original Clause 6. We believe that the government amendments address this concern while recognising that the reclaim fund is a private rather than a public body. I want to emphasise that we are talking about a body that is not a government agency.

To require the reclaim fund to lay its annual accounts and reports before Parliament is unnecessary in the light of the amendments we have tabled to increase the transparency of the fund’s work. Requiring the fund to report directly to Government and Parliament would be to define it as a public body and would be out of keeping with the fund’s status as a private body. We have also reflected carefully on the debates about the Treasury’s direction-making power. I wish to stress first and foremost that it is not the case that the reclaim fund is a public sector body, so the Treasury is not in a position to give directions, as some have contended.

The Bill sets out how the reclaim fund will be constituted. It does not establish a reclaim fund since that is a task for the industry. As the creature of the institutions that establish it, the fund will be truly independent of government. We do not envisage using the direction-making power in the Bill to interfere in the day-to-day running of the reclaim fund and the management of its money. That will be the sole responsibility of the Financial Services Authority, which will regulate the reclaim fund for obvious prudential purposes.

The direction-making power that we are taking is not a day-to-day issue; it is the ultimate sanction that the nation would expect us to have to ensure that the reclaim fund functions in accordance with the articles of association, particularly in those areas which the FSA will not regulate and where it would not be expected to do so. This includes, in principle, the requirements in Schedule 1 to the Bill of the publication of information by the reclaim fund on the use of money to cover reasonable running costs, or the requirements elsewhere to transfer surplus money to the Big Lottery Fund. The power the Treasury will have is meant to be used only in exceptional circumstances to require the reclaim fund to comply with the statutory requirements under the legislation—no more and no less than that.

I recognise that there are concerns about the power scheduled for the Treasury. However, the Government’s new amendment addresses those concerns by requiring the Treasury to lay before both Houses any directions to the reclaim fund so that there is complete transparency in the use of the power. The amendment is similar in effect to the second part of what was originally Clause 6.

I hope that I have satisfied the House that the power that the Treasury seeks is an exceptional reserve power to deal with the reclaim fund. However, I accept that if and when it is ever exercised it should be subject to full transparency. I hope the House will recognise that we have a reserve power which the Treasury can effect only by ensuring that there is transparency, and that it will support the Government’s position.

Moved, That the House do agree with the Commons in their Amendment No. 7 and do propose Amendment No. 7B in lieu of the words so left out of the Bill.—(Lord Davies of Oldham.)

My Lords, I thank the Minister for introducing Amendments Nos. 7, 7A and 7B. I shall not go over the interesting discussions that we had before on whether this is a private body, a public body or a hybrid. The plain fact is that this is the only example that anyone can locate of a private sector body—if, indeed, it is one—which has a power of direction from the Treasury. That is why, when the Government chose to remove Clause 6, which we so painstakingly inserted into the Bill during its passage through your Lordships’ House, we were disappointed. Nevertheless, that has been considerably ameliorated by the Government bringing forward Amendment No. 7B, which we welcome because it contains the most important part of what was in Clause 6. I thank the Minister for that.

My Lords, like the noble Baroness, we are grateful to the Minister for his explanation and for reintroducing the key part of Clause 6 in Amendment No. 7B. I am tempted to at least begin to reopen the arguments about what kind of body this is. I was not convinced when we debated it before, and I am certainly not convinced now, about this concept of a body whose purpose is to raise money that the Government then spend at their own discretion but which is nothing to do with government. It is a wonderful model. If government could do this across the board, just imagine, there would be bodies which were not public bodies but whose sole function was to raise money which the Government would then decide, in minute detail, how to spend.

We spent many hours discussing this earlier, however, and it would tax the patience of the House to go any further. We support the amendment.

My Lords, I am grateful for the graciousness that both noble Lords have displayed. I am more grateful to the noble Baroness, Lady Noakes, because she did not produce quite the quibble that the noble Lord, Lord Newby, had. The noble Lord said how extraordinary it was for a non-public body to raise money, but let me be absolutely clear that this organisation is not raising any money. Transferred to it will be dormant accounts which, I insist again, belong to the owners of those accounts if they succeed in establishing title at some later stage. The noble Lord will not get away with raising the spectre of the Government being fertile in how to pass the crucial role of Parliament with regard to raising resources for public purposes.

On Question, Motion agreed to.

Amendments Nos. 8 and 9

8: Page 7, line 3, at end insert “in all circumstances”

9: Page 7, line 4, leave out subsection (3)

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

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

Amendment No. 10

10: Page 7, line 13, at end insert-

“( ) The Treasury may by order amend the figure in subsection (1)(a).

( ) An order under this section is subject to annulment in pursuance of a resolution of either House of Parliament.”

10B: Line 3, leave out from "section" to "House" in line 4 and insert "may not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each"

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10, but do propose Amendment No. 10B as an amendment thereto.

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

Amendments Nos. 11 and 12

11: Leave out Clause 12

12: Insert the following new Clause-

“Review and report to Parliament(1) The Treasury shall carry out a review of-

(a) the operation of this Part, and(b) the effectiveness of the efforts made by financial institutions to secure that those entitled to money in inactive accounts are made aware of the fact.(2) In reviewing the operation of this Part the Treasury shall in particular consider-

(a) how many banks and building societies have transferred balances as mentioned in section 1(1) or 2(1);(b) how much money has been transferred and how promptly;(c) how effective have been the arrangements for meeting claims made by virtue of section 1(2)(b) or 2(2)(b).But the review shall not consider the activities of a reclaim fund in so far as they are regulated activities for the purposes of the Financial Services and Markets Act 2000 (c. 8).

(3) The Treasury shall make arrangements to enable anyone with an interest in any aspect of the review to make representations, and shall consider all representations received.

(4) The Treasury shall set out the results and conclusions of the review in a report and lay it before Parliament.

(5) The report must be laid within three years from the date when a reclaim fund is first authorised."

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

We have listened to the arguments setting out the importance of a review of the scheme to ensure that it is working and to take action if we identify any problems with its operation. We agree that it is right that the Government return at an appropriate time to review whether the scheme is effective in delivering the right outcomes to consumers, so we have made it clear that we will undertake a post-implementation review when the scheme is up and running.

We have listened carefully to the debates in both Houses and have been convinced that our doubts about such a review should be set aside. We have brought forward a new clause to commit to a comprehensive review, set out in legislation, and accountable to Parliament. This was the main burden of representations in this House and in the other place, and I hope it will be recognised that we have listened to these views and are acting accordingly.

The clause is clear and detailed. It commits the Government to review the scheme within three years after it is up and running. The review will cover the effectiveness of the money inside the scheme. This includes industry arrangements for reuniting customers with accounts before they are dormant, industry participation in the scheme, and the arrangements for repaying customers whose assets have been transferred to the scheme. This will be based on consultation with all relevant parties.

I insist again that this scheme comes from the industry and we could not make this move without the fullest consultation, which we undertake to carry out. We will present our findings and conclusions in a report which will be laid before Parliament.

As to the scope of the review, as I have said, it will look at the effectiveness of the legislation and of the industry’s arrangements for reuniting owners with their accounts. It will not review FSA regulation of the reclaim fund’s management of money, which will ensure that the reclaim fund keeps back sufficient money in reserve to meet reclaim applications; I do not think that noble Lords will think that appropriate. FSA regulation is a matter for the FSA and we expect the regulator to make its own assessment of the effectiveness of its regime. It is not for us to second-guess that position or to add extra demands.

I hope that the House will appreciate that strong representations on this matter from both opposition Front Benches, from many parts of House and from the other place have convinced the Government of the merits of this proposal. I hope that the Government’s amendments will be supported.

Moved, That the House do agree with the Commons in their Amendments Nos. 11 and 12.—(Lord Davies of Oldham.)

My Lords, we shall not object to Amendments Nos. 11 and 12, but I regret the Government’s removal of the more extensive review and report to Parliament that was contained in the Bill when it left your Lordships' House and its replacement by the new clause in Amendment No. 12. The Minister described it as a comprehensive review, but it is less comprehensive than that which we inserted into the Bill. In particular, it does not look at the desirability and practicality of establishing similar schemes for other categories of asset, which arose throughout our consideration of the Bill. That is to be regretted.

The original review and report would have been triennial, which with the benefit of hindsight I think was a fatal flaw in the formulation, but the three-year review that we are offered instead is once-only. Somewhere between the two would have been a better outcome.

Nevertheless, it would have been open to the Government simply to strip out the review and not to have made any statutory provision for it, so we are grateful that a statutory provision is reinstated in the Bill. However, we regret that it did not go as far as the review proposed by your Lordships' House.

My Lords, I am grateful to the Minister for explaining the scheme. He explained what was in it, but he did not explain what it left out. As the noble Baroness, Lady Noakes, said, it leaves out scope for being broadened to consider other categories of asset. As we discussed in Committee, other schemes in other parts of the world cover many other categories of asset. As my noble friend Lord Shutt has just pointed out to me, if the Britannia Building Society is taken over in some manner by the Co-op, it might become an insurance company or a new, slightly unusual body, and it will not be immediately clear that it is covered by the Act. That is unfortunate.

It is equally unfortunate that there will be only one review. However, it is better to have one review than to have none, and it is better to have it covering the majority of the matters that we wanted it to do. With those caveats, I say that we will not oppose the amendment.

My Lords, I share the regrets expressed that the new clause is in a number of respects weaker than that which it replaces. I shall not reiterate what has already been said by other noble Lords.

The real concern for many of us here has been moral. So much of the debate here and in another place has focused on the various mechanisms for distributing moneys in dormant accounts to a variety of good causes, but the primary public policy objective should be that moneys held in these accounts is reunited with their proper owners or heirs. Only once those owners have been provided with both a simple mechanism and an appropriate timescale for recovering their lost assets should they be considered for distribution for other purposes. Many of us are still concerned about whether such a mechanism and timescale as are proposed in the amended Bill are sufficiently robust. In the view of many of us, the recent mylostaccount voluntary scheme needs significant improvements if it is to be truly effective. It is of course good that there is now imposed on the Treasury a requirement for review and report; it is encouraging to hear that the review will look at the effectiveness of the industry reunification scheme and that the recommendations will be laid before Parliament. However, I am looking to tempt the Minister to give a slightly firmer affirmation that the Government are committed to a thorough review of the workings of the Bill in this respect after three years, and perhaps also in due to course to look again at the possibility of further reviews.

My Lords, I am grateful to all noble Lords who have spoken in this debate. I notice that one verb—or noun—categorises everybody’s response; that is, “regret”. The noble Baroness, Lady Noakes, showed her political judgment when she identified that the Government’s position in her terms was significantly different from that which we adopted when the Bill was last before the House—and, indeed, it is. We took considerable persuasion on this matter, so while I note the regrets, on this occasion noble Lords who have spoken may also feel that they have had some success in this area. The Government are, of course, always wise enough after mature consideration of all viewpoints holding sound weight to change their mind, which they did with regard to this review.

The noble Lord, Lord Newby, wants me to extend this Bill to other financial assets, the insurance industry and so on. I can see the attractiveness of that, as here we have a scheme which, when it works, will bring great benefits to the nation. The noble Lord wants to see extra dormant resources channelled that way. I applaud him for his ambition, but he will forgive me if I emphasise the fact that the Government have to deal with the here and now and with where we have agreement with an important part of the financial industry to make progress with the substantial resources, which are not inconsiderable, in dormant accounts in banks and building societies. There would be a whole range of complexity involved, if we extended this Bill to other areas. Therefore, the noble Lord will just have to rein in his passions in the short term and, no doubt, will be fertile in managing to produce some ideas on this theme in future.

It has taken us considerable years of consultation, analysis and building of consent with regard to this legislation. I hope that noble Lords will recognise that the Government are bound to be content to ensure that this scheme is working well before we consider other possibilities. The review will be a comprehensive one that provides the framework in which to analyse how the scheme is working against the objectives of the Bill. I am grateful for the support, although it was expressed somewhat reluctantly, of all noble Lords who spoke.

On Question, Motion agreed to.

Amendment No. 13

13: Page 11, line 31, leave out subsection (2)

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 13.

The government amendment inserted in Committee in the other place has the effect of removing what was, in this House, subsection (2) of Clause 23, which was inserted by noble Lords, against government opposition, into the Government’s intended process for issuing directions to the Big Lottery Fund. The effect of subsection (2) was to require Parliament to agree, by affirmative resolution, to the directions issued to Big by the Secretary of State concerning operational matters, such as Big’s financial management, staffing and accounts; and by the Secretary of State or the devolved Administrations concerning the distribution of dormant account funds.

As set out in the other place, the Government removed noble Lords’ subsection (2) because it would be inappropriate, given the devolution settlement. These issues are so sensitive at the other end and there are times when I feel that noble Lords may not always be conscious of those matters at this end. The concept that Parliament and the Government would be involved in scrutinising aspects that relate to the devolved Administrations’ powers is a matter of considerable concern. That is a prime reason why the Government could not accept the structure of the Bill as produced by this House in January.

We also rejected the requirement imposed by the former subsection (2) for parliamentary scrutiny of financial spending directions, given that it is customary for departments to issue financial directions of this sort to their non-departmental public bodies without parliamentary scrutiny. I ask the House to appreciate just what might be the significance of all directions from government departments being subject to parliamentary scrutiny of that kind, what an impossible task would be created for Parliament and what an impossible task would be forced on government departments. Yes, we can do that for policy in terms of the allocation of funds, but the detailed direction implied in the original proposal could not be acceptable to the Government.

However, we appreciated the concerns expressed in this House that the Government should be open and transparent about their intentions with regard to the issuing of English spending directions. In both Houses, the Government have been clear about the cross-government process they have established for drawing these up. We have listened to the points made by noble Lords; the noble Lord, Lord Newby, was particularly emphatic on the point about the time delay between directions being issued and Big publishing them in its annual report. The Government have confirmed that Big will publish the spending directions on its website on the point of issue. I believe that this produces the necessary transparency and underscores the Government’s commitment to this objective.

Moved, That the House do agree with the Commons in their Amendment No. 13.—(Lord Davies of Oldham.)

My Lords, I have another minor expression of regret that these subsections are being removed, but I recognise that the devolution card trumps all others in your Lordships' House. Therefore, it would be wise not to row against that. I record our gratitude for the Minister’s undertaking to place the directions on Big’s website, as that will at least give some earlier sight of those directions and allow issues to be raised in Parliament, if there were any of concern.

My Lords, I am grateful to the Minister for his assurance about the publication of directions on the Big website. As he reminded the House, my concern was that the original thought was that directions would be reported only in an annual report, which might mean in reality that you would not know until 15 months after the directions had been issued, which seemed to me inappropriate. Given the subject matter covered by the Bill, these are intensely political areas. Therefore, it is very important that people should have the ability to know that directions have been given that change the balance of funding and of priorities that Big is expected to follow in respect of these moneys from the reclaim fund. I welcome the Minister’s reassurance and will not be opposing the amendments.

My Lords, I am grateful to both noble Lords. As this is probably the last time, with any good fortune, that I shall be speaking more generally on these matters, I pay tribute to the assiduous work from both Front Benches, even including on this occasion—if the Conservative Party will forgive me—the Liberal Chief Whip, the noble Lord, Lord Shutt of Greetland, who has been particularly assertive on this Bill.

On Question, Motion agreed to.

Amendment No. 14

14: Page 16, line 1, leave out subsection (2)

My Lords, before dealing with the amendment, I mention that little tremor that always affects any of us at the Dispatch Box when we have an amendment and no note at all of what it is about. That moment of panic just descended. However, I find that this is the privilege amendment, so I beg to move that the House do agree with the Commons in their Amendment No. 14.

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

Amendments Nos 15 to 19

15: Page 17, line 24, leave out “, the following information in relation to that year”

16: Page 17, line 24, at end insert—

“( ) its annual accounts and reports for that year (within the meaning given by section 471 of the Companies Act 2006 (c. 46));”

17: Page 17, line 26, after “fund” insert “in that year”

18: Page 17, line 28, after “fund” insert “in that year”

19: Page 17, line 31, after “transferred” insert “in that year”

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 15 to 19.

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

Emergency Services

asked Her Majesty’s Government what steps they are taking to encourage the co-ordination of fire safety and emergency services across the European Union.

The noble Lord said: My Lords, this summer I visited Slavutych, the town in the Ukraine built to replace Chernobyl following the 1986 nuclear explosion. As I entered the small, commemorative museum, my eyes fell immediately on the photographs of those who arrived first on the scene and perished at Chernobyl—the brave men and women of the fire and rescue services.

Chernobyl affected not only neighbouring Belarus and Russia but also the rest of Europe. Still today in Chester I look out on the north Wales peaks whose market in sheep meat remains tightly controlled. We are still one Europe and one world when manmade and environmental disasters strike and, because accidents happen increasingly across national borders, our response must equally be transnational. This is the subject of tonight’s debate.

These threats are not diminishing, as quickening climate change accelerates the incidence of environmental disasters that devastate local communities—searing heat waves in France, severe snowfalls in Germany, floods in Britain, landslips in Italy and wild fires in Greece and Spain. There are still acts of terrorism—as in London, Madrid and Paris—or failures of technologies, as with the Buncefield disaster that startled my noble friend Lord Brookman from his bed the morning it happened, and fires in tunnels through the Alps and under the Channel.

At home, the recent NAO report on the £330 million programme for the fire and rescue services points to successes such as the response to Buncefield, but also to failures, such as in procurement and management, all pointing to the need for a UK fire lord or tsar.

However, the EU is our concern tonight. It, too, lacks recognition of the pivotal roles of the fire and rescue services in protecting communities throughout Europe. The European Commission and the member states are not talking properly to each other, certainly not on a structured or professional basis—a victim perhaps of a short-sighted interpretation of subsidiarity. Similarly, the Commission’s silo approach to these cross-cutting issues inhibits a co-ordinated response. We need a clear and single point of entry into the Commission to provide an observatory and a data-collecting point. We also need to co-ordinate trans-European emergencies and we need member states to help one another. What can my noble friend do to advance that?

This problem is further exacerbated by the mosaic of the different member states’ organisation of their fire and rescue services. In the UK, oddly, FRS is dealt with by the emergency medical services, whereas France and Germany do their health through the emergency services themselves. Sweden and Bulgaria have national agencies, whereas Britain remains local; consequently, our local services know too little of EU developments and therefore fail to give the British view in Brussels.

Does my noble friend recognise a departmental confusion in the United Kingdom? EU FRS matters are dealt with by the Cabinet Office. This bypasses her own Department for Communities and Local Government, which is surely better placed to canvass competent local authorities on EU fire and rescue service issues and thus improve the European Union legislative proposals, standards and practices. At present, the firefighter’s voice is second-hand and so second rate.

The lack of a fire lord or a fire tsar also impairs our response to European Union social legislation, which affects the fire and rescue services in Britain. The dismantling of the British opt-outs in the working time directives will scupper the use of part-time employees in Britain. Ironically, in protecting our workers we may lose the right to exceed working time hours as appropriate and negotiated by workers through collective agreements. Indeed, I note that the driving hours directive has already dried up the availability of part-time drivers used in the service. With the free movement of workers across Europe, we must have certainty throughout the single market of common and verifiable standards of competency among those who practise in the fire and rescue services sector.

The lack of a fire sector skills council in the United Kingdom and common examinations reviewing civil emergency skills likewise hampers us. I ask my noble friend to address these national deficiencies, because they impact on the European stage. European Union social law must not inadvertently undermine our domestic fire and rescue services.

To create sensible EU law and practice we must have accurate statistical data in Britain. We are proficient at the national data, but our EU partners are not. Nor are these data properly standardised. Thus, in the United Kingdom, we record delayed deaths subsequently reported from an earlier emergency incident, whereas in Europe that does not happen. In the European Union, these deaths are recorded locally, not nationally as in our case. An example of this is that the EU legislative proposal for substituting reduced ignition propensity cigarettes for existing slow burn will need sound and comprehensive data across the European Union to convince us that the unwanted deaths from smouldering stubs can be stamped out. Will my noble friend encourage the collection of good and comprehensive data across the European Union?

I now turn to the Government’s lukewarm response to the French President’s proposal for an EU civil protection rapid reaction force. The Commission has already provided use of EU funds to transport firefighters to EU disaster hot spots or to pay for aerial water bombers dowsing wild fires across national boundaries. Indeed, the United Kingdom has received a grant of £180 million to compensate for the disastrous floods in 2007. However, the UK is not actively engaged in the rapid reaction force proposal, where the British firefighters can help abroad. Our view that Britain will never need others’ help is daft. Pooling EU resources and humanitarian aid at times of national disasters is sensible and sound. The UK should get involved in the Barnier proposal now if for no other reason than protecting the many Britons who visit, work and live across the European Union.

We should promote the civil protection force and ensure good liaison with the developments within NATO, too. Likewise, the deplorable incidence of hotel fires abroad leading to family tragedies at home is allowed because we have a disparate set of 27 laws applying to hotel safety. This mosaic of law must cede to a sensible EU directive. It will help us all to sleep better in our beds at night, whether in Corfu or in Carshalton.

Britain’s viewpoint on these matters is missing from the EU Fire Safety Network, an organisation funded by the EU civil protection unit, which is based in the Brussels environmental directorate. I am told that Britain’s CLG-nominated fire resilience representative attends only intermittently, with inadequate and infrequent reports back. Will my noble friend tell the House how such cross-cutting issues that affect DBERR, the Department for Work and Pensions, the Cabinet Office and the Department for Transport will be properly communicated in Whitehall? We cannot do that if we are absent from Brussels. The safety of British families and businesses is not helped by snubbing Brussels.

If Britain does not speak up, British trade and industry are vulnerable to the misapplication of EU laws in the field of fire and rescue services. The construction products directive requiring the use of the CE mark is not systematically monitored in Britain, because of the lack of resources in local government trading standards. This means that British export firms are poorly advised on relevant EU law governing the circulation of their goods and services within the single market. The REACH chemical regulation, with significant cost implications for the fire sector companies, is added to the already strict UK hazardous substance control regimes, with sparse assessment of the cost to related industries. The EU services directive remains similarly unexamined. Nor is the understanding of single market codes and standards promoted by the self-financing approach to the BSI. We need something more hard-headed and designed for the entrepreneurs to brief themselves in order to succeed.

In conclusion, I hope that we understand the necessity of spreading our concern at the time of these disasters wider than the United Kingdom for the protection of our people, not only here in Britain but also in the European Union. I thank Dennis Davis, my colleague from Chester and the former chief fire officer of Cheshire, and his associates. Not only has he worked hard for many years to raise these issues at the European level, but he has helped in the preparation of the debate this evening, which I bring to the attention of the House.

My Lords, I first declare an interest as an officer of the All-Party Fire Safety and Rescue Group. My noble friend Lord Harrison, a colleague and friend, is to be congratulated. It is appropriate and worth while to have this debate. Frankly, I only wish that there were more participants making a contribution.

I congratulate all our firefighters and emergency workers in the United Kingdom. Their dedication, bravery and service to our nation are indeed immense. Their heroism, commitment and sense of duty at King’s Cross, for example, and, as my noble friend Lord Harrison said, at Buncefield in Hertfordshire, as well as recently with the shuttle train—the third such incident in the past 12 years—are of the highest order. We are deeply proud of them all.

The all-party group works closely with the Federation of British Fire Organisations, which will be taking a keen interest in the debate. Its concerns are my concerns. I am not talking of weakness or governmental inactivity. The question is whether the management of safety can be more effective.

My noble friend Lord Harrison has covered much of what needs to be said in his wide-ranging, clever and well understood speech. Is there a need for wider participation between government, fire rescue authorities, and public and private bodies and enterprises? If so, how can it be achieved with a European dimension?

I do not profess to be an expert in the fire and rescue field in the United Kingdom or across Europe—although, when I was a steelworker in south Wales, danger and death were never far away. However, I am advised that there is no certain or professional relationship between the EC and member state Governments on fire and rescue services. Perhaps the Minister will address this point when she sums up.

The Government work closely with the Federation of British Fire Organisations. FOBFO wants to strengthen that relationship. In this respect, FOBFO strongly states that its vital focus is in recognising the importance of the European Union as both a trading and a social partner and the impact that this has on the fire and rescue services. I sincerely hope that the Government do all that they can to assist.

My Lords, I sometimes wonder why I am here—on this occasion mainly because my noble friend Lord Harrison has said just about everything that needs to be said on this subject. There is little that I can add, apart from “Hurrah!” or something.

I felt inclined to contribute to this brief—and I shall be brief, let me tell you—debate because, as older Members of the House may recall, and there are not too many here, I have spent a lifetime in the construction industry. That industry of course finds fire safety and things of that sort extremely important. I remind my noble friend Lord Brookman that when he was a young man I was involved in the steel industry, too. I worked in a town called Motherwell—not a spa but a big steel concern.

I was a structural engineer in the 1940s. The Dalzell steelworks were built on made-up ground, much of which had come from ironworks slag from the nearby Clyde Bridge. Interestingly, it formed a pretty good foundation for a steelworks apart from one flaw: it was given to spontaneous combustion. The foundations under the steelworks would therefore catch fire from time to time. We applied a high-tech solution to this problem: we hurried along and filled up the hole under the foundations, where the fire was burning, with concrete. The fire would go out. We solved the problem; it was not too high-tech, but it seemed to work. I have therefore always had an interest in the relationship between the construction industry and fire.

As we all do, I congratulate my noble friend Lord Harrison on raising this subject. I thought that his opening remarks were a little apocalyptic. He drew our attention to Chernobyl. Now, we all know that Chernobyl was not a very good idea. However, as the noble Lord, Lord Taverne—a good personal friend of mine, although he sits on the opposite Benches for some idiosyncratic reason of his own—pointed out, the Chernobyl disaster was never as bad as people and the press continually say. It is like Three Mile Island. Nothing happened there either, but the press go on about it.

Leaving the apocalypse aside, all that I have to say is that I endorse everything that my noble friend has said. Were it not for vanity, I would now sit down—but I shall not just yet. I add a remark that has been provided for me by the Federation of British Fire Organisations, to which my noble friend Lord Brookman alluded. It pointed out that last November a new era of European Community solidarity began to emerge. The Commission held a civil protection forum to emphasise the renewed vigour that it feels is needed to address the unprecedented demands of EC citizens facing natural, economic and technological disasters.

I am somewhat tepid in my admiration for the European Union. I have swung from opposition to support to tepidity, if that is a word. It is a funny kind of organisation. When it is at its best—and it is by no means always at its best—it means that if we do not pull together, we sink together. Sinking together does not seem to me a very good idea if pulling together will save us from sinking together. So I endorse everything that my noble friend said. I hope that I have not kept noble Lords for too long from their dinner.

My Lords, like other noble Lords, I am extremely grateful to the noble Lord, Lord Harrison, for initiating the debate, and to the Federation of British Fire Organisations for raising these extremely important issues with us through its briefing. It is some 10 years since I was a member of a fire authority and I certainly do not claim any special or particular knowledge of fire safety issues. However, I recognised many of the issues that the noble Lord, Lord Harrison, raised. I have some 15 years’ experience in local and regional government in the European Union and am therefore very familiar, not particularly with fire issues, but with other issues concerning the different structures and systems in member states, and the difficulties that that sometimes causes in achieving mutual understanding and reaching agreement on how best to approach these matters.

I spent eight years, until last May, as a member of the Greater London Authority, of which the London Fire and Emergency Planning Authority is a part. However, my role, for eight years, was that of chair of the finance committee of the Metropolitan Police Authority; therefore, I am very familiar with the sort of issues that we are discussing. My experience relates to the Metropolitan Police Service, although I think that it is relevant to the fire service as well. The Metropolitan Police Service has very good international links. It has many contacts worldwide, particularly in Europe. It generally has a good relationship with Europe, with which it generally works well on operational issues. However, I found that an organisation as large, well equipped and well organised as the Metropolitan Police Service still had remarkably little understanding of how the European Union works and of how to influence the decision-making process at the right stage, not when it is too late and something is being done to it. For an organisation with an annual budget of some £3 billion, it had little awareness of the opportunities—albeit now limited—for gaining funding from the European Union. We set up an EU oversight group, which I chaired, but whose membership otherwise comprised senior officers from the police service and the police authority, specifically to look—given that I chaired the finance committee—at opportunities to raise funding. However, another objective—this was probably more important—was to look at the policy developments that were coming through the processes of the European Union, whether through the Parliament or, more usually, the Commission, so that at an early stage we could recognise issues which were not necessarily about policing but might well be of concern to it. That must have exactly the same relevance to fire and rescue services.

We should not assume, therefore, that simply because authorities have good contacts and good relations across Europe they necessarily know what is happening in the European Commission, the Parliament and the other organisations, still less that they are equipped and informed to intervene at an early stage when the policy is being formulated, not at the much later stage when, realistically, all that is happening are negotiations about the finer points to try to reach agreement. Therefore, my first question to the Minister—I am sure that she will address this—is what mechanisms there are within the Department for Communities and Local Government to look at fire and safety issues from an EU perspective. I am very aware from my 15 to 20 years’ experience of how her department deals with European issues generally—it generally does so very well—but here we are talking about fire and rescue services specifically. In addition, as the noble Lord, Lord Harrison, said, these are cross-departmental matters within the UK Government, much of the responsibility for which rests with the Cabinet Office rather than with CLG. My subsidiary question is: what are the mechanisms within the UK Government for effective co-ordination and liaison on these issues in the EU context, and how effective is that mechanism?

I was concerned to read in the Federation of British Fire Organisations’s briefing:

“Fire and Rescue Authorities are rarely advised or able to influence EC developments affecting the Fire and Rescue Services”.

That chimes exactly with what I was saying about my experience with the Metropolitan Police Service. I must ask CLG, which is responsible for fire authorities in this country, what steps it is taking, and will take, to ensure that fire and rescue services and fire authorities are advised and are able at an early stage to influence EC developments, probably through feedback to CLG or to the Cabinet Office through central government. Central government need that input, knowledge, experience and thought from the fire services. With regard to the Metropolitan Police Service, I cannot, unfortunately, remember the specific instance about which the commissioner spoke to me, but it had discovered a measure which was about to be agreed by the European Commission which would have a very substantial impact in operational and financial terms on the police service, but it was too late to do anything about it. That is the key question. The noble Lord, Lord Harrison, laid out very well the difficulties involved here with different structures in the different member states and, indeed, with the range of responsibilities across various departments of the UK Government. This is a challenge, but I hope the Minister will be able to reassure us that the UK Government, perhaps led by her department, are able to meet and rise to that challenge.

We live in an age where free movement throughout the European Union, whether for work or leisure, is a growing reality. I am the last person to call for greater regulation. Indeed, I spend much of my time calling for less regulation rather than more. I am a passionate believer in subsidiarity. Therefore, I do not call for the European Union to take over fire and rescue services—far from it. I welcome the cultural diversity that we have, but we need to be able to deal effectively with the results of that diversity and to recognise that people are moving around the European Union member states freely and that they deserve proper protection and effective liaison to bring that about.

I again thank the noble Lord, Lord Harrison, for raising these important issues and look forward to the reassurance from the Minister that, I am sure, we are about to get.

My Lords, like the noble Lord, Lord Tope, I am grateful to the noble Lord, Lord Harrison, for bringing this debate before us, although I must admit that he raced through his speech at such a pace that I was not quite sure whether he had a strategic point to aim for. He seemed to say that everyone was doing a lot of good work and that everyone was doing some things wrong. However, that is a naturally human state.

Our ancient forebears regarded fire as one of the four great forces of nature and believed that, if fire was out of control, it was really dreadful. I learned to respect that point of view in my younger days, when I used to burn every field of straw on my farm myself. That was 10 days of hard work, at your peril—although it could be done with safety. We need always to bear in mind that fire, which we regard as a tool and a friend, will break out if you give it half a chance. That is, of course, when our fire and rescue services come to the fore. I add my tribute to those very brave men.

There was criticism from the fire service that perhaps the reason the service was so dangerous because of the wretched business of risk assessment, which is difficult when you have a big fire. You may think that you have all the knowledge about the contents of a building and its construction. If the fire is out in the open, you have a different set of parameters to deal with. However, fire makes its own rules and we have to face the fact that every now and again we will have a tragedy.

The Fire Brigades Union told us of the very sad rise in the number of deaths in the fire service in recent years, after a period in which it suffered no deaths. Have the Government any statistics on the number of fires over the same period, which began in 2003? It could be that the number of tragedies per fire is minuscule; however, to the person involved, it is 100 per cent. We need to recognise that and do everything we can to reduce the risk to the absolute minimum—but we cannot remove it.

The second issue is that the debate is aimed towards—I will not say at—the European Union. If I understand the situation correctly, fire prevention, the fire services, safety and so on, is not, in fact, a European competence; it is a national competence—and rightly so. In this country, we have made it even a local competence. That also has to be appropriate, because it is only at a local level that you can make a reasonable assessment of the risks in a community. It is no good having a wonderful ivory tower in the middle of London and trying to tell people in Hartlepool, Liverpool, Bristol or Southampton or in our rural communities what their level of fire risk is. A much more local organisation is needed to provide appropriate cover. We are very fortunate in this country to be able to enjoy the services of a large number of volunteers who cover great areas of the country.

Sometimes, paradoxically, volunteers have greater experience of firefighting than their professional brethren, who, if they are fortunate, may have a shift pattern which inadvertently means that they might not attend a fire for a year or more; whereas part-time firemen, apart from doing some weekend practice, attend only when there is a fire. There is a slightly strange situation whereby sometimes the amateur, as you might put it, is more experienced than the professional. However, all their work is wholly admirable.

There needs to be a European information exchange facility. The noble Lord, Lord Harrison, mentioned that each nation had its own safety regulations for hotels. However, given the volume of travel that we all undertake nowadays, it would be reassuring to know that there was at least some parallel organisation that was, in looking at this matter, disseminating best practice—not just in fire regulation, but in equipment, communications and all those other things.

So much can be done above the national level, but it is not simply a European problem. We do not have the only valid sources of information; this is an international problem. To be fair, I know that a considerable exchange of information already goes on, but there is no formal structure. Perhaps it would be better if the situation were better recognised, so that information was more freely available across national boundaries.

When all is said and done, we will still have a service of brave people who so often come to rescue us from mistakes that we have made. Perhaps we have accidentally left something switched on at night or fallen asleep while smoking in bed. Perish the thought, but that is not unknown. These things lead to tragedies. We can have the most wonderful service in the world and people who will give their lives for us if they have to—and they do—but if we ourselves are not careful and sensible, we deserve all the trouble that we get into.

There is, therefore, another level of responsibility in all of this, which I hope the noble Baroness will touch on: personal responsibility. That is where this particular area of safety begins. If we do not get that bit right, there is nothing that anyone else can do to help us.

My Lords, I am very grateful to my noble friend Lord Harrison for initiating such an important debate. The contributions around the House have been a tribute to the wide-ranging issues that he raised, as well as demonstrating our very different experiences across the House. Although the House may not be full, there is absolutely no question that every Member would take an interest in the role of the fire services.

One of the most impressive things that I had the privilege of doing this year was attending the official opening of the National Fire Service memorial by Her Royal Highness, Princess Anne. I had the privilege of speaking to some of the families whose loved ones, as firefighters, very sadly had died this year. That brought home to me at a very personal level the personal contribution and price paid in the most difficult circumstances. I certainly join every noble Lord who has spoken on the extraordinary contribution that our firefighters make, not just to keeping our communities safe, but—we must not forget, as my noble friend reminded me—to the added benefits that they bring to the communities that they serve and the extraordinary efforts that they make to become involved in them, especially regarding young people in schools and so on by informing and supporting the work of the community.

This is an extremely important debate, for many different reasons. Although we have been focusing on Europe, other issues have been raised by noble Lords, which I shall try to address. I shall certainly write to noble Lords if I cannot. I am very grateful to my noble friend for giving me advance warning of some very wide-ranging and technical questions, which I hope to be able to address towards the end of my response.

This has, indeed, been a wide-ranging debate, and it has provided me with an opportunity to talk about what Her Majesty’s Government are doing to encourage the co-ordination of fire safety and emergency services. That is something about which my noble friend is particularly concerned and it is an ambitious theme. I want to set out what we are doing, primarily in working with our partners in Europe, to reduce accidental fires in the home and non-domestic premises. I was very interested in the two examples given by my noble friends Lord Brookman and Lord Howie of Troon. Together with Buncefield, they illustrated two very different professional experiences and showed some of the genuinely catastrophic implications of accidental fires. That was a very useful perspective. With our European partners, we are trying to prepare properly to deal with emergencies, including with cross-border co-operation.

I reassure my noble friend that I would not dream of pretending that I know as much as he does about the work that is done in Europe or by the fire service. I want to try to bring together what we know is happening, and that will illustrate how this Government and the Department for Communities and Local Government are at the forefront of many EU work streams to co-ordinate fire and rescue services and emergency response work across Europe.

I think that my noble friend called for a fire tsar. It is some time since we heard the call for a tsar, so my noble friend has brought about the welcome return of this mythical figure. In fact, we have a tsar in the very experienced Sir Ken Knight, our Chief Fire and Rescue Adviser, who is more of a knight than a tsar. I have got to know him and have accompanied him on the odd occasion, and I have been incredibly impressed by the esteem in which he is held throughout the fire service. I do not think that we could have better advice.

I move on to the way that we work in Europe, in particular. The UK is a member of the EU’s civil protection mechanism, which is crucial. The mechanism co-ordinates assistance and provides prompt support and assistance to any country inside and outside the European Union that requires help. It became operational in 2002 and, since then, has been activated for a number of disasters within Europe and around the world. Three examples are the 2004 tsunami in south-east Asia, the 2005 forest fires in Portugal and the 2005 floods in Bulgaria and Romania. Those were three very different but dreadful cases where our help was needed.

A further element of the mechanism is the training programme, which is designed to prepare national responders for international deployment, the co-ordination of a disaster response and the assessment of disaster areas. As of 11 July, the UK has had 11 deployable personnel, eight of whom are part of the fire and rescue service. We expect to have 20 fully trained personnel for deployment by the summer of 2009.

To pick up a point made by the noble Lord, Lord Tope, we have also exerted considerable influence. We have played key roles in recent exercises to ensure that the EU is prepared to deal with major disasters and incidents. These have included: exercise EULUX 2007 in Luxembourg, which simulated a conventional chemical and radiological attack; exercise EUPOLEX 2005 in Poland, which tested the Community’s ability to respond effectively to a major incident requiring assistance from member and non-member countries; and exercise EUROSOT 2005 in Italy, which simulated a scenario based on an earthquake. That gives an idea of how, in a very practical way, we are bringing our experience into play.

The Government have invested £300 million, through the New Dimension project, to enhance the capacity of fire and rescue services to deal rapidly and effectively with terrorist and other large-scale catastrophic incidents. Part of my response to the noble Lord, Lord Tope, concerns the investment that the Department for Communities and Local Government makes as part of our wider £1 billion fire and resilience programme. These specialist New Dimension assets have been delivered to ensure that the fire and rescue service is prepared to respond to national incidents. However, in the event of an EU or international disaster, the Government would obviously want to deploy this capability abroad to assist where it was able to do so.

I turn to the specific steps that the Government are taking to encourage other forms of leadership in the UK and the co-ordination of specific fire-safety issues across the European Union. This is an area where my noble friend has played an absolutely key role. UK fire statistics show that smoking products cause the greatest number of accidental fire deaths in the home. Taking up the point made by the noble Lord, Lord Dixon-Smith, this is of course a very acute example of where personal responsibility comes in. In 2006, 3,168 accidental dwelling fires in the UK—an extraordinary figure—were started by smoking products, killing 96 and injuring 1,146.

My noble friend Lord Harrison knows that the Government have been instrumental in encouraging the European Commission to look into the case for creating a European standard for fire-safer cigarettes—cigarettes that are designed to self-extinguish if left unattended, rather than smoulder down and set things alight. We have watched with interest developments on this in other countries—in particular, the US and Canada. In October 2005, Canada became the first country to implement a cigarette fire-safety standard. Assessments that have been carried out since then on the basis of the Canadian methodology suggest that we would have had 2,116 fewer fires if such cigarettes had been available. Therefore, these fire-safer cigarettes work.

Since my noble friend and I debated this matter in October 2007, the European Union has voted overwhelmingly to create such a standard, and I am very glad to bring the House up to date about that. By establishing a European standard for fire-safer cigarettes, manufacturers will be compelled by law to produce cigarettes that meet the EU standard. The Government continue to be at the forefront in pushing this process forward. We expect work on developing the standard to commence late this year, and it will probably take about two years to complete.

We also learn from the experiences of other countries. The UK is one of the founding members of the European Fire Safety Network, which was set up in 2004 with the support and welcome of the Commission’s Civil Protection Unit, the committee for the action programme and the Community mechanism in the field of civil protection under the aegis of the civil protection committee. In response to the noble Lord, Lord Tope, about the role of the CLG, in relation to fire-safer cigarettes, our officials in that department led very much from the front. Sir Ken Knight was also involved in that work.

The European Fire Safety Network currently includes representatives from national authorities in 23 EU states which are competent in fire prevention matters. The idea is to exchange knowledge and foster co-operation between nations to help to improve fire safety. Here, perhaps I should mention some fire statistics. With the other members of the forum, we have achieved consensus on issues such as support for the development of fire-safer cigarettes and the need for better fire statistics. I hope that that reinforces the point made by the noble Lord, Lord Dixon-Smith. At the UK’s suggestion, the network has agreed to consider the use of fire statistics across Europe. It will look at what members of the forum gather by way of fire information and what comparisons this enables, what gaps exist and how this might be improved. I believe that real progress is being made there. We are liaising, for example, with the Federation of the European Union Fire Officer Associations, Eurostat, the European Fire Academy and so on. This is a major undertaking, which is very progressive.

In conjunction with colleagues from the Government of Estonia, we have offered to collate information from EU members to produce an overview of the situation, with recommendations for how that could be improved to promote the better use of statistics across Europe. However, the EU itself would need to take the lead in how the statistics would be collated.

My noble friend raised some questions about the extent to which CLG attended meetings. My advice is that it has certainly attended many meetings on European issues in recent years. I can advise him that the UK will also be hosting the next meeting of the network to tie into a celebration of 20 years since the introduction of regulations on fire safety in furnishings, which BERR will be launching jointly with CLG on 25 November. That is yet another example of joined-up government. We are assiduous in this work and as officials now know that the eye of my noble friend is on them, they will be even more assiduous.

I will not go into our strategies in the UK in great detail, except to say that our key strategy is to drive down preventable deaths. We have proactive community fire safety activities. We have a very good record, particularly in the penetration of smoke alarms; the 80 per cent smoke alarm ownership is a tremendous achievement. Of course, we still need to reach 20 per cent of households which are not yet covered. Effective fire safety standards extend well beyond the home and we want to ensure that all UK premises are as safe as possible. Prior to October 2006, there were more than 70 separate pieces of fire safety legislation in England and the fire safety order brought all fire safety legislation together in one place, simplifying the framework. That has been a progressive step forward.

The noble Lord, Lord Dixon-Smith, asked about deaths among firefighters. Every single death of a firefighter is a tragedy. Thankfully, the number of fatalities still remains very low and injuries are steadily falling. Our data show that the number of deaths while on operational duty over the past 20 years averages less than two per annum. There has been no fatality in England in the past 12 months, which is positive. Obviously, we can improve the situation with a whole range of measures.

I turn to the specific issues raised by my noble friend. I recognise and agree with my noble friend Lord Harrison that fire and rescue services have a distinctive and pivotal role. He questioned co-ordination mechanisms and criticised their absence. I believe that we have a strong co-ordinating mechanism within the EU. In fulfilling its monitoring and information-sharing function during disasters within and outside the EU, the Commission's Monitoring and Information Centre acts as the single point of contact for member states. The Monitoring and Information Centre can also be valuable as an entry point to the Commission's various director-generals at times other than during disasters.

My noble friend was critical of cross-government arrangements, but within the UK we have the Civil Contingencies Secretariat at the Cabinet Office, which is the most appropriate department to represent the Government on fire and rescue services in relation to the EU because of its strategic responsibility and the perception it brings. I think that is absolutely justified. CLG works closely with the Civil Contingencies Secretariat, sharing and disseminating information on EU matters. Most of the civil protection debate at EU level is on the principles of international mutual aid and how that might be enhanced across all aspects of the civil protection agenda. There is little or no detailed discussion on practical fire and rescue service issues which tend to occur in any other forum where the Civil Contingencies Secretariat is not involved.

I turn to my noble friend’s remarks about the impact of the working time directive and the driving-hours directive on the UK fire and rescue service. Dealing first with the working time directive, we are clear that losing the UK’s opt-out could have a major impact on the fire and rescue service. There is no question of dismantling the opt-out. The UK’s position remains unchanged. We remain committed to keeping the opt-out. I should perhaps explain that the UK’s position was agreed by the Council of Ministers in June. Officials from my department are working closely with BERR and the Cabinet Office to ensure MEPs and other member states are fully briefed on the UK’s position.

The position on the driving hours directive is that the Chief Fire Officers Association is currently surveying all fire and rescue services to enable the potential impact of the drivers' hours rules on the retained-duty system and their ability to provide appropriate emergency cover to our rural communities to be assessed.

My noble friend has also expressed concern that the encouragement of cross-border movement of labour creates employment complications within the fire sector as there are currently no agreed EC standards of competency. I am pleased to say that a considerable amount of work is being undertaken by various groups within the EU to work towards the harmonisation of fire and rescue service functions and recognition of professional qualifications between member states. The Fire and Rescue Sector Vocational Standards Group is considering aligning the current firefighters' national qualifications framework with the European qualifications framework and will consider wider work from across the EU as part of the process.

It is the Government's policy that the existing 25 sector skills councils should cover the UK workforce. The fire sector is too small to justify its own sector skills council but the Fire and Rescue Sector Vocational Standards Group is currently discussing sector skills council membership with the Skills for Justice sector skills council. So there is a recognition that there can be more synergy. The UK Fire and Rescue Sector Vocational Standards Group is considering aligning the current firefighters' national qualifications framework with the European qualifications framework.

My noble friend described a civil protection rapid reaction force, whose creation has been called for by Michel Barnier, as rather lukewarm. The Commission and member states generally have supported measures to enhance civil protection in the EU. The first pillar civil protection mechanism has been amended to allow limited financial assistance towards the cost of transporting civilian response from a donor country to one affected by disaster, including aerial water bombers to be used in wildfire situations.

On the proposals made in the Barnier report, the UK's position is clear. HMG support the principle of member states co-operating voluntarily in the response to disasters, but not the creation of a stand-by European civil protection force. That is consistent with our general attitude to how we see European co-operation working best. A European civil protection force would not be a cost-effective way of responding. The current voluntary approach, which allows member states to provide urgent assistance bilaterally, offers more flexibility and better value for money.

My noble friend also mentioned hotel safety and the fact that it is not regulated. Our position on this matter is quite clear. We recognise that while there is considerable support for any initiative aimed at achieving a more consistent standard of fire safety in hotels across Europe, there is no consensus on a need to replace the EC recommendation with any European law.

Finally, on trade, we have the construction products directive. Rather than read my quite detailed response to the specific issues raised on trade, I shall write to my noble friend.

We gladly recognise the contribution made by the UK fire trade to the fire safety agenda. I think we are playing a positive and successful role in Europe. I am very grateful to the noble Lord for allowing me to explore some of those issues. It has been a most useful debate.

Energy Bill

The Bill was returned from the Commons with the amendments agreed to with an amendment. It was ordered that the Commons amendment be printed.

Climate Change Bill [HL]

The Bill was returned from the Commons with the amendments agreed to.

House adjourned at 7.09 pm.