To ask Her Majesty’s Government when they expect to publish the planned draft clauses on House of Lords reform in the light of responses to the White Paper An Elected Second Chamber: Further Reform of the House of Lords.

My Lords, the Government have always said that they would consider the possibility of publishing draft clauses in the light of responses to the White Paper. We are still in a period of consideration.

My Lords, I think I am grateful for that Answer. Does the Minister recall that on seven occasions now he has said that pre-legislative scrutiny might be appropriate for draft clauses? Has he noticed that, in recent months, the Conservative leader has announced that he is now campaigning for the same vote, the same value, right across the country—in other words, for proportional representation? Would it not be wise to see whether consensus could be reached on this rather contentious issue through pre-legislative scrutiny, presumably in a Joint Committee of both Houses, so that the Government can build on the consensus arrived at within the White Paper discussions?

My Lords, it is not for me to comment on the difficulties which the Liberal Democrats and the Conservative Party may have with the system. Clearly, the White Paper discussed a number of electoral system options that could be adopted for a reformed second Chamber. We welcome comment on those matters.

My Lords, may I assure the Minister that the noble Lord, Lord Tyler, is clearly deluding himself? The Conservative Party has no intention of campaigning for proportional representation.

My Lords, I am heartily reassured on that point.

My Lords, there is clearly consensus between the two main parties on objecting to proportional representation. Will my noble friend take that into account in any further considerations?

Indeed, my Lords. There are clearly different views about what electoral system might be appropriate for the second Chamber. It is important that any electoral system that is brought forward is not seen in any way as challenging the perfectness of a first-past-the-post system for the House of Commons.

My Lords, whatever differences there may be about the ultimate shape of the House of Lords and how it is composed and elected, do the Government recognise that there is broad consensus that an interim measure, along the lines of my noble friend Lord Steel’s Bill, would make a difference and meet the public recognition that change is appropriate now? Will the Government give a lead?

My Lords, we have had a great many opportunities to discuss the Bill proposed by the noble Lord, Lord Steel. Of course, elements in it could be contained in a major reform proposal based on the White Paper’s proposal. The Government have said that they are already prepared to move swiftly on matters concerned with conduct and discipline. The fact is that the Government’s efforts take forward substantive reform. That is why we established the cross-party groups which led to the White Paper. Let us hope that in the manifestos for the next election there will be a consistency of approach among the political parties on substantive reform. Then legislation could soon follow.

My Lords, does my noble friend agree that at the end of March, during the Committee stage of the Bill proposed by the noble Lord, Lord Steel, there was unanimity on the four main principles of the Bill and that that should also be taken into account by Her Majesty's Government?

My Lords, as I said, there are clearly elements within the Bill proposed by the noble Lord, Lord Steel, which would need to be addressed within substantive reform. It is worth making the point that, to take the question of a statutory Appointments Commission as an example, the White Paper accepts that if the eventual outcome was an 80 per cent elected House, there would need to be a statutory Appointments Commission and legislation would follow that course. The proposal of the noble Lord, Lord Steel, embraces a statutory Appointments Commission that would decide which party-political appointments could be made. I have to say that that is entirely unacceptable to the Government.

My Lords, as there is obviously consensus between Conservative and Labour Peers in this House that this is a matter best left alone, can we not achieve some mechanism by which all the Liberal Democrat Peers resign and re-elect themselves in some different form?

My Lords, the more questions are asked, the less consensus I see in your Lordships' House. I think that the best possible approach is for the White Paper proposals to be taken forward and we look forward to legislation in the new Parliament.

My Lords, does not the Minister feel a sense of shame that a Labour Government—a Labour Government—after 12 years and three thumping majorities have left this House a House of patronage quite unrepresentative of the people whom they are supposed to represent?

No, my Lords, I do not. This Government are the first Government for many a year to take forward and enact substantive reform of your Lordships' House. It is widely accepted that those reforms have led to this House becoming a more effective Chamber. The whole point of the cross-party working group of which the noble Lord was a very influential member is to continue the process of reform. That is what we are committed to do.

My Lords, does the noble Lord accept that his original Answer was most acceptable to many of us in the House and that if it were the intention of Her Majesty's Government to continue in a period of consideration indefinitely, that would be very welcome?

My Lords, I fear I must disappoint the noble Lord. We intend to report in the summer on the results of the consultation. That will be an important step forward. We can then discuss what further steps need to be taken.

My Lords, is the noble Lord right when he uses the word consultation? He has referred to consideration throughout but now it is consultation. What is the difference?

My Lords, the White Paper is being fully considered and of course there has been a consultation process. Indeed, we received about 150 comments on the White Paper, which was published last year, so we will publish a summary of the views expressed. Of course, we are ever eager to hear the views of your Lordships' House on these matters.

To ask Her Majesty’s Government how they plan to reduce delays in the parole system.

My Lords, we introduced a new parole process for indeterminate sentence prisoners on 1 April, with targets for each of the agencies involved, to be monitored by senior representatives of each agency. We amended the Parole Board rules to increase its capacity to hold hearings and increased the board’s budget by 18 per cent in 2009-10. We are recruiting more judges to the board. This package of measures will, over time, significantly reduce the delays in the parole process.

My Lords, I thank the Minister for that encouraging reply but, according to a Written Answer he gave last month, hundreds of parole hearings are still being delayed. Why do the Government not provide the resources to the Parole Board and others now to deal with cases on time and to release those who are safe to release? That would reduce prison overcrowding and the need for so many new prison places, Titan or otherwise, especially as the Times last week gave a figure for the cost of borrowing alone for each new prison place of £150,000.

My Lords, we agree. Delays in any prisoner receiving their parole decision are unacceptable. As my reply set out, various measures are being introduced to tackle delays. I repeat that we have increased the board’s budget for 2009-10, from £8.3 million to £9.8 million, but increasing the budget alone does not solve the problem. We need more judicial members to consider parole cases. We are in the process of recruiting more board members, including judges, and we have changed the Parole Board rules to allow greater flexibility in the composition of Parole Board oral hearings, thus enabling more cases to be heard on time.

My Lords, later this afternoon, we understand that the noble Lord will come to the House to make a U-turn on Titan prisons, so as to save the Government a bit more money and impose more strains on the Prison Service. How long will it be before he comes back to this House to make a further Statement on that alleged 18 per cent increase in money for the parole system—it is very necessary—to reduce the pressure on prisons?

My Lords, I am delighted that the noble Lord supports the 18 per cent increase in the budget for the Parole Board in 2009-10. I presume that if it should ever happen that his party is in power, it would not dream of cutting that. Perhaps he could give a response to that later. I will be coming to the House and the noble Lord will have to be patient.

My Lords, would it not be a more sensible solution to those that have been proposed by the Government for them now, especially in the present financial climate, to take the decision to abolish preferably all life sentences or at least those that are discretionary?

My Lords, of course the Government listen with particular interest to what the noble and learned Lord says with his vast experience, but what he proposes is not on our agenda at the moment.

My Lords, the Minister has referred to the appointment of more judges to the Parole Board, but he will recall that in February 2008 the Court of Appeal criticised the independence of the Parole Board in its position within the Ministry of Justice. Will the Government consider the Parole Board to be made part of Her Majesty’s Courts Service and to function as a court, when the pressure on judges might not be so great?

My Lords, we have considered carefully the judgment to which the noble Lord refers, which is why within the department these matters have now been transferred to a different division; namely, no longer the NOMS division but the Access to Justice division.

My Lords, should the Government not have foreseen the pressure on the Parole Board when they introduced indeterminate sentences in 2003?

My Lords, I am quite prepared to say that the number of cases that arose out of having the tariff too low for indeterminate sentences perhaps should have been foreseen. I am glad we have been able to put that right in the Act passed by this House last year, and to be able to say that the fact that the tariff now cannot be any less than two years has already had an effect.

My Lords, in how many cases have the delays been so serious that they led to successful judicial reviews? What was the cost of these proceedings and any compensation awarded subsequently?

My Lords, I am not able to say how many judicial reviews there have been against the Parole Board as a result of delays in the process because we would need to conduct a manual trawl of such reviews to provide the information. However, I will write to the noble Baroness with as much information as I can provide.

My Lords, while I welcome the measures announced by the Minister, can he give the House an indication of when it is likely that the backlog in the hearing of cases, which is of very considerable proportions, will be disposed of? The delays caused form a serious blot on the administration of justice in our country.

My Lords, I can help the noble Lord. Provisional year-end hearings for 2008-09 indicate that there were 2,300 three-member oral hearings and 416 single-member oral hearings. It is estimated that 5,000 oral hearings will be heard in the 2009-10 financial year, including clearing the backlog of cases as well as new ones. Of course it would be a foolish Minister who got up and said that we would clear all the backlog—some of it involves just a few weeks’ delay—but I repeat that none of it is acceptable.

My Lords, can the Minister confirm that one of the reasons for the delay in granting parole to those who might be assessed as safe to release is the failure of the Government to ensure that the prisons provide the rehabilitation courses required? The Minister did not say anything about this in his outline of the measures he is taking to reduce the delays. How has the situation regarding the provision of courses changed since the court decision of 2008 in the case of the Secretary of State for Justice v Walker and James, where the court referred to the systemic failure on the part of the Government to provide the necessary rehabilitation courses in prisons?

My Lords, the noble Lord will know that the case has been heard by the House of Lords Appellate Committee and that we await its judgment. It is therefore best for me not to comment on it. So far as courses are concerned, when considering whether to direct the release of tariff-expired IPP prisoners, the Parole Board will consider a whole range of information on each prisoner, not just whether they have completed important formal accredited programmes. We allocated an extra £3 million in each of the last two financial years to streamline assessments and improve access to courses and, as my right honourable friend the Secretary of State has made clear, the number of courses has been increased. More importantly, changes to the categorisation procedure mean that IPP offenders can move straight to category C prisons where many more courses are available.

To ask Her Majesty’s Government what steps they have taken to use contacts between Her Majesty’s Armed Forces in Iraq and the Iraqi authorities to support the United Kingdom defence industry in bidding for contracts for the re-equipment of the Iraqi armed forces.

My Lords, support to the United Kingdom defence industry in bidding for contracts for the re-equipment of the Iraqi armed forces is provided by United Kingdom Trade and Investment staff and our defence attaché in Baghdad. Her Majesty’s Armed Forces in Iraq are responsible for providing support to the Iraqi security forces and are not involved in equipment procurement issues.

My Lords, I am grateful to the Minister for that reply. As a main coalition partner, our Armed Forces have made huge sacrifices in Iraq, yet we have sat back and watched the Americans walk away with one of the biggest rearmament and rebuilding programmes ever seen, leaving us with virtually nothing. What representation does DSO have in Iraq, and with billions of dollars of future sales expected, will it now take a more dynamic official role in promoting British companies there?

My Lords, I appreciate the sentiment expressed by the noble Lord, but he is slightly understating the presence and activity of UK representatives in this matter. None the less, it is the case that there is a clear Iraqi preference to make procurement for its Armed Forces through United States foreign military sales. Indeed, you could say that they are rather dependent on a foreign military sales system because it is easier for them. However, they are making moves towards direct contracts with other countries and we will be encouraging that.

My Lords, is not one of the problems the fact that DSO no longer exists and the very specialised work that it undertook is now being undertaken by UKTI? What assessment is being done to look at whether UKTI is as effective as DSO used to be, with the support that it had from the Armed Forces, in promoting British defence companies in the sort of way that the noble Lord’s Question implies?

My Lords, I do not think that there is any evidence to suggest that since the transfer of responsibilities and location for DSO there has been any diminution in its work rate or effectiveness. I think that it is actually quite desirable to extend and deepen the expertise of UKTI as a whole in both the defence and the security fields. However, if there is a concern, it is one that I will watch out for with a personal interest.

My Lords, I gather that the defence industry is grateful for the noble Lord’s efforts to include defence equipment in the MoU that is, as I understand it, being negotiated between our Government and the Iraqi Government. However, I have talked with the Defence Manufacturers Association and it believes that there is a particular problem with the translation and language aspect, particularly for our smaller defence-equipment exporting companies. Is there any possibility of reinvolving for mutual benefit the Iraqis who were interpreters for our forces, some of whom were brought out of Iraq?

My Lords, the noble Lord is right that we have included representatives of this sector in many of UKTI’s activities. Indeed, on my recent visit to Iraq, I was accompanied in the business delegation that I led by a number of company representatives from this sector. In answer to the noble Lord’s specific question on translators, he makes an important and interesting suggestion. I will look into it and I will write to him.

My Lords, does the Minister accept that one of the questions always asked by people who might buy British defence equipment is whether it is being used by the British forces? That is why the link between DSO and the Ministry of Defence was so essential in the past. It is very difficult to get that link working when it is in another department.

My Lords, I appreciate the noble Lord’s point, and I am sure that the link is an important one. However, the link has not been lost in DSO’s movement from the MoD to UKTI. I think that a rather well integrated and seamless operation is still being mounted. I will personally take an interest in this to ensure that that seamless operation is maintained in the future, as it has been in the past.

My Lords, can the Minister indicate whether Iraq is a designated area for support from ECGD for any contracts that are won by British companies?

My Lords, that issue was raised during my business delegation visit to Iraq and I am following it up. There is some resistance in view of the considerable risks involved. However, I think that it would be a great shame if through the absence of ECGD cover we were to lose important commercial opportunities which would be of as great a benefit to the Iraqi people and their commercial objectives as they would be to our businesses in this country.

To ask Her Majesty’s Government when they will announce their reaction to the Congressionally-mandated Research Advisory Committee’s inquiry into Gulf War Illness, published in November 2008.

My Lords, the Government made it clear on 10 March (Official Report, cols. 1055-57) that they would await the findings of the United States Institute of Medicine review of the Research Advisory Committee report. The Institute of Medicine plans to produce its report in February 2010.

My Lords, I thank the Minister for that Answer, but my understanding from the chairman of the Research Advisory Committee was that the Institute of Medicine was not going to call for the report to be reviewed by it. In view of what the Minister has said, will he give the House an assurance that, once that reference has taken place, they will speedily find a conclusion to this dreadful problem that has run on for so long?

My Lords, the whole House knows of the important work that the noble and gallant Lord, Lord Craig, has done for Gulf War veterans, but I find it difficult to give an assurance that I can secure closure, given the efforts that the Government have made so far. I have said that we expect a report from the Institute of Medicine in February 2010, but it is difficult to see in what way that will change what we are doing for these veterans. They are being treated under what we believe to be fair procedures for addressing the disablement they are suffering.

My Lords, I have a non-pecuniary interest as a member of the Royal British Legion Gulf War Group. Will the Minister give a fuller explanation for why no one from his department attended the symposium in the House on 24 March on this important research work? He will be aware that first of all it was said that no invitations were received and then, in a Written Answer to me on 20 April, it was said that there was too short notice. However, I have in my hand two letters sent to the noble Baroness, Lady Taylor of Bolton, and to the Veterans Minister, dated 20 and 27 February, long before the symposium took place. Is it any wonder that veterans in the British Army feel that their service for this country is undervalued and their illnesses are not fully understood, because of the way that the ministry seems to treat all these issues?

My Lords, I refute the suggestion that we do not look after our veterans or take a serious interest in this issue. The Ministry of Defence’s policy is to attend symposiums like this one, and we would have been delighted to attend. The noble Lord may have in his hand letters of a particular date, but the Under-Secretary of State for Veterans, Kevan Jones, received an invitation in his office three days before the event took place and was already committed to another long-standing engagement overseas, while the private office of my noble friend Lady Taylor did not receive an invitation.

My Lords, will my noble friend tell the House what the Government are doing to help the veterans of the 1990-91 Gulf War? Would it not be possible to consider giving some form of ex gratia payment to these brave ex-service men and women?

My Lords, we have provided help for these individuals under the appropriate policies. They receive pensions for the level of disablement, and those pensions can be reviewed if the disablement increases. We have introduced policies in Command Paper 7424, The Nation’s Commitment: Cross-Government Support to our Armed Forces, their Families and Veterans. It would be fundamentally wrong to treat veterans from the Gulf War with these conditions and these levels of disablement differently from veterans of any other operation who had a similar level of disablement.

My Lords, my noble friend knows of my high regard and respect for him and will recall this House having been told that, before addressing the implications of the inquiry’s findings for afflicted British veterans of the conflict, the MoD must await the outcome of the US Institute of Medicine’s review of its report. Can I now confirm that MPs and Peers have since been informed by the RAC, at the symposium held here in the Queen’s Robing Room on 24 March, that its findings are not being reviewed by the Institute of Medicine, and that this was made clear by the institute itself in a letter from its senior programme officer on 24 April?

My Lords, we understand that, in its press release on 1 December last year, the IOM committed to considering this report. We have spoken with the Department of Veterans Affairs, which says that it has no plans to reissue or update its statement. My understanding is that the study will take place and will report in February next year, as I said.

My Lords, will the noble Lord at least agree that the MoD was directly responsible for both causes of Gulf War illness identified in the report? Should not that factor be borne in mind in seeking to reach agreement with the veterans now?

My Lords, I shall certainly not agree any such blanket statement with a lawyer, as I should not survive long if I did. I repeat that the pensions that the individuals have are about levels of disability and are uniform for the same levels of disability. In 1997, this Government had a new start for these groups. They agreed to study the groups and to commit to research. All this has been done. Lots of money has been spent on the research and we are now concentrating on the rehabilitation of these veterans. We see no value in committing our own resources to further study of causation. Of course, if our friends in the US have new information, we shall consider it.

My Lords, I promised the House to update it on developments in the investigation into allegations made by the Sunday Times newspaper earlier this year against a number of Members of this House. I will continue to do so as appropriate.

Noble Lords may have seen media reports at the weekend and this morning purporting to reveal the conclusions of the inquiry into the investigations that has been carried out by the Sub-Committee on Lords’ Interests chaired by the noble Baroness, Lady Prashar. I am aware that these reports caused considerable concern to Members of this House. Like them, I utterly deplore such speculation and urge the media to resist repeating it until the process adopted by this House is complete.

I make no comment on the accuracy or lack of accuracy of these reports. Both the House authorities and my office made it clear to the Sunday Times, which originated these reports, and to other media organisations that we would make no comment on such speculation and that the process of examining these allegations was not yet complete. While the process is under way, it is of course the case that the Members concerned are and remain full Members of this House. When the process is complete, the report of the Committee for Privileges and of the sub-committee will be published and available to Members and to the wider public, including the media. The House will then have the opportunity to debate the report. While this process is under way, I urge all sides, both within this House and beyond it, to refrain from speculation, whether in public or in private. Members of this House and the procedures of this House deserve nothing less.

My Lords, with the leave of the House, my noble friend Lord Bach will repeat the Statement on prisons and probation at a convenient point around 4 pm. My noble friend Lord Darzi of Denham will then repeat the Statement on swine flu.

In an earlier debate, on Amendment 84A, I touched on our concern that Ofcom would be able to extend its regulation by means of this clause into exempted services that are currently free from any regulation. With this amendment, I should like to focus in a little more detail on the provisions of Clause 36.

I confess that the clause takes a little time to understand, since it tries to set out what differences between the UPS and another service can be disregarded from an assessment of whether the service is sufficiently like the UPS to be regulated. As I understand it, the service under question can differ from the UPS by one of the criteria set out in subsection (1)(b) and still be considered within the scope. I would be grateful if the Secretary of State would confirm that if the service differed in two respects—let us say, if under sub-paragraphs (i) and (ii) it covered only a city and delivered on only five days a week—it would not then qualify as within the scope under subsection (1)(b).

My confusion continues within subsection (1)(b)(iii), the drafting of which does not quite follow the related drafting within Clause 29(3). There, the phrase is an affordable price,

“determined in accordance with a uniform public tariff”.

Here, it is drafted as,

“an affordable price in accordance with a public tariff which is uniform”.

I hope that the Secretary of State can explain this difference.

There is also the matter of there being two criteria within a single sub-paragraph: that of a uniform tariff and that of affordability. Does a service qualify as within scope if it offers a uniform tariff at a much higher price than Royal Mail, or if it offers an affordable set of zonal tariffs? Or can it offer both high prices and zonal pricing and still qualify under this sub-paragraph?

I am not convinced that a service offering a uniform but much more expensive tariff should qualify as within scope. Price is a key element in assessing competitiveness and cannot be disregarded as justifiably as, for example, the question of whether the service covers the entire United Kingdom.

There is also the question of what qualifies as “affordable”. Does the Secretary of State intend this sub-paragraph to relate directly to the price offered by Royal Mail under Clause 29, despite the difference in drafting? How much more expensive does the tariff have to be to count as non-affordable?

Subsection (1)(b) seems capable of being interpreted in many different ways. I hope that the Government mean it to signify that only services that differ from the universal postal service in a single, non-critical way become eligible. If that is the case, the drafting could be made much clearer to signify it. I therefore beg to move.

Clause 36 sets out when a service is within the scope of the universal service. First, a service within the scope of the universal service is one that falls within the description of a service set out in the universal postal service order made by Ofcom under Clause 29, as set out in subsection (1)(a). Secondly, it is a service which would fall within the description of a service set out in the universal postal service order, but which does not meet some of the minimum requirements of a universal service: collection and delivery are not provided on each of the days required under Clause 29, or the service is not provided throughout the UK, or the service is not provided at an affordable uniform price. This is set out in subsection (1)(b). Finally, a service is also within the scope of the universal postal service if Ofcom believes that it is interchangeable, from the users’ point of view, with one set out in the universal postal service order. This is set out in subsection (1)(c).

The effect of the specific amendment of the noble Lord, Lord Hunt, is to remove “affordable” from the characteristics of a service which can be put aside when deciding whether a service falls within the meaning of,

“scope of the universal postal service”.

On its own, Amendment 89A would mean that a service that is the same as a service set out in the universal postal service order, but is provided at an unaffordable tariff, may not fall within the scope of the universal service, unless it were caught by Clause 36(1)(c)—that is, if it could still be viewed as interchangeable with a service in the universal service order. Then it would still fall within the scope of the universal service. Since it is arguable that a service provider would not provide unaffordable services, this amendment may in practice achieve very little. However, what it does is to introduce substantial uncertainty and, therefore, scope for dispute over where the regulatory line is drawn, which is likely to make regulation more expensive in practice.

Crucially, along with the other amendments of the noble Lord, Lord Hunt, on Clause 36, this amendment could weaken the protection of consumers. A key reason behind Clause 36 is to protect users by enabling Ofcom to impose conditions, and requirements to contribute to any possible compensation fund, on providers which provide services which could undermine the provision of the universal service through, for example, offering competing services which cherry pick the most lucrative parts of the universal service. A first-class, uniform priced letter service provided only in London would be an example.

Noble Lords might be of the view that this clause offers Ofcom too much discretion, but it must not be taken out of context. It is right that Ofcom has the tools available to secure the provision of the universal service. There are sufficient mechanisms in place in the Bill to make sure that Ofcom will use these tools only where necessary to meet its statutory duty.

On the noble Lord’s first question, the service is within scope if it does not meet one or more of the minimum requirements. In view of this, I invite the noble Lord, Lord Hunt, to withdraw his amendment.

The purpose of the amendment was really to draw out of the Government what the Secretary of State has just said, so at least we know where we are. I am concerned, as are others on these Benches, that we may be extending the jurisdiction of Ofcom into exempted services that are currently free from any regulation at all. That is a worry. Therefore, I completely agree with the Secretary of State that we have to be clearer, which was really the purport of the amendment—not to introduce uncertainty but to bring about a situation in which the drafting could be made considerably clearer. However, I shall carefully reflect on all the points that the Secretary of State has made and, in the mean time, I beg leave to withdraw the amendment.

Amendment 89A withdrawn.

Amendment 89B

Having dealt with paragraph (b), I turn to the interaction between that paragraph and paragraph (c). Paragraph (b) sets more or less objective criteria on which a service falls within the scope. Paragraph (c) allows Ofcom to assess whether a service falls within the scope on the basis of its interchangeability. Our next group of amendments looks at the basis on which it makes that assessment, so I shall leave my concerns about that until then. However, the current drafting appears to ensure that a service must be considered as within the scope if it fulfils paragraph (b), even if Ofcom does not consider it interchangeable. It is entirely automatic; even if Ofcom does not think that it is interchangeable—perhaps the service operates only one day a week—this clause requires Ofcom to consider it as within scope. I cannot believe that that is the Government’s intention, and I look forward to reassurance from the Secretary of State. I beg to move.

I have already explained what Clause 36 does: it sets out when a service is within the scope of the universal service. The amendment of the noble Lord, Lord Hunt, would require services to meet both subsection (1)(b) and subsection (1)(c) to be within the scope of the universal service. Services would have to be both those which would fall within the description of the universal service but for the fact that they do not include specific minimum characteristics and services considered by Ofcom to be interchangeable with universal postal services from the point of view of users.

In consequence, this amendment would restrict which services can fall within the scope of the universal service. In turn, it would restrict Ofcom’s ability to impose regulatory conditions on postal operators. As we discussed earlier, the main purpose behind Clause 36—indeed the main purpose behind the whole of Part 3—is to protect the universal postal service. This amendment could weaken this protection because regulatory requirements whose purpose is to protect the provision of the universal service can be imposed only on postal operators providing services within the scope of the universal service. These requirements are general universal service conditions under Clause 37, recovery of administrative charges incurred by Ofcom under Clause 38 and sharing of the burden of universal service obligations under Clause 40.

A particular aspect of the protection given by Clause 36 is that it seeks to make sure that providers cannot escape proportionate, targeted regulation protecting the universal service by providing services which have some but not all of the features of a service required to be provided as a universal service, or which are interchangeable from a user’s perspective with such a service, but which cherry pick from the specifications. The most obvious features that could be cherry picked from the list of minimum requirements of the universal service set out in Clause 29 are spelt out in Clause 36(1)(b).

The postal services market is changing. We cannot predict with certainty which way this change will go. Therefore we need to make sure that Ofcom has the right regulatory tools available where this is objectively justifiable and proportionate to ensure that it meets its duties, primarily securing the provision of the universal service. This is why it is particularly important that Clause 36(1)(c) continues to stand as a separate strand of what could be included in the scope of the universal service. It gives Ofcom appropriate discretion because it is not possible to spell out in the Bill all occasions when services should be regulated for the benefit of users and to secure the universal service. In view of that explanation and reassurance, I invite the noble Lord, Lord Hunt, to withdraw his amendment.

So, the Secretary of State is saying that the only thing that he can predict, the only certainty that he can give us, is the prospect of uncertainty. He adduces in evidence that the market is changing. We are all agreed on that, just as we are all committed to the universal postal service. But how do we decide on proportionate and targeted regulation? I remind the Secretary of State that we are giving Ofcom quite substantial powers. We must, as a Committee, be persuaded that it is necessary to give it this wide range of powers, even though there may be uncertainty as to how they will operate. I hope that the Minister would also consider carefully the points that I have raised, just as I will carefully consider his. I beg leave to withdraw the amendment.

Amendments 89C and 89D look at the criteria by which Ofcom can consider a service to be interchangeable. The previous amendment considered the possibility that Ofcom would be forced to consider a service to be within scope, even if it knew that it was not interchangeable. These amendments look at what sort of services it might willingly consider to be interchangeable.

Interchangeability is a key feature of the postal services directive. However, as we all know, the simple repetition of a word from a directive does not mean that all the associated meaning is carried down. The clause gives no indication of the grounds on which Ofcom will be assessing the interchangeability of the service. As we have explored, paragraph (b) has no impact on paragraph (c). The safeguards on Ofcom’s behaviour that are set out in Schedule 6 apply only to the imposition of regulatory conditions. While those safeguards are, of course, welcome, the inclusion within scope, even if Ofcom decides to hold off the actual imposition of a condition, must be worrying to an operator. In a sense, the clause gives Ofcom the ability to hold a Damoclean sword over the head of an operator without being required to justify its assessment, since a decision to impose a condition has not yet been made. Schedule 6 therefore does not yet come into operation. Will the Secretary of State justify this? If he is unable to do so, will he find ways by which we could make the situation more proportionate and targeted? I beg to move.

Amendments 89C and 89D add specific matters to what Ofcom must take into account before coming to the view that a service is interchangeable from the point of view of users, with a service set out in the universal postal services order: namely, the characteristics of the services, including added-value features, as well as the intended use and the pricing.

That would introduce a higher test before a service could be said to be interchangeable with a service in the universal postal service order. This has a knock-on effect on Ofcom’s ability to impose certain conditions, notably general universal service conditions that Ofcom may consider necessary to ensure that a universal service is provided in accordance with the required standards under Clause 37.

In this instance, restricting Ofcom’s discretion to regulate can only weaken the protection of the universal service. This is because, as I explained earlier, Clause 36, in conjunction with other clauses, seeks to ensure that Ofcom regulates where this is proportionate, targeted and protects the universal service.

3.30 pm

The Bill as it stands gives Ofcom the right amount of discretion. Ofcom can impose regulatory conditions only when this is proportionate and objectively justifiable under Schedule 6. There are also tests as regards when particular conditions can be imposed set out in the clauses themselves. As I have said before, Ofcom is an experienced regulator with targeted, transparent and proportionate regulation at the heart of its decision-making.

In addition, the language used in this amendment is not clear. I accept that the words used come from a recital of the most recent postal services directive—a recital that we have borrowed from in using the phrase “interchangeable with a service” of a description set out in the universal postal service order. I believe that we have taken the meaning of the recital and made it into a provision which is clear. We expressly chose not to include the words set out in this amendment as they do not add clarity to the provision but, rather, introduce undefined and unclear terminology. That is not in the interests of anyone.

I reassure your Lordships that Ofcom will objectively assess which services are in the scope of the universal service, and therefore what could potentially be regulated. The scope of the universal service is defined primarily by reference to the universal service order. As we have previously discussed, to decide which products should be provided as a universal service, Ofcom will carry out a thorough market assessment and a robust consultation. In turn, this will provide a strong evidence base for the scope of the universal service. In any event, Ofcom must regulate proportionately. Ofcom will need to target the regulation of the services within the scope of the universal service very carefully. In addition, according to Schedule 6, Ofcom can impose regulatory conditions only when this is objectively justifiable. Therefore, there is no reason to assume that merely because a service can be regulated it will be regulated. We have made sure that a service cannot be regulated unless Ofcom can show that the tests required by the Bill are met. As regards safeguards, Section 3 of the Communications Act on better regulation applies. In view of this, I ask the noble Lord to withdraw his amendment.

This, has been another useful opportunity to look at the text of the Bill to scrutinise its effect. The Secretary of State rightly identified my source. I proudly admit that I took it from the recital. However, there is still no indication of the grounds on which Ofcom will assess the interchangeability of the service. We have reassurances from the Secretary of State, which I shall consider carefully, that Ofcom will utilise its powers proportionately and in a targeted way. Service providers should have greater clarity about what will need to be proved in assessing the interchangeability of the service. I shall consider carefully all that the Secretary of State has said and I hope that he will consider introducing greater clarity. In the mean time, I beg leave to withdraw the amendment.

In moving Amendment 89F, I shall speak also to Amendments 89H, 95B to 95D, 99, 100 and 103 to 109 standing in the name of my noble friend the Secretary of State.

Amendments 89F, 89H 95B, 95C and 95D relate to general universal service conditions. The Bill currently requires that a universal service must include a collection of letters from every access point on every working day. Access points include, for example, post boxes. These amendments clarify that where there is a designated universal service provider it is only that provider that needs to ensure collections from its access points. Were these requirements to apply more widely, this would have a disproportionate effect on competition and may discourage operators from entering the market. We need at least one service which includes such a daily collection, and it is right that this service should be provided by the designated universal service provider.

These amendments also seek to ensure that Ofcom has the power to impose requirements on all operators to take steps for guarding against loss or damage to postal packets, and ensuring that all postal packets are delivered to the intended addressee. Currently, Clause 37 provides that a general universal service condition may require persons to take steps for guarding against loss or damage and ensure that all postal packets are delivered to the intended addressee. However, before such a general universal service condition can be imposed, Ofcom must consider it necessary for the purposes of securing that the universal service is provided to the required standard.

Furthermore, conditions under Clause 37 can only be imposed on providers of services within the scope of the universal service. We believe that this is too restrictive and that all users of all postal services are right to expect that their packets will arrive at the intended address intact and undamaged. Therefore, we are seeking to amend the Bill to allow Ofcom to impose conditions where it is proportionate to do so for the purposes of ensuring that postal packets arrive undamaged and to the right address on any postal operator.

Amendments 99, 100 and 105 relate to the postcode address file, or PAF as I will henceforth refer to it, which contains the postcode used by the Royal Mail to provide postal services. As part of the transition from Postcomm to Ofcom, this Bill gives powers relating to the PAF to the new regulator. These powers allow Ofcom to enforce access to the PAF as well as to give directions in respect of the terms in which Royal Mail is to make the PAF available. These provisions are at paragraph 39 of Schedule 10 and reflect the current arrangements under the Royal Mail licence.

Postcomm currently has the ability to direct Royal Mail on the issue of compliance with and modification of a code of practice through licence condition 22 of Royal Mail’s current licence. The code of practice covers procedures for ensuring that persons affected by changes to the postcode address file are notified, as well as procedures for ensuring that the holder is made aware of users’ views. As a result of the more general move within this legislation from a licensed to a general authorisation regime, Ofcom requires the power to ensure continuation of these arrangements through a different mechanism provided by these amendments.

First, these amendments allow Ofcom to require the owner of the PAF from time to time to have in place a code of practice approved by the regulator. Secondly, they require the owner to comply with any such code of practice. Thirdly, these amendments allow Ofcom to enforce the code of practice through the Schedule 7 enforcement mechanism in the same way as any other regulatory condition.

A final group of minor and technical amendments deals with errors in the current draft of the Bill. Amendment 104 relates to Section 95 of the current Postal Services Act. It is consequential to a change widening the scope of Schedule 5 to that Act. Its effect is to alter Section 101(2) of the current Postal Services Act so that it refers to Ofcom rather than Postcomm.

Amendment 106 seeks to amend the list of references in Section 122(10) of the Postal Services Act to sections which are being omitted. The list should also omit,

“paragraph 4 of Schedule 7”,

because Schedule 7 of the Postal Services Act is being repealed.

Amendment 107 amends the definition of “the Postal Services Directive”, in order that it picks up amendments made by the 2008 directive and any subsequent directive.

Amendment 108 makes a correction to Schedule 10 so that it refers to the correct part of the Postal Services Bill.

The final amendment, Amendment 109, is to the reference in Section 16 of the Consumer, Estate Agents and Redress Act 2007 as to the meaning of “public post office”, so that it refers to Section 125(1) of the Postal Services Act 2000, rather than the Postal Services Act 2009.

I hope that I have provided a clear or sufficient description of this group of government amendments, which are important to ensure that the Bill functions as intended. I beg to move.

I am grateful to the Minister for explaining these amendments. While we are looking at Clause 43, I hope he can provide some clarification about the powers that the Government are giving Ofcom to regulate, as he has explained, all postal operators on certain matters. Clause 37(2) sets out the conditions for protecting against theft, loss and so on, while Clause 43 deals with what the Bill calls the “essential conditions” on matters such as confidentiality. Can he give us a little more information on these safeguards? Our concern is that they are largely covered by existing law and may be duplications. Can he expand on why it is necessary for the regulator to get involved in ensuring that private companies deliver a non-universal service package to the correct address? How much involvement does Postcomm currently have in these areas?

I thank the noble Lord for his three questions. I do not know the specific answer to the question about the extent of Postcomm’s writ in relation to the activities of so-called private companies. However, he also asked a specific question which has been a feature of a series of amendments which he and his colleagues have tabled on the legitimacy and value of extending or defining Ofcom’s remit in relation to companies other than Royal Mail. It would be helpful if the Government wrote to the noble Lord and laid out clearly in chapter and verse where those extensions are, where there are changes to the current regime and why those changes are proportionate and necessary to provide the new regime with a functioning set of rules.

I very much welcome the Minister’s words a few moments ago. The Committee would certainly find it very helpful if such a letter could be written and a copy placed in the Library, if not in the Printed Paper Office, so that everyone could share in the knowledge that he has agreed to give us.

Amendments 89G, 89J and 90A are the first of several groups of amendments relating to the imposition of a levy on postal operators in order to share the burden of providing the universal postal service. Many of us were unaware that that was proposed until we received the department’s document in February setting out the Government’s policy on the future of the universal postal service in the UK. Our amendments in this group seek to ensure that, in the event that a levy is considered necessary, postal operators become liable for such a levy only to the extent that they provide services within the scope of the universal service. As Ministers have already concluded and admitted today, as the Bill is drafted, Ofcom is given a great deal of discretion over the method of distributing the liability, as well as over a number of the other issues that we have been raising.

Of course, there are safeguards against discrimination and the distortion of competition and so on in Clause 40(6), but there seems to be nothing in the proposed legislation to prevent the levy being awarded on, for example, an assessment of each company’s ability to pay. I hope that the Minister will be able to give us a little more clarity on how a levy would be imposed on operators and on what criteria the division of liability might be made. I beg to move.

I fear that I am going to disappoint the noble Lord in providing the level of clarity that he is looking for but I shall try.

These amendments relate mainly to contributions from other postal operators to any scheme set up to share the burden of providing any universal service as defined by the regulator. They relate to both Clause 37 on general universal service conditions and Clause 40, headed “Sharing of burden of universal service obligations”.

One purpose of Amendment 89J appears to be to ensure that Ofcom gives consideration to the extent to which operators provide services within the scope of the universal service before imposing conditions necessary to secure the universal service. This amendment is, I am afraid, unnecessary. Ofcom can impose these general universal service conditions only to the extent necessary to secure that the universal service is provided to the required standard and not for any other reason. Furthermore, as with all conditions, Schedule 6 requires that Ofcom can impose conditions only where it is objectively justifiable, not unduly discriminatory, proportionate and transparent. The other type of condition that can be imposed, under Clause 37, is for the purpose of sharing the burden of universal service obligations—the compensation fund.

The amendments proposed by the noble Lord, Lord Hunt, would require that, if any such condition were imposed on postal operators, Ofcom would have to give consideration to the extent that the operator provided such services. In essence, we would interpret that as, again, a point about proportionality.

Clause 40(6) is already explicit in requiring that any compensation scheme operates in a proportionate manner, including the source of its funding. Further, it states that it must not involve or give rise to any undue discrimination against particular postal operators. Schedule 6 is also clear that, when imposing or modifying any regulatory condition, Ofcom must ensure that it is proportionate. Furthermore, under Section 3 of Ofcom’s founding statute, the Communications Act, Ofcom is required to follow the principles of best regulatory practice when carrying out its functions. Again, this expressly includes proportionality. Therefore, there would in effect be a triple lock of proportionality on exercising the allocation of those costs if that were to happen.

I hope that I have provided the noble Lord with some reassurance on this point and I therefore ask that at this stage he withdraw his amendment.

At this stage, I will. I beg leave to withdraw the amendment.

This is a simple probing amendment to clarify what effect subsection (5) has on the provisions earlier in the clause. When I used to have to carry through legislation, I was always questioned on any provision as general as this one. I did not want to disappoint the Minister on this occasion.

I remind the Committee that Clause 37(5) states:

“Nothing in this section is to be read as restricting the generality of the provision that may be included in general universal service conditions”.

I also ought to point out that the drafting of the subsection is repeated at intervals throughout this part of the Bill and seems to imply that any limitations imposed on Ofcom earlier in the clause are not actually limitations at all. I look forward to the Minister reassuring the Committee on that.

In general, this provision seems to be included only where the Bill gives examples of what may be included in a condition rather than limitations about what may not. However, is the requirement in subsection (3)(a), to abide by a scheme under Clause 40, not a restriction? I hope the Minister can give a little more explanation about this subsection and what it means. I beg to move.

Securing the provision of the universal service is, as we have discussed on a number of amendments, at the heart of the Bill. Clause 37 provides for general universal service conditions and recognises that to secure the provision of the universal service it may not be sufficient to impose conditions solely on the universal service provider—if not now, then at some probably surprising date in the future—and that therefore other postal operators providing services within the scope of the universal service may also have to have conditions imposed on them.

The purpose of subsection (5), which this amendment seeks to leave out, is to make clear that while the clause does specify that certain matters can be included in general universal service conditions, this does not mean that other matters cannot. It is, as the noble Lord rightly points out, to ensure that Ofcom has a degree of discretion—not a limitless discretion, but a degree of discretion—as the guardian of the universal postal service under this regime, thereby giving it the scope to do the task at the heart of the Bill, namely to secure the universal service. The amendment would remove that discretion from Ofcom. It would not in future be able to impose any other conditions even if it judged them to be necessary for the purpose of securing the universal service. Perhaps I may digress from my speaking notes to say that in telecommunications, for example, the regulator has a similar discretion albeit it is subject to the same restrictions of proportionality.

We know and have discussed that the postal market is changing very quickly. In those circumstances, this restriction could in future threaten the universal service. I also remind your Lordships that for the imposition of any regulatory conditions there are strict tests that Ofcom is required to have met. It is not our view that this subsection either removes or in any way reduces the need for those strict tests to be met.

I hope I have provided the noble Lord with reassurances that Ofcom already must meet tests before imposing regulations. To tie its hands now could put the universal service at risk in the future, or at worst slow it down in the process of reassessing the need for its provision. I would therefore ask the noble Lord to withdraw the amendment.

I have followed very carefully what the Minister has said, but I did not quite understand what he meant by “some surprising date in the future”. Perhaps he could clarify what the word “surprising” means in this context.

I was just trying to surprise the noble Lord. My point was that it is an unpredictable date. The purpose of allowing the regulator the opportunity to exercise discretion is to be able to adapt at speed to a market that may change at a faster rate than we, with all our collective wisdom, may be able to predict in 2009. To underscore the central point—which perhaps does not need to be said but is worth placing on the record—all decisions of public bodies, particularly statutory competition regulators, must be reasonable or they will be challenged in the courts. Indeed, they have been.

I am very grateful to the Minister. He will understand that I know the procedure for judicial review; no doubt we will come back to that at some stage. I am grateful for his clarification.

I feel that we need more information. I sense that the Minister is beginning to understand why we are pressing him on these points. I am sure that we will return to them later, but, in the mean time, I beg leave to withdraw the amendment.

Our amendments in this group are intended to ensure that postal operators providing services outside the universal postal service order are not expected to bear a disproportionate administrative burden—or any burden at all where it would be inappropriate. I should also like to take the opportunity to probe a little further some of the specific requirements in Schedule 4.

My first amendment ensuring that the charges are proportionate is slightly otiose as the word appears in Schedule 4, but I wanted to ask the Minister on what basis the charge is to be proportionate. The word “proportionate” is one that he has already used on several occasions—indeed, the Secretary of State used it earlier—but it can mean different things. One can conceive of two companies, one big and one small, both providing services eligible for an administrative charge. I hope that the charge would not be proportionate to the entire company turnover but instead will be calculated considering only the relevant service.

Schedule 4 also raises some questions. In paragraph 1(1), it restricts the administrative charge to be eligible only on postal operators providing services within the scope of the UPS. That is quite correct, as Ofcom should only be regulating those services, but later it makes it clear that that charge is to cover Ofcom’s postal services functions, which can under paragraph 2(2) include setting up mechanisms for resolving disputes between postal operators and users. We will later come to the nitty-gritty of a consumer protection condition, but the dispute mechanism that Ofcom is expected to set up under this condition will presumably fall under the Schedule 4 description of postal services function. That condition is to fall on all postal operators and all services, not just those falling within the scope of the UPS. Does that mean that regulated operators will have to bear the burden of costs partly resulting from non-regulated operators?

I also ask your Lordships to note that Schedule 4 contains powers for Ofcom to impose penalty charges. Again, those are restricted to being appropriate and proportionate, but they could be significant, especially if a dispute reaches the level covered by paragraph 7, where Ofcom has the power to prevent an operator from providing the service at all. Will the Minister therefore clarify whether Ofcom could direct the operator to stop services falling outside the scope of the UPS? There seems to be nothing in the Bill to stop Ofcom getting involved in any area of the operator’s business. In addition—again we will turn to this issue later—there is no right of appeal. There is merely the right to make representations.

I hope we are talking about only small amounts of money here, but when the regulator has as much power as is being given to Ofcom in this case, would it not be better to allow for the penalty regime to have a right of appeal, as is usually the case? I know that in other legislation your Lordships have felt strongly about that. Therefore, I hope that the Minister will consider it. I beg to move.

My Lords, I agree with the noble Lord that that amendment probes a number of areas, some of which I hope I can give him some reassurance on; we may need to clarify others in writing. The specific amendment relates to Clause 38, which, as the noble Lord rightly points out, allows Ofcom to impose charges on postal operators providing services within the scope of the universal service and to meet the reasonable costs that Ofcom, as the proposed sector regulator, may incur in carrying out its postal functions.

Proportionality, which both these amendments promote, is, as the noble Lord has already accepted, a central tenet that Ofcom must follow when regulating and would apply to its costs and the allocation of its costs. As a point of record, it is my understanding that it would be required to consult on its charging regime and on the allocation of costs within that charging regime. It is also the case that Ofcom has committed itself to a level of efficiency and cost reduction over the period, which will have the effect of reducing in absolute terms the costs in total, although I understand the noble Lord’s point about to whom the costs are allocated. Those requirements are provided for in the original Communications Act, Schedule 6 to this Bill, and, specifically in relation to recovering administrative charges, paragraph 1(3)(b) of Schedule 4.

I therefore say to the noble Lord that his amendments, while laudably seeking to minimise regulatory costs, are unnecessary. I hope that he will see fit not to press them.

If the Minister will allow me, I will take that as praise for my having moved the amendment, because we have raised some important points. I would now like the opportunity of considering carefully what the Minister has said. In the mean time, I beg leave to withdraw the amendment.

My Lords, with the leave of the House, I will now repeat a Statement made in another place by my right honourable friend the Lord Chancellor and Secretary of State for Justice. The Statement is as follows:

“With permission, Mr Speaker, I should like to make a Statement on prisons and probation. Let me begin by paying tribute to the 70,000 staff working in these services. Last Monday, my right honourable friend the Prisons Minister issued a Written Ministerial Statement about the serious disturbance which occurred at Ashwell prison, Rutland, on Easter Saturday, 11 April. Prison Service staff acted with exemplary skill and professionalism in dealing with the riot. I thank them sincerely, as I do officers of Leicestershire Constabulary and other emergency services which so ably assisted. Prison Service and police investigations are now under way.

Investing in prison and probation services has been a key priority for this Administration. Prison places are up by nearly 25,000 to 85,000, with spending rising by a similar proportion, while the probation case load has risen by 52 per cent and spending has increased by 70 per cent in real terms. This is the first post-war Government to see a sustained reduction in crime, down 39 per cent since 1997, with the chances of being a victim the lowest for a generation. There has been a 23 per cent fall in adult reoffending between 2000 and 2006.

Understandable concern has been expressed about the number of juveniles and women held in custody. There has over the past year been a reduction of 8 per cent in the number of juveniles in jail, and the number of adult women prisoners has fallen by 3 per cent over the same period. In response to the recommendations of my noble friend Lady Corston, I have committed £15.6 million over two years to help divert vulnerable women offenders from prison. We also want the Prison Service and the NHS better to deal with offenders with mental health problems. The report of my noble friend Lord Bradley will be published shortly.

My noble friend Lord Carter of Coles was asked in 2007 to consider how better to manage short and medium-term prison pressures. I published his report alongside an Oral Statement on 5 December 2007. Since the publication of my noble friend’s report, we have already provided an additional 3,500 prison places. He recommended that net capacity should be brought up to 96,000 by 2014 and that 7,500 of these places should be created by the construction of three 2,500-place prison complexes, described as ‘Titans’. In June last year we launched a consultation on these proposals, and I am most grateful to all those who responded. The Government’s response to the consultation is published today, along with the document Capacity and Competition Policy for Prisons and Probation and an economic impact assessment. Copies are available in the Vote Office and the House Library.

Once a prison is established in an area, almost without exception the local community becomes very supportive of it. A prison is a source of secure, well paid employment and a focus for much volunteering. The research evidence which shows that prisons have no adverse effect on house prices or crime rates is then borne out by experience. But proposals for new prisons can at first be controversial. I did see merit in the proposals of my noble friend Lord Carter for 2,500-place prisons, especially as they would have been complexes with four or five separate and distinct regimes. But most of those whom we consulted took a different view and believed that the disadvantages would outweigh the advantages. Not the least of those of this view was Dame Anne Owers, HM Chief Inspector of Prisons. I have looked very carefully at everything which has been said and have concluded that the right approach is to deliver the 7,500 places not through Titans, but through five prisons holding 1,500 offenders, each divided into smaller units. We already operate successfully prisons of this size.

These new prisons will be neither Victorian replicas nor large warehouses. They will be modern, purpose-built institutions for adult male prisoners only. They will be safe, secure and effective in helping prisoners deal with their offending, and will develop the work, education and life skills they need to turn their lives around.

I can announce today that we are working to secure sites for the first two 1,500-place prisons at Beam Park West in the London borough of Barking and Dagenham, and Runwell in the borough of Chelmsford in Essex. Both prisons will be privately built and run, and their construction and operation will sustain many hundreds of jobs. Prison capacity planning depends crucially on projections of future demand and judgments about the cost-effectiveness and appropriateness of replacing older places with new capacity. These and other considerations are kept under constant review, and further decisions as to sites and the removal of older provision will be announced in due course. In this context, I can tell the House that we will not be pursuing a prison on the Omega site in Warrington.

Meanwhile, work is already in hand to increase capacity by approximately 8,500 places over the next three years. It also remains my intention to withdraw the end-of-custody licence scheme as soon as safely possible. The expansion is going to include two new public prisons—Isis, adjacent to Belmarsh, and Coltishall, a former RAF base in Norfolk—and two new private prisons, Belmarsh West and Maghull. We are also expanding HMP Littlehey, near Huntingdon, to provide 480 places by early next year as a quicker, more cost-effective option than buying and converting a prison ship.

At all times, but especially in today’s economic climate, we have a duty to ensure that prison and probation services work as efficiently and effectively as possible in the interests of the public. We are seeking to improve the efficiency of public sector prisons through reforms to workforce structures for new uniformed staff and by reducing management costs. From today, we will be consulting on the detail of these plans.

Nearly 90 per cent of prison places are delivered directly by the public sector but the private sector also plays an important part. The Government’s approach to competition was described in last November’s Pre-Budget Report and last Wednesday’s Red Book.

I have already set out the situation for new-build prisons. Five existing prisons have previously been subject to competition. Of these, Manchester, Buckley Hall and Blakenhurst are currently run by the public sector, and Doncaster and Wolds are run by the private sector. Each will be subject to a new competition as their current contracts end. Blakenhurst now forms part of Her Majesty’s Prison Hewell, so we will put the Hewell cluster to competition when the contract for Blakenhurst ends in August 2011. Two poorly performing public prisons, Birmingham and Wellingborough, will be market-tested this year. Public, private and third sector providers will all be invited to bid.

Let me now turn to probation. It is against a background of greatly increased real-terms budgets that the Probation service is now being asked to make some savings of low percentages this year and thereafter. Detailed analyses show that historically the workload and resources of probation areas have not necessarily been well matched, especially when measured against convictions, the key determinant of workload. So we are now seeking to target resources better to match needs. We want to be clearer about the service probation should deliver, to reduce administration costs and rigorously to manage contracts.

The probation trusts’ programme gives areas greater control over budgets and enables the private and third sectors to provide more services. If probation boards fail to become trusts, from 2010 options will include amalgamation into existing trusts or being put to competition in the open market. Probation court services will remain within the public sector, as required by the Offender Management Act 2007.

Probation areas are now also required to review their services against a national ‘best value’ framework. If services fail to meet the standards necessary, areas must improve performance or use competition to identify alternative providers. As the first services to be reviewed in 2009, at least 25 per cent of community payback and victim contact services will be competed in the open market.

We have provided nearly 25,000 prison places since 1997 to accommodate the most serious, dangerous and persistent offenders, and we are committed to bringing the total number of places up to 96,000 by 2014. Over the past decade, prison conditions have been transformed. As Her Majesty’s Chief Inspector of Prisons has acknowledged, prisons today are more decent, more constructive and considerably more secure. They are places of punishment and reform. The measures I have announced today for expanding and modernising the prison estate and the management of prisons and probation will allow us to realise still further improvements to public protection and reoffending, with maximum benefit for the taxpaying public.

I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, as always, I offer my thanks to the noble Lord for repeating the Statement, but perhaps I might take him up on one or two of the figures that he has put before the House. He talks about this being the first post-war Government to have seen a sustained reduction in crime. At the same time, he boasts about having provided some 25,000 new prison places. All those new prison places seem to be full, because we know that the prisons are bursting at the seams. Why that has happened when we have had a sustained reduction in crime seems hard to understand, if one believes the government figures. Could it be that, at the same time as we might have seen a sustained reduction in crime, as the Minister has put it, we have seen a dramatic increase in violent crime? It is violent crime that most citizens in this country fear most of all. When the Minister comes to respond, will he acknowledge the fact that we have seen a near doubling of violent crime since 1997, and that is why the numbers in prison have had to go up by quite such a large number?

The Minister referred in his opening remarks to the recent disturbances at Ashwell prison. I acknowledge his remarks about how the Prison Service staff acted, and we offer our full support, but we await the result of the full investigations by the Prison Service and the police into what happened there. In the mean time, I would be grateful if he could tell us what warnings his right honourable friend the Secretary of State received about any potential unrest there and what further warnings he might be receiving about problems arising at other prisons that are bursting at the seams.

I shall move on to the central part of the Statement: the whole question of Titan prisons. We on these Benches welcome the fact that the Government are performing an admirable U-turn here and are getting rid of those prisons, even if they are to be replaced by mini-Titans, which we will get on to later on, and even though we suspect that this is done not as a result of the consultation—we know the attitude that this Government normally take to consultation—but merely to save money. I hope that the noble Lord will be able to start by offering some assurance to the House about what the alleged savings are likely to be from changing from Titans to mini-Titans, as they have announced today.

I shall expand, because the Minister asked me to, on the comments that I made at Question Time on the parole system. I said on that occasion that I welcomed the alleged 14 per cent increase—I say “alleged” because we never know with this Government just whether they will be offering an increase or not, and because, although we might welcome more money coming in, we want to see a parole system that is working properly and will deliver genuine savings to the Prison Service by getting some people out of prison earlier. We want to know how that money is going to lead to the easing of the pressure and whether it really will do so. What will that alleged 14 per cent do and when will it come in? We have considerable fears that, although the Government may boast about an improvement in cash, as we have seen so often before in so many other parts of the Government’s activities over the past 11 years, we will not see any improvement in the actual service.

On the prisons themselves, the Minister tells us that the three Titans are to go—that is, 7,500 of the places that the Government were offering. They are to be replaced by what I think we will call “mini-Titans”, which will be five prisons of 1,500 places each. Just what will the saving be from doing that? As I understand it, the cost of one of the three Titans appears in the current spending round, but the cost of the other two does not. Now that we have five mini-Titans replacing three Titans, which ones appear in the current spending round and which ones do not? Is it one, two, three or whatever? No doubt the Minister will be able to tell us.

When will they come on stream? The noble Lord boasted that the Government hope to get up to the order of 96,000 prison places by 2014; certainly they will need that, given the current estimates, admittedly at the high end of the scale, for the prison population being up at about that level. Can he still assure us that those mini-Titans and all the others will be built by that stage? Will he tell us by what means they will be built, on which he was faintly vague? Are they all to be built under PFI and at what cost?

The noble Lord also talked about the further work to find another 8,500 spaces over the next three years. We would be grateful if he could expand on that and tell us just how he intends to do it, particularly as he also talked about ending the early release of prisoners on licence. How does that fit in with releasing the pressure on numbers, as it will obviously lead to a further increase in numbers in due course?

Lastly, on probation trusts, I thought that the noble Lord was a little coy when he said, talking about the economic climate, that,

“the probation service is now being asked to make some savings of low percentages”.

The House would be grateful if he could spell that out in greater detail. If the probation service is being asked to make cuts, we need to know a bit more than just that they are of a low percentage. I trust that the noble Lord will be able to answer all the other questions in due course.

My Lords, I am grateful to the Minister for repeating the Statement. One sentence stands out:

“Prison capacity planning depends crucially on projections of future demand”.

In the 22 European countries that form part of the International Crime Victim Survey published by the United Nations and are studied by the International Centre for Prison Studies, the average number of people who are imprisoned is 104 per 100,000 of population. The figure for England and Wales is 152. If we were to imprison people at the same rate as the average European country, we would have a prison population of 56,856 as opposed to the current population of about 82,000.

My question to the Minister is simple: why are we planning to increase the number of prison places? Why are there projections of future demand that suggest that we will need 96,000 prison places in a short period of time and, according to the report of the noble Lord, Lord Carter, over 100,000 by 2014? It is just wrong. The Government need to rethink their position completely. It is not as though the prison expansion policy that we have seen over the past 10 or 15 years has made any difference to crime. In my professional life, I have seen the number of people sent to prison and the length of time for which they are imprisoned dramatically increase, to such an extent that I am incapable of giving a fair and accurate representation of what a prisoner is likely to get these days, as it is so different from the experience of most of my professional life.

If the Government are suggesting that an increase in prison population has resulted in a fall in crime, I point out that, according to the International Crime Victim Survey, the level of common crime in Europe reached a plateau in 1995 and has shown a steady decline everywhere. The level of victimisation in Europe has now decreased to that of 1990.

Britain remains a high-crime country. It is second among the 30 countries worldwide surveyed in the 2004-05 survey to which I have referred. Only Ireland was higher. Our victimisation rates are statistically higher than the European average: 21.8 per cent of the population of England and Wales were victims of crime in 2003, compared with an average of 15.7 per cent elsewhere.

Why do the Government pursue a policy which has failed, when their own reports and briefings, produced by the Ministry of Justice, indicate what works? Alcohol treatment in the community reduces violent crime; drug treatment in the community reduces acquisitive crime; restorative justice, which does not involve sending people to prison, reduces reoffending. The Government should target already overstretched probation and prison resources at what works and not at tinkering or at producing Titan prisons, or smaller prisons which hold the same populations. Who makes the projections of future demand? Is it judges, or are judges simply pressured by the ministry to fill prison places as they are made? Is it the effect of the press, which always demands tougher punishments? What causes these projections of future prison demand to be made by the Home Office or the Ministry of Justice? There is significant fault in many of the ways in which this Government have dealt with the criminal justice system. This perhaps is the most obvious.

My Lords, I am grateful to both noble Lords, who, as I understood it, were in favour of our announcement today on new prison building—certainly, the noble Lord, Lord Henley, spoke as though he welcomed it. We believe that prison is the appropriate place for serious, persistent and dangerous offenders and we make no apology for it. Of course, we also believe very much in community sentences, and think that more use should be made of them than sometimes has been. We have worked hard to increase the confidence of sentencers by strengthening the range of community options available and ensuring that sentences are rigorously enforced. We invested £13.9 million over three years to run seven intensive alternatives-to-custody demonstrator projects, including community payback and other projects that are known about in this House. For less serious offences, community sentences can be a better and more effective punishment than a short prison sentence. It is therefore important that there are effective community sentences to achieve the best outcomes for the victims of crime and the public. That is why we have invested not just in prisons but in probation, too. Since 1997, if I may remind the House, the amount that we have spent on probation has increased by 67 per cent in real terms. In 2008-09, probation areas received an additional £40 million to facilitate the use of community orders.

However, the fact is that in any modern society it is necessary to send people to prison. Prison is not just for punishment; it is for reform, too—which is why it is important that new prisons should have in them all the facilities they possibly can to rehabilitate those who have offended seriously.

The noble Lord, Lord Henley, asked me a number of searching questions. He asked why the prison population was rising at a time when crime was falling. We have had this exchange before; the fact is that we are catching and imprisoning more violent and dangerous offenders and they are not being released until it is safe to do so. There are 70 per cent more serious and violent offenders in prison than in 1997. Sentence lengths for most offence groups have increased. If an offender is released but poses a risk to the public, we are recalling them to prison.

People generally do not question the proposition that crime has fallen under this Government, which is something that we are proud of. The noble Lord, Lord Henley, asked me about Ashwell. No warnings were given, and there are none about other institutions—although I am not sure that I would tell the noble Lord if there were. As for this very welcome U-turn, as he describes it, he seemed slightly sceptical as to whether it was as a result of consultation. It is as a result of consultation and of very strong opinions expressed by a very wide variety of people, not least in this House, about the original idea about the 2,500 prisoners. The Government cannot win either way; if we stick with what we originally said, because we are fearful of being accused of backing down for various reasons, we get criticised. If we do make a U-turn and say that we are persuaded that it is a better way of producing new prison places, we are immediately accused of doing it for all kinds of other reasons. Ah, well.

As for parole, we had a brief exchange over the Dispatch Box earlier this afternoon. We need the extra money for parole, because too many prisoners have not had their assessment by the Parole Board at the appropriate time. We have to reform the system of parole and how it is managed to ensure that that does not happen again.

On cost, the bill costs estimated for Titans were £367 million per prison, which makes a total of £1.1 billion. I am talking, of course, in slightly broad terms. The bill costs that we have estimated for these five prisons, two of which I have announced today, are £264 million per prison, making a total of £1.3 billion. Rather than cutting, as has been suggested, we are going to spend a little more, because we are persuaded that this is a better way in which to build new prisons and is something that is generally wanted.

I hope that I have answered most of the questions. Prison projections are produced by the Ministry of Justice analysts and are published as national statistics. They are subject to quality assurance oversight by the independent UK Statistics Authority. Of course, the noble Lord, Lord Thomas, is right. How can one ever say that a projection or forecast will be absolutely accurate? One cannot, but we do the best that we can, and I hope that the announcement that I have repeated in the House today receives generous support.

My Lords, in the context of the item in the Statement that speaks of savings—cuts might be a more expressive word—that the probation service will be required to make, is it not the case that probation officers spend only 25 per cent of their time on front-line work with offenders, as the director-general of NOMS, Mr Phil Wheatley, told some of us here last month? Is that not deeply unsatisfactory? What steps will the Secretary of State take to reduce the bureaucracy that evidently takes up the rest of their time?

My Lords, the noble and learned Lord makes a good point. Certainly that is an unsatisfactory figure and the management needs to improve. On the issue of cuts, as it turns out there has been an underspend in the past year by the probation service so there will not be a requirement for less money to be spent in the year ahead. I take the noble and learned Lord’s point about direct contact between probation officers and prisoners. Indeed, I talked earlier today about the Parole Board and how important it was for the probation service to play its part in making sure that reports are produced on time so that hearings can take place and not be adjourned.

My Lords, the Minister has not answered the question posed by my noble friend Lord Thomas about why this country has the most punitive policy towards the incarceration of prisoners in the democratic European context. Will he reflect on what it is about this country that causes our prison population to be completely out of kilter with that of comparable democracies in Europe?

I served Roy Jenkins when he was Home Secretary in the second Wilson Government in the mid-1970s, when we had half the prison population that there is now. I remember at the time that Roy Jenkins considered that the right approach was to ask what the maximum number of prisoners we could keep within the prison establishment was and how to reduce the prison population rather than have an ever increasing, demand-led building of prisons. Is the Minister aware that as part of that philosophy, which seems to have been wholly abandoned by this Labour Government, John Harris—the then Minster of State, later Lord Harris of Greenwich—spent a great deal of his time in the Home Office building more and more bail and probation hostels and finding alternatives to custody as a main priority? What is it about the present Labour Government that has caused them apparently to abandon that philosophy of keeping the prison population within the existing framework as far as possible and improving stock but not expanding it? Rather like public expenditure, we should be working within a certain proportion rather than have it ever increasing. The same should be for prisons so that we do not have a demand-led system. Am I right in saying that there has been a complete volte-face in the philosophy of the Home Office and the Government?

My Lords, I do not think that there has been. I remember well the time when the noble Lord played a prominent part in these matters, and the House has fond memories of the late Lord Jenkins of Hillhead, of course. He was an outstanding Home Secretary for his time, but times have changed. It is important to recognise that people outside are concerned about the number of serious, persistent and dangerous offenders who did not get sent to prison for long enough in the past. It is all very well for us to say that we must do everything that we can to keep such offenders out of prison and in society, but there are people who are in prison because they will not behave themselves when they come out. It is necessary for any sensible Government to have a policy that means that the kind of offenders that I have mentioned are kept in prison.

However, that is not the end of the story. Many non-custodial sentences are available now that were not always available, even in the 1960 and 1970s. The Government encourage courts to use these sentences. I referred to community sentences for offences that would otherwise require short terms of imprisonment. It is important that both custodial and non-custodial disposals are available to us. I question whether we as a Government and a country are much better or worse than other countries in Europe. We need to make sure that those who are properly convicted of serious offences by the courts are punished and, we hope, reformed. One matter that was not raised by the noble Lord was the fact that what happens in prisons now is vastly different from what happened in the era that he was talking about. There are now all sorts of courses and attempts at rehabilitation that did not exist then.

My Lords, I congratulate the Government on the reduction in the rate of crime over the past 10 or 11 years and on their decision, announced today, on Titan prisons. These are both welcome. My noble friend mentioned that five smaller prisons are in the pipeline. Does he agree that, if the rate of crime goes down, we will probably not need all those prisons? Should not the Government’s policy be directed as much at saying, “We do not need all five” as at saying, “The five are in the pipeline and will be built come what may”?

My Lords, I am grateful to my noble friend for his support for our decisions today. On the second part of his question, everything depends on conviction rates. We all know that many offences are committed where no one is found guilty. If we continue to convict more people who commit serious offences, of course more people will go to prison. It must be in society’s interests that those who commit serious offences are convicted and punished.

My Lords, I welcome the announcement that Titans are no more, although I cannot say that I am particularly happy about the announcement of prisons that will house 1,500 inmates. That is another unit that has been consistently proved to be far too large.

The Minister reminded us that it was 5 December 2007 when Titans were announced. What a pity we did not have a consultation either before or immediately after that date. It could have saved 18 months of confusion and uncertainty, and directed the minds, experience and advice of all the people who contributed to the consultation towards producing something that was practical and realisable. I worry that again we have had the announcement of what the noble Lord, Lord Henley, referred to as mini-Titans, without consultation. How can we be certain that they are going to work?

Another thing that concerned me in the Statement was the remark that the Government are always seeking to reduce management costs. That is far from the truth. We now have a monster National Offender Management Service agency with more than 4,270 people on its staff. Yet the prisons are saying that they lack staff to deal with overcrowding, and probation staff are pressed. The noble and learned Lord, Lord Mayhew, mentioned that only 25 per cent of probation time is available for probation work. I visited a prison where the governor told me that 90 per cent of her time was taken up with bureaucracy. If the Government are faced with extreme financial problems demanding a clear, consistent and detailed look at how they are going to spend money for the better protection of the public by rehabilitating offenders, how can they produce yet more figures, Bills and developments without doing anything about the waste that is hidden in the current structure of the prison system, and which has been proved over and over again? Surely they should do something about the bureaucracy that is preventing people who are there doing the work that they ought to be doing.

My Lords, I am grateful that the noble Lord feels that we have made the right decision in not going ahead with Titans. The United Kingdom prison system already operates prisons of the same size as the proposed new prisons. The noble Lord should be comforted to hear that the new prisons will be divided into smaller units. He is a severe critic of the way in which management is carried out in the Prison Service. However, every effort is made to ensure that management is at all times efficient and humane. Given that prisons, probation and what to do with serious offenders are an incredibly important part of our national life, I believe that the Government have a good record on this.

My Lords, as president of the Howard League I welcome the retreat from Titans. Given that 20 years ago in another place I and at least two noble Lords I can see on the Labour side of this House railed against three or four Members of the then Conservative Government whom I can see on this side of this House—and, indeed, one on the Labour side who has since changed sides—at a prison population of 45,000 people, what on earth is the evidence that the unrelenting playing of the “go to jail” card has reduced recidivism and the other adverse consequences of the use of imprisonment for non-serious offences? Can the Minister confirm that, for the lower level of offences, community sentences provide lower cost and no less success? Why have the Government chosen to reduce the budget to the Probation Service when an increased budget to that service provides best value?

My Lords, as I said, there will not be a reduction in the Probation Service in the year ahead. However, all parts of national life are affected by our economic difficulties. I have explained why the Government feel it is necessary to imprison those who have committed persistent, serious and dangerous offences. We have imprisoned many more of those people than were imprisoned in the past because the rate of conviction has gone up.

The noble Lord is, of course, right that community sentences are appropriate for those who have committed offences which would otherwise require a short prison sentence. That is why over the past few years we have put a lot of money into community sentences and will continue to do so. There is no great delight in sending people to prison, but to a greater or lesser extent society needs to be protected from people who have committed serious offences. I believe that if you asked anyone outside this House whether that was so, they would say, “Of course, you don’t want to incarcerate them for ever. You want to reform them and rehabilitate them”. That is what our proposals are intended to do. Prisoners should be in modern cells in modern prisons with courses available, and should be offered every opportunity to leave prison and lead a lawful life.

My Lords, the basic paradox to which the noble Lords, Lord Henley and Lord Thomas, referred remains; namely, that whereas crime has fallen steadily since 1997—I have no reason to doubt that it is down by 37 per cent—nevertheless our prisons are overflowing and the percentage of our people in prison is much higher than it is among our European neighbours. I suggest that a possible reason for that is not the number of crimes but the extent of the sentences which are now imposed. I give a simple example.

When I became a judge, the maximum sentence for causing death by dangerous driving was two years, now it is 14 years. The judges reflect what Parliament says should be the maximum sentence for offences, so it is not surprising that sentences for causing death by dangerous driving have increased more than fourfold. The same is true of creating new crimes; for instance, that of causing death by careless driving with a sentence of five years’ imprisonment. It is the creation of new offences and the increased sentences for existing offences which explain the paradox to which attention has been drawn. I hope that the Government will resist the ever-present pressure from the media and others to increase sentences for particular cases that come to their attention and about which they can create great sensation. If the Government can resist that pressure, there is a hope.

My Lords, I am grateful to the noble and learned Lord, as always. One of the explanations for this seeming paradox, as I said earlier, is that sentence lengths for most offence groups have increased. Some would say that for some offences that is not a bad thing. I seem to remember that there were cases of causing death by dangerous driving where two years’ imprisonment seemed ridiculously short for the seriousness of the offence. There was also a lacuna in the law as regards causing death by careless driving because for serious offending the court could pass only an insufficient sentence. If the noble and learned Lord is saying to me that there are examples where sentences have been extended more than they ought to have been, I am sure that he is right. However, in some instances it has been necessary to change the law and allow for extra sentencing when judges believe that to be appropriate.

My Lords, many people will be pleased to hear what the Minister said about the Corston review. We have waited for that for a long time. Will he assure the House that there will be proper and up-to-date health facilities in the new prisons? Will he also ensure that there will be a contingency plan for a serious flu epidemic?

My Lords, I am grateful to the noble Baroness for her comments on our response to the Corston review. Over the next two years, £15 million will be dedicated to keeping vulnerable women out of prison. Furthermore, the number of women sent to prison in the past 12 months was lower than in the previous 12 months.

The new prisons are not for women prisoners or juvenile offenders. They will be built to the highest modern standards. The idea is to have some common parts of the prison in addition to the separate units.

I am afraid that I am not briefed to be able to answer the noble Baroness’s question on possible pandemics, and I do not want to get it wrong. No doubt the Prison Service has its own plan to deal with any such eventuality.

My Lords, my noble friend seems not to have answered the question put by the noble Lord, Lord Thomas of Gresford. If 22 other countries in Europe have far fewer people in prisons than we have, what is the reason for that? Will he give us a brief explanation? We have heard some vague references, for which we are very grateful, but we still have not had a serious answer to a sensible and appropriate question.

My noble friend made some point about efficiency savings which I support. However, following what was said by the Chancellor in the Budget last week, is the Ministry of Justice now looking more seriously at specific expenditure cuts, as I hope are all government departments?

My Lords, on my noble friend’s final question, like all government departments we are, of course, doing our duty. As to his first question, it is necessary that I go away and write a letter to the noble Lord, Lord Thomas of Gresford, with a response to his point. Britain is not exactly the same as other countries. It has a higher number of crimes of certain types and a lesser number of other types, but the question that has been repeated around the House deserves a more detailed answer than I have been able to give this afternoon. That is what I shall do.

My Lords, with the leave of the House I should like to repeat a Statement made by my right honourable friend the Secretary of State in another place. The Statement is as follows:

“With permission, Mr Speaker, I should like to make a Statement on the reports of human cases of swine influenza, known as the AH1N1 infection, in some parts of the world, notably Mexico and the United States of America.

The outbreak began in Mexico on 18 March and as at 9 pm last night there have been over 800 cases and 89 deaths in that country. However, to date, only 18 cases have been confirmed as being caused by the AH1N1 virus and it is highly possible that other, more routine causes of infection are currently circulating in Mexico.

On Tuesday last week, under the terms of the international health regulations, the United States reported seven cases of the AH1N1 infection. On Friday 24 April, the United States Centers for Disease Control confirmed that samples from Mexico contained the same virus as those in the United States.

Twenty cases have now been confirmed in five different states of the USA; four have been confirmed in Canada and one in Spain. Suspected cases have also been reported from New Zealand, France and Israel, although it is important to note that these are suspected cases and have not yet been confirmed as the AH1N1 infection.

In the UK, 25 cases under investigation have been reported. Eight of these have proved to be negative, and three are currently undergoing further specialist tests. These patients are in isolation wards in hospital, after recently travelling in Mexico. People who have been in close contact with them are currently being contacted. The remaining 14 suspected cases are undergoing initial investigation and are sufficiently well to be managed in the community.

It is too early to say whether the cases in Mexico and the US will lead to a pandemic. Scientists do not yet understand the extent to which cases in Mexico and the US are linked and are not yet able to make a complete assessment of the health implications of this new virus.

A pandemic is declared when the World Health Organisation raises the pandemic alert to Phase 6. This means that there is widespread person-to-person transmission of a virus in the general population. At the moment we are at Phase 3.

The director-general of the WHO, Dr Margaret Chan, has declared that this is a public health emergency of international concern. The WHO is convening a committee of experts from around the world which is meeting this afternoon to review the situation and determine what further action is required at a global level.

In deciding the pandemic alert state, the WHO bases its decision on expert scientific advice based on the available epidemiological and scientific evidence. The range of symptoms in those affected is similar to those of regular human seasonal influenza. It is important to note that, apart from in Mexico, all those infected with the virus have experienced mild symptoms and have made a full recovery.

The swine flu that has been isolated in Mexico and the United States is sensitive to the antiviral drugs Tamiflu and Relenza. These drugs are effective in treating the illness, provided they are taken quickly enough. These medicines can reduce the length of symptoms and usually their severity.

I would like to outline to the House the measures that we are taking in response to this situation in the UK. The UK has been preparing for a flu pandemic for the past five years. We have established a stockpile of enough antivirals to treat more than 33 million people—that is, half the population of the UK. All NHS organisations have pandemic flu plans in place and the Department of Health is now working closely with the NHS to ensure that these plans can be put into action so that antivirals can be made available to the public very rapidly, should we reach that stage.

Over the weekend, the Government have been putting in place precautionary measures to implement the plans we have been developing in the case of more widespread infections in the UK. I have spoken to ministerial colleagues and my opposition shadows this morning, and I will be convening a meeting of the Civil Contingencies Committee immediately following this Statement.

We have enhanced our port health checks so that passengers arriving in the UK with symptoms of illness are identified and assessed. Information is being made available to passengers arriving at ports and we have provided urgent advice to doctors.

Should the virus start spreading widely in the UK, we propose to use our antiviral stockpile for the treatment of symptomatic patients. We already have an advanced agreement in place with manufacturers should a vaccine be developed, although it is important to note that it will be some time before scientists can develop a vaccine, as this virus is not yet sufficiently understood. Experts are currently examining whether vaccination with regular, seasonal flu vaccine can in any way boost immunity to the H1N1 strain, and we are considering how best we can use the limited stocks that are currently available within the UK.

Many people will wish to know whether they should wear face masks. Although we are aware that face masks are being given out to the public in Mexico, the available scientific evidence does not support the general wearing of face masks by those who are not ill while they are going about their normal activities. We are, however, urgently looking into how we can increase our stockpiles of face masks for healthcare workers who are treating sick patients. We have also published infection-control guidance for support staff treating or caring for people who have symptoms.

We already have well advanced plans for providing information to the public in the event of a pandemic—in particular, about what people can do to help themselves in the event of swine influenza being confirmed in the UK. Updated information is available on the NHS Choices and HPA websites, and further information is also available for health and social care staff on the Department of Health website. We are putting in place an information line containing recorded, up-to-date information for those who want to know more about this type of flu. In addition, NHS Direct is providing information to people who have recently travelled overseas and are worried that they may have symptoms.

There are three key messages I would like to stress at this stage. First, it is important to emphasise that in all cases outside Mexico the symptoms of this illness are mild and all patients have made a full recovery. Secondly, we can all take simple measures to prevent infection—in particular, covering the nose and mouth when coughing or sneezing and washing hands regularly. Anyone who develops flu-like symptoms should go home and contact NHS Direct or their GP by phone. Thirdly, anyone who has recently travelled to the affected areas and is experiencing influenza-like illness should stay at home to limit contact with others and seek medical advice by phone from a local health professional or NHS Direct.

In line with advice from the WHO, there are currently no travel restrictions on those who are planning to visit affected areas. Anyone planning to do so is advised to ensure that they take the measures I have outlined to prevent infection and to consult a doctor immediately if they show signs of flu-like symptoms. To enable local health services to respond to the pressure that the possibility of a pandemic may bring on services, we are working with primary care trusts to ensure that arrangements are in place to support the distribution arrangement for antivirals, should that become necessary,

There is trepidation and concern across the world. Here in the UK, we are monitoring the situation very closely, alongside the WHO and our international partners. The UK has been preparing for such an occurrence for a number of years and the World Health Organisation has recognised that the UK and France are the two best prepared countries in the world. I will of course keep Parliament fully updated on what is obviously a rapidly developing situation”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for giving me a copy of the Statement an hour or so beforehand. I also want to express our deepest sympathy for all those affected by this outbreak. I congratulate the World Health Organisation on its rapid response when the outbreak came to light in Mexico. It has greatly improved its all-round performance under the very able leadership of the director-general, Dr Margaret Chan, who was appointed two years ago.

Perhaps I can reassure the Government that they can count on our full support in their efforts to prevent the spread of this disease. We shall do all we can to boost the nation’s morale and confidence that the epidemic will be contained. The fact that the UK is among the best prepared countries is in no small measure due to the constant pressure applied to the Government, since 2004, by Mr Andrew Lansley in another place. It is a pity that the Government refused his request for a debate on the pandemic influenza in January. I am sure that if our Minister, the noble Lord, Lord Darzi, had been in another place, he would have insisted on such a debate and would have excised the objections from the congenital snag hunters.

Can the Minister tell the House how the Government propose to inform the public if the national flu contingency plan is triggered? I assume from the Minister’s Statement that the national flu line service is not yet ready. Perhaps he could tell us when it will be ready. The EU has advised against non-essential travel, but the UK Government have not followed suit. Perhaps the Minister could say why that is so.

On face masks, the Minister and I are very well aware that if a mask is lowered, as it often is, and left for a while round the neck, it is much less effective when returned to the face. Perhaps that could be emphasised.

Most of all I want to emphasise that I am very worried indeed that the Government have decided to treat only those with symptoms and not to give the antiviral treatment prophylactically to the family contacts of those who contract the disease. I cannot emphasise strongly enough what a serious mistake that is and I urge the Minister to persuade the Government to change their mind. In the flu epidemic of 1918-19, many returning members of the Armed Forces knocked on the doors of their homes but received no answer as the whole family was dead inside. The Minister has said that we have a very plentiful supply of antivirals, which is great, but they should be used prophylactically to protect family members from this disastrous possibility. Will the Minister give us an assurance that he will use his charm and pressure to get the Government to change their mind?

My Lords, I also thank the Minister for allowing us to see the Statement before he repeated it in this House, and I associate myself with the remarks made by the noble Lord, Lord McColl.

The Prime Minister must be feeling a little like the Pharaoh in ancient Egypt who had the seven plagues visited upon him. I have lost count of the number of plagues that the Prime Minister has had in his 18 months, but he must be wondering what he has to do to make them stop. This is one such and, as ever, the tabloid press are making a feast of it. This morning alone we have had front-page headlines such as “Pig sick”, “Killer pig flu”, “Swine flu sweeps globe”—which it has not yet quite done—and the Daily Mirror modestly asking: “Is swine flu already here?”. The general public are being subjected to those headlines and to all sorts of opinions and advice in the newspapers by medical journalists, ordinary journalists, retired doctors, active doctors, people who are not doctors at all, soothsayers and an awful lot of other people.

What stood out for me was the advice from the 1918 flu epidemic, which recommended that everyone in the population should wash out their nostrils with soap and water—carbolic soap, presumably—night and morning and eat lots of oats. I am not sure whether oats are a good preventative, but it cannot do us any harm to eat more oats, so that is what I shall be doing.

We have had two reports that may be relevant, and I look forward to reading them. There was one in 2007 on controlling international borders and the spread of diseases, which I must confess that I have not read, but I think that the gist of it was that we should not always wait for top-down direction from international organisations but should get active ourselves—which the Government have done, and I give credit to them for that. I understand that the Select Committee on Science and Technology is investigating UK readiness for a pandemic and that that report will be out quite soon.

I shall ask a few questions briefly. First, on the subject of wearing masks, I wonder whether the general public would not feel more comfortable if they were told that on crowded underground trains and aeroplanes it might be prudent to wear masks. After all, it is the hay fever season, so an awful lot of sneezing, coughing and blowing of noses is going on anyway. I, for one, would feel more comfortable, and I ask whether we have a sufficient supply of masks. I presume that they are available from pharmacies, but I do not know. We need to know that and people should make up their own minds whether they wear them.

Will the Minister tell us how long he estimates that it will be before the new vaccine is ready? Do we have firm plans in place for its delivery? Do we have enough staff, enough people on the ground, to immunise people? As it has already been said that the old vaccine confers some immunity against this new swine influenza, I would have thought that it would be prudent to vaccinate the young, fit and vulnerable people with it straight away. Let us use up the old stock, because we will have a new vaccine by next winter anyway. Why not use up last winter's stock to protect our young people, who, it is thought, are the most vulnerable?

I would like to know whether Tamiflu and Relenza will be available off-prescription. I agree with the noble Lord, Lord McColl, that it is better to use them prophylactically for people who have swine influenza among their family circle. Will they be available off-prescription? If so, are the supplies adequate? Do we have a mechanism to ensure that individuals are not stockpiling it already by some means or other to protect their families? When patients are advised not to go to GP surgeries but to call their GPs for advice, what will happen if their condition worsens rapidly? Will GPs do home visits or will those patients who fear that they may have swine influenza be dialling 999 and infecting ambulance crews up and down the country? Do we have a system in place for rapid disinfection of our ambulance services if that occurs? We are told that official advice from the Department of Health is coming. Could we please have it as soon as possible? People are being subjected to so many opinions on this that we need official advice on websites, and in doctors’ surgeries and pharmacies, as soon as possible.

My Lords, I am grateful for that response to the Statement made by the Secretary of State. First, I will try to address some of the very important issues raised by the noble Lord, Lord McColl. On the national flu line, we have a contract with British Telecom, and we anticipate that the flu line will not be ready until the autumn. Lest we forget, most pandemics occur in waves, as we saw in Spanish flu, which was in three waves. Obviously, we are focusing all our efforts on ensuring that the line is available in the autumn. Through the NHS operating framework, we have also ensured that the NHS is ready to deal with such a situation. NHS Direct and all PCTs are looking at the options in which they could release the stockpile of antivirals if such a need arises. I hope I have covered that point.

There has been a fair bit of debate about travel and the evidence of the benefits and disadvantages of the approaches for border closure, an issue raised by the noble Baroness, Lady Tonge. This is still under review. UK nationals may be advised against all essential travel to certain countries or areas during the pandemic through the usual FCO travel advice process. If I remember correctly, we did this in the days of SARS when a statement was released by the FCO. We are keeping a close eye on that. Unlike the United States, we do not have a major border with a country like Mexico where cases have been identified.

The noble Lord raised the issue of wearing masks, and I could not agree more. Most surgical trainees are taught how to wear a mask. If masks are used in certain situations, we have a duty to ensure that they are appropriately worn. I will come back to the issue of masks, which was raised by the noble Baroness. Masks tend to prevent cross-infection from someone who is infected for up to three feet. There is evidence that healthcare providers, such as staff working in health services, should wear masks because they are in fairly close contact with patients. But there is no evidence to suggest that an individual who is not infected needs to wear a mask in open spaces. However, if an individual has the flu, he or she should wear a mask. Perhaps I may remind noble Lords of public health advice that is well known to all of us: if you have the flu you should remain at home. You should not be wearing a mask on the streets. That is the relevant evidence as far as masks are concerned.

On the use of antivirals, there is a debate in the scientific community on whether they should be used as a prophylactic measure. I do not think any other country has adopted a clear policy on household prophylaxis using antivirals, but we should consider it. Much will depend on demand for antivirals, and I have made a point of saying that we have enough to supply 50 per cent of the population. We may look at this again in considering a move from symptomatic patients to looking at close members of the household who might be at risk. However, that is all being kept under review and at the moment the policy is to treat only symptomatic patients because we cannot predict actual demand.

I turn now to some of the points raised by the noble Baroness, Lady Tonge. She asked about new vaccines. It will take a while to map out the mutation of this virus. We know that it is an H1N1 virus and a relative of the Spanish flu virus. I predict that at best it will take three months to come up with a new vaccine, but let us not forget that we also have to build up a stockpile of the drug. That is why the Statement makes it clear that it could take up to a year to acquire an adequate supply.

On whether we have enough staff to administer the vaccine, I think that we are in a good place in that regard. We have done a lot over the past three or four years in getting the public to understand that the ordinary influenza vaccinations that we have been giving to high-risk groups, such as the elderly and the young, are of value. Moreover, one of the advantages of a universal healthcare system where patients are registered across the board is that it puts the UK in a good place to ensure that vaccinations can be made available.

On the point about advice and algorithms in management, we are in the right place to come up with these on either the HPA or Department of Health website, and I have no doubt that the Chief Medical Officer is actively engaged in the process as we speak. I hope that I have addressed the major questions that have been raised.

My Lords, I thank the Minister warmly for his prompt and appropriate repetition of the Statement prepared for the other place. Reference has been made to the fact that the Science and Technology Committee of this House has been engaged in detailed discussions on these matters, and I bring forward two questions which arise from the issue of treating symptomatic patients. This first is this: do the Government have a policy on giving key workers early access to the drugs that are already available? Secondly, are there clear criteria for the identification of these key workers, not all of whom will necessarily be in the health and care services?

My Lords, I am grateful for the noble Lord’s intervention in relation to the work of the Science and Technology Committee, and I await its report. We have a policy in place for ensuring that all key workers in the healthcare system are protected as much as possible, which includes giving them supplies of the antiviral drugs. As I said earlier, we do not yet have a vaccine that we know works in this situation. We have a small supply of the H5N1 vaccine, but it is not effective here. Antivirals will be distributed and certainly all other precautions will be taken. The priority is to ensure that we have not just a competent but a healthy workforce that is able to deal with some of the challenges we will face if this becomes a pandemic.

My Lords, I have to say that I found the noble Lord’s response to the question put by my noble friend about the suggestion that antivirals should be used prophylactically less than satisfactory. As a co-opted member of the Select Committee that is currently looking at this area, we have recently been given some interesting information by the noble Lord’s department. It refers to two published papers on the use of antivirals for post-exposure household prophylaxis. However, let me make it clear that I am not talking about pre-exposure prophylaxis, because I accept that it is probably ineffective.

Perhaps I may quote from the Department of Health paper:

“The modelling shows that antiviral prophylaxis of the household contacts of infected cases given within 24 hours of symptoms appearing in index cases could have a greater impact on a pandemic than a simple treatment policy, reducing cases and hence deaths”,

and goes on to say that it could,

“significantly limit the impact of a pandemic”.

Why cannot the Government now take a decision to embark on this policy? I had a long discussion this afternoon with the noble Lord, Lord May of Oxford, who has repeatedly asked the same question. We are told that the Government are actively examining the feasibility of introducing the policy, but does the noble Lord accept that that is not enough; that there has to be a clear decision that this will be used? If this is not done, I suspect that the Secretary of State will find himself in an extremely embarrassing position if this pandemic subsequently spreads to the whole country.

My Lords, I am grateful to the noble Lord for his advice and for highlighting the evidence base. I agree that there are plenty of studies looking at seasonal flu in which prophylaxis for post-exposure has been used quite successfully, and I have no doubt that that information could translate into a pandemic situation as well. We do not have a view on this now for the simple reason that we need to consider the size of the stockpile we have—which, as I said earlier, will treat 50 per cent of the population—versus the worst-case scenario.

A simulation of, “what is the worst-case scenario, what is our stockpile?” will be carried out and a decision will be made about a post-exposure prophylaxis. I am not excluding it; I am just making the point that we need to wait for evidence of the transmission of the virus and how quickly it is progressing to enable us to evaluate the worst-case scenario versus the stockpile. Otherwise, we may end up in the situation where we do not have a stockpile for treating patients who are infected with the flu. I promise the noble Lord that I will keep a close eye on this. The whole department, including my right honourable friend the Secretary of State, is looking at our policies on a daily basis.

My Lords, I have two questions on the antivirals. My first question is whether we have a sufficiently rapid distribution process to make sure that the antivirals reach the GPs and patients when they need them. My second question relates to the availability of the doses. It is good to hear that we have enough for 33 million people—half the population—but would it not be wise to develop a greater stockpile? We would not then run into the problems that we have heard about in deciding whether to give the drug to close contacts.

My Lords, I am grateful for my noble friend’s intervention. On his first question on distribution, absolutely we need to have a streamlined distribution system. If I could come back to the point raised by the noble Baroness about prescriptions, this is not a situation in which you would have to wait for a prescription. You would make a call, go through your symptoms and your drugs would either be delivered to your household or a member of the family in that household would go and pick them up. We need to make sure, though, that we have a system for monitoring this—in other words, a patient number or a patient identity number—to prevent acquisition of the drugs for the wrong reasons.

I am also grateful for my noble friend’s advice on greater stockpiling. I reassure the House that everyone in the department is calling every manufacturer to ensure that we increase our stock. We have every intention of making sure that we have as much as possible. I have just given the figures about our stockpile of antivirals before the pandemic even hit the news. The House can be reassured that we are doing everything possible to increase our stockpiles, not only of antivirals but of the other medications that might be required in the event of a pandemic.

My Lords, I thank the Minister for the leadership that he is providing and for the Statement he has given us today. However, I want to ask about antivirals and their distribution. Have healthcare workers currently looking after patients who are in isolation been given antivirals that they can start taking at the very first hint of a symptom? In their planning, are the Government considering distributing to first-range frontline workers antivirals that they can hold and start taking at the very first symptom occurring?

The reason that this needs careful consideration is that we know that containment is crucial in any type of epidemic. In the SARS epidemic, from which we can learn a lot of lessons, it was clear that containment—geographical containment and the complete prohibition of movement in and out of the area—was key to what happened. That included the isolation of the healthcare workers who were involved in looking after those cases. I declare an interest as a co-opted member of the committee that is looking at pandemic influenza.

My Lords, I am not entirely sure about the healthcare workers involved in treatment, but I am more than happy to look into that and come back. The current policy, although we are always reviewing this, is that healthcare workers who get symptoms will be given the antivirals, but not in advance of seeing a patient—in other words, not pre-exposure but post-exposure. I am happy to look into that further, though. That policy will continue to change. We are fortunate to have enough stockpiled to treat 50 per cent of the population, so we have leeway, but we could do more. The policy for staff regarding pre-exposure, post-exposure and symptoms could always change.

My Lords, it is reassuring to learn that this virus, H1N1, has, in many cases outside Mexico, produced a mild illness from which people have quickly recovered. There is, however, a microbiological principle that has been recognised for years, although I do not think it happens very often with viruses, called “passage”, meaning that sometimes, when a virus passes from one individual to another and goes on through that individual to another, it may increase in pathogenicity. Is there any evidence to suggest that viruses such as this may in fact increase in pathogenicity through that principle?

Also, is it not in fact an influenza A virus? The seasonal vaccine is effective against certain strains of influenza A. If it is likely that the seasonal vaccine might be of value, would it not be appropriate to be willing to distribute that at an early date if the number of cases increases in the UK?

I am grateful for the fact that there is no ban on travel at the moment, because at the end of next week I am due to travel for 48 hours to Boston, Massachusetts, to speak at a memorial service for a greatly revered colleague with whom I worked in 1953. Perhaps it would be wise if I took some Tamiflu with me. Would the Minister advise me to do so?

My Lords, I am grateful for my noble friend’s comments. I agree with him that the virus could behave in any way. We do not have sufficient evidence to see how it has behaved so far. There are all sorts of thoughts out there about whether it has become milder since it has been in the US. We do not even know where it started, although the major cases are in Mexico. We need to keep a close eye on these issues.

I do not know exactly how much of a stockpile of the seasonal vaccine we have from last year. I do not think the new vaccine is out yet. I am grateful for the noble Lord’s input on that, though, and I will be happy to look at it. Let us not forget that we do not yet have a case in the UK, but I hope I have reassured noble Lords that if there is one, we will look at all these possibilities.

There is no way that a practising surgeon could give advice to my noble friend on whether he should take Tamiflu.

My Lords, the answer to the noble Lord, Lord McColl, about direct travel to Mexico seemed to be slightly equivocal, in as much as it is okay to go there from the UK but not from France. Will he clarify what the position is? What would he recommend with regard to direct travel from the United Kingdom to Mexico, as there is a large volume of traffic? I declare an interest in this.

My Lords, as I said earlier, today, we are not advising any restrictions on travel to Mexico. However, we are advising any person who is travelling to Mexico to be aware of the symptoms and to have clear advice on returning to the UK and on engaging with any passenger who becomes ill. The advice is that we do not have any restrictions, but people should be aware of the issues that have arisen. That could change tomorrow. I made it clear that the FCO is in charge of making the decision, and if it changes, as it did about travelling to Hong Kong during the SARS epidemic, then we will recommend that.

My Lords, I am a member of the Science and Technology Committee looking at this issue and a regular traveller to Mexico; I have been there every year for the past 10 years. I notice that people coming in on BA flights have had detailed information taken and, presumably, a record kept of their home address and where they can be contacted. However, many people flying from Mexico come either via the United States or on one of the European airlines from Madrid, Frankfurt or elsewhere. What steps are being taken to generally acquire knowledge about those who are coming directly or indirectly from Mexico?

My experience of the medical services in Mexico is that they are usually of outstanding quality, and I often wish that our hospitals could be as clean and kept in such a good state as many of its hospitals are. We are quite fortunate that the epidemic has come from a country with high medical standards and not from one of those parts of the world where the attention given to it might have been rather less efficient.

My Lords, I have no experience of the Mexican healthcare system, so it would not be appropriate for me to comment on that. I am aware, however, that at every port of entry there are clear signs saying that if you are arriving from Mexico then you need to contact an office, irrespective of which carrier is bringing you in. It is not a carrier issue, nor is it about your previous port of embarkation; it is about where you are travelling from.

My Lords, the Minister may recall a debate in this House on 24 February of the ad hoc Committee on Intergovernmental Organisations, which dealt with the issue of the spread of pandemic diseases. It confirmed one of the things he has said: that this country is highly regarded around the world for its work within governmental and international organisations.

The committee was concerned about the area between the time that the disease is identified in animals and the time that it transmits to human beings. The majority of these diseases, as the Minister will know, come from the animal population. I appreciate that he may not have the answer to this immediately, but what involvement have we had with the office in Paris that deals with animal diseases, with regard to learning from the current situation, about the transmission point? When did the Mexican Government first become aware that this disease had emerged in the pig population, and at what point did we identify it as transmitting to the human population?

My Lords, I am grateful to my noble friend. I do not have any details about what contacts have happened. I reassure the House that the cross-Government contingency committee in this country, which we have described before as COBRA, is meeting, and the Secretary of State has attended. With regard to our information internationally, however, I could be reassured only that the WHO, as the noble Lord, Lord McColl, said, under the leadership of Margaret Chan, is doing a fantastic job in co-ordinating activities across the globe and trying to address some of these challenging scientific questions.

I also reassure my noble friend that in this country, when it comes to epidemiological science and the issue of cross-transmission, we have the best scientists and they are actively looking at this question.

My Lords, how long do the results of a test take? Is this not an illustration of the need for rapid test results? Also, has there been a restriction on pigs in the infected areas, as pigs are carriers of heavy viral loads?

My Lords, the test takes a matter of hours. It is a PCR test, not a culture-type test, so I can reassure the noble Baroness on that. If there is a pandemic—I hope that there will not be—most people will have their symptoms treated before the test. At the moment, we are testing anyone who may be infected. As for the restriction on animals, I have no information that any pigs in this country are infected with the virus, although I am not entirely sure what is happening in Mexico. We say that this is swine flu, but only a component of the virus is pig-related. This is not a situation in which a pig will infect a human. The virus is mutated. We believe that it has parts of human flu virus, parts of pig flu virus and parts of bird flu virus, but it is H1N1.

My Lords, does the noble Lord agree that we cannot expect a vaccine soon, because the virus mutates rapidly? Therefore, it is important that we should observe simple hygiene practices at home when people have flu. For example, people should not use the same cutlery and crockery as someone with flu, they should not use the same towels, flannels and soap as someone with flu and, if possible, the patient should be isolated within the home, so that the vulnerable—young children and the elderly—are not in immediate contact with them. Would that not be helpful? Will he also say for how long a patient is infective and can pass on the virus?

My Lords, on that note, as we are coming to the end, let me say that I could not agree more with the noble Countess. The most important message that we can get out is about preventive measures. We have all sorts of campaigns, such as “Catch It, Bin It, Kill It”, which means that, if you sneeze, catch it in a tissue, destroy that tissue immediately and wash your hands. These are the most important principles in preventing a pandemic. We are doing everything possible to get that message out to the community. I do not have information on the infectiveness of the virus, but I remind the House that in some cases the patient may be completely asymptomatic but still infective, so the infectivity period is so far hard to judge.

In moving Amendment 89N, I shall also speak to Amendments 89P and 93B. Amendment 89N is straightforward. It would delete the words,

“may from time to time”,

in line 8 on page 22. Amendment 89P would add, at the end of line 10, the words in the Marshalled List. I shall come to Amendment 93B later.

In May 2008, Richard Hooper’s team produced its interim report, The Challenges and Opportunities Facing UK Postal Services. I remember reading it for the first time and thinking that Richard Hooper, whom I had met only a couple of times, had produced a pretty good report. However, it is a pity that it was ignored, or not developed, in the final report, which was published in December. Somewhere between the interim report and the final report, something must have affected the thoughts of Richard Hooper’s team.

Most notable of these changes or omissions was the critique of the results of Postcomm’s botched introduction of competition, which was absent in the final report. Equally, the final report failed to add anything much on the universal service. The interim report noted of the universal service obligation:

“It helps social cohesion by linking rural communities with more densely populated areas of the country, and ensures that older people and those with disabilities have an accessible, reliable means of communication and the capacity to send and receive”,

mail. This was not developed in the final report or in the Bill. After all, the Bill removes the protection that these groups currently have under the Postal Services Act. Be that as it may, the failure of Hooper’s final report to develop the debate on the future of the universal service is notable because the inquiry took submissions specifically on this question. However, the final report did not come to a conclusion on whether the universal service represents a burden for Royal Mail.

Probably the biggest indicator that the universal service involves a burden is the failure of the competition to make any moves towards competing for the universal service obligation. The obligation involves the creation of a network of capital, as we discussed on previous amendments, and workers capable of delivering the service. The competition has drawn the conclusion that it is not worth while challenging for the obligation. The only explanation is that this is a burden that the competition will not shoulder and that Royal Mail is too efficient in the delivery of this service for the competition to defeat. Such a conclusion would obviously be against Hooper’s findings, but many of those findings are beginning to look faulty anyway, so perhaps the truth is both that the universal service is a burden and that it is delivered too effectively by Royal Mail for anyone else to consider shouldering that burden.

For the purposes of regulatory clarity and cost-efficiency, the amendments would direct Ofcom to analyse and come to a decision on the universal service costs. Postcomm failed to do this throughout its entire history, which was a pivotal point of its general failure. We must direct Ofcom towards a better policy. It may be argued that this would impose on Ofcom a very difficult task from the outset. Well, there is already a mass of material on methodologies that could be used. The most important issue, though, is that we have already suffered eight years of regulatory drift on this. It must be brought to a conclusion. If Ofcom is the body to do this, it should do so with some urgency. Amendment 93B proposes that examination be brought to a conclusion by the end of the financial year, with any necessary regulatory changes being implemented in the next financial year. I do not believe that this urgency is in any way inappropriate. The Government have suggested that defence of the universal service is at the heart of its concern in the Postal Services Bill. If that is so, it should not be too difficult to accept these amendments. I beg to move.

In speaking to the amendments, my noble friend has made clear what he is aiming to establish. It is certainly a fact that no competition can be provided to Royal Mail at present or in the foreseeable future. We know that some people hope that one of the competitors may at some time be able to take over the full service, including the extra mile, but the competition is not there at the moment. In the mean time, as my noble friend says, there is no doubt that the universal service provider is losing money in taking on what is being asked for; the service is a financial burden to it. My noble friend is quite right to say that this matter should be looked at quickly. He is right to set a date by which it should be done and to say that we ought to know the cost to the universal service supplier—Royal Mail—of undertaking these tasks. The service should not be a burden on it and we need a report as soon as possible. I am pleased to support the amendments that my noble friend has put forward.

I shall speak to various amendments in this group. I should assure the Committee that the reason for the state of my right eye is not that the debate on the Postal Services Bill has become aggressive behind the scenes. Nor is it anything to do with the noble Lord, Lord Mandelson, although I know that he gets blamed for a lot of things.

We propose that Clause 39 should not stand part of the Bill, and we have tabled Amendments 91 to 93, because our party has taken the view that one of the significant errors that has occurred in the operation of the services in question in the past few years is that the regulator was not tough enough to ensure that the Royal Mail’s competitors provided the appropriate payment for the universal service obligation. As we all know, many bulk mail producers have been using other contracts which have then required the Royal Mail to deliver through the post box. Many of those competitors have therefore been taking advantage of the universal service obligation and should compensate for it. Our amendments indicate that we do not think that there is any need for an Ofcom review, but that the Bill should state that those people should pay their appropriate proportion of the USO.

I was hoping that the noble Lord, Lord Razzall, would open up a little more on who was responsible for his current appearance, but I was disappointed. I am afraid that we have serious reservations about the amendments in this group. As later amendments that we have tabled suggest, we are deeply concerned about the possibility of a levy being imposed on the sector without further parliamentary involvement. To impose a levy without clear indication that it is necessary would be counterproductive. We all hope that this Bill will put Royal Mail on a sound financial and managerial footing for the future provision of the universal postal service. Surely that is its core purpose. In such circumstances, it is too early to conclude that the UPS cannot be provided at a profit. We were glad to see the Hooper review confirm that there was no indication that a levy would be necessary.

I, too, was rather hoping that the noble Lord, Lord Razzall, would reveal all, but that is perhaps something to look forward to later. I thank the noble Lord, Lord Clarke, for again so clearly making the case for why there is a need for a change in the regulatory regime, why there is a need for the underpinning and support of the universal service obligation, and why there is a need to ensure that it is done on transparent terms, all of which the Government agree with. The Government’s concern for the provision of a strong universal postal service is absolutely at the heart of the Bill. It was at the heart, too, of both the first and the second Hooper reports. Indeed, on page 32 of the final report, Hooper lays out clearly the importance of the universal service obligation and makes it clear that that is the fundamental rationale for the sum total of his recommendations.

The Government’s view is that in the first instance the most effective safeguard for the universal service is for Royal Mail to modernise and become efficient on open and transparent terms, thereby enabling it to meet the costs of its universal service on a fair basis, but from within its own resources, and to reap the benefits from being the sole provider of the universal service as well as the transparently allocated costs. To that end, I rather agree with the noble Lord opposite that establishing a universal service fund today would be counterproductive. It could have the perverse effect either of weakening the incentives on Royal Mail to adapt to changes in the market or removing the need for us to have an accurate and transparent in-first-instance cost structure for such a universal service. At a time when by the Royal Mail’s own admission there is an urgent need for modernisation to invest and compete in the modern communications market, it would also be unfair on other service providers and customers who at this stage should not be penalised or required to contribute to a universal service fund which may simply exist as a means of capturing inefficiency.

As I said, the Hooper report’s proposals, which we are implementing in the Bill, are the right way forward to enable Royal Mail to get the balance right between modernisation and a fair cost structure, thereby maintaining the universal postal service for the foreseeable future. However, the Government also recognise the risk that falling letter volumes and the other structural market changes outlined in Hooper may accelerate, thereby eroding the ability even of an efficient Royal Mail to maintain the universal service at its own cost, which is why we are giving Ofcom the power to set up a universal service fund should a future need arise.

The noble Lord, Lord Hunt, asked earlier—I think in relation to Amendment 89G—for more details on how a so-called “sharing scheme” for financing a universal service fund could be imposed. The possibility of a compensation fund is provided precisely to guard against those longer-term changes in the market which we cannot foresee now but which may come. In addition, the Bill gives assurance that such a sharing scheme will be imposed only in specific circumstances. First, it requires in Clauses 39 and 40 specific steps for Ofcom to follow: a review of the financial burden of universal service obligations, an audit of this review, the publication of its conclusions and an assessment of whether the financial burden is unfair. Only then can regulations to set up a fund be brought to bear. Secondly, the compensation scheme must work objectively, proportionately and transparently, must not be unduly discriminatory, and must avoid or minimise distortion of competition. Thirdly, the procedures and safeguards generally provided by the Bill apply: Section 403 of the Communications Act and paragraph 1 of Schedule 6 to this Bill.

Amendments 89N and 89P, proposed by my noble friend Lord Clarke, would place Ofcom under a duty to review the financial burden of the universal service conditions by 1 March 2010. Clause 39 currently gives Ofcom the discretion to review the financial burden of the universal service, but does not impose a time limit.

Ofcom will undertake a full strategic review of the postal services market as soon as it has the powers to do so. It will take longer to complete these tasks properly and to consult on them than I fear my noble friend is allowing. So there will be a full initial market review. Clause 39 provides discretion to undertake a specific review of the net cost of the universal service at a later date, should that be needed.

The Government believe that the discretion proposed in Clause 39 is both necessary and important for Ofcom to regulate effectively. By that stage, Ofcom will have become the body which will be expert in the postal market. It will have been required to gather a robust evidence base through market review, assessment and clearer accounting separation. It will have a duty to protect the universal postal service. Ofcom will therefore be best placed to decide when exactly is the right time to review whether providing the universal postal service may constitute an unfair burden on a single universal service provider.

In addition, requiring a review of the financial burden of the universal service by the end of the financial year is, in practice, unrealistic. There would simply not be enough time for Ofcom to undertake this review between autumn 2009 and March 2010 alongside its initial market review. As recommended by the Hooper report, Ofcom will start working with Royal Mail as soon as it has powers to develop a shared understanding of its costs and the benefits of providing a universal service.

Let me now address Amendment 93B before turning to the amendments tabled by the noble Lord, Lord Razzall. This will enable me to respond fully to each of the noble Lords, first my noble friend Lord Clarke and then the noble Lord, Lord Razzall. This amendment would require contributions to be made from 1 April 2010, provided Ofcom has determined after such a review that contributions should be made. This would happen even if the regulations for setting up the universal service fund scheme, required by Clause 40(6), are not made until a later date. I fear that this is unworkable. If a universal service fund were ever to be set up, it would be crucial that enough time was allowed for Ofcom to consult on and make regulations to ensure the proper operation of the universal service scheme, as I outlined earlier to the noble Lord, Lord Hunt. It is important that any such regulations are set up in an appropriate and considered manner, ensuring regulatory certainty and appropriate safeguards as provided for in subsection (6), which states that the scheme must be objective, proportionate, transparent, and non-discriminatory and avoid or minimise the impact on competition. I therefore invite my noble friend Lord Clarke, to withdraw his amendment.

I thank the noble Lord, Lord Hoyle, again for his continuing support in defence of our wonderful Post Office. I do not want to get into the origins of the injury to the noble Lord, Lord Razzall. All that I can offer is sympathy and hope that whatever it is clears up.

The noble Lord mentioned that perhaps in the past the regulator has not been tough enough and the Government seem to have gone along with the idea of letting it do exactly what it likes. Anything in this section of the Bill that talks about control of a regulator to see that it is not imposing unfair competition is something that we will have to look at very carefully. On bulk mail deliveries, the Committee has heard me speak many times about the unfairness of the cherry picking that went on and was clearly prophesied, and I shall not go into that today. The noble Lord, Lord De Mauley, asked who was responsible. If the Committee has not heard me so far, I shall say again: the Labour Government in the Postal Services Act 2000 are responsible for the whole mess that we are in at the moment. It was an ill founded Act that gave the wrong base for the Post Office finances and imposed an unfair advantage to the Royal Mail’s competitors.

I am delighted that the Minister can confirm, once again, that concern for public service is at the heart of the Bill. Good. He then went on to speak about the much needed modernisation, and I am delighted that he mentioned it because I had not talked about it earlier. Before we left last Wednesday, my final comment was to ask when someone would tell us what was meant by modernisation, such as how much it will cost, what the machines will cost and where they are. Those are questions that I have been asking since Second Reading—and most noble Lords know that I tried to stop the Bill ever having a Second Reading. But it did get one, and I have repeatedly asked those questions. Outside the Chamber, I have taken the opportunity to speak to the Minister, who tells me that it is in progress and we are going to get it.

For those people interested in the modernisation agreement, we are now three years into a five-year agreement agreed between the workforce as represented by the CWU and the Royal Mail. The modernisation programme has over 90 per cent penetration of achievement with two years still to run. When we are looking and talking about how quickly you could work things out, since that modernisation agreement started to take effect, instead of losing £1 million a day, as was the case at the beginning of that period, the Royal Mail is now showing a profit of £1 million. The signs are pretty good—and in response to Hooper’s proposal on modernisation we should stand back and say, “Well, it’s already working”. Agreements were made before pen was ever put to paper on the Hooper report. I listened very carefully to what the Minister said on the amendments tabled by the noble Lord, Lord Razzall, and they are deserving of very close attention before we come to Report. There are things that I could be attracted to if I have understood what the Minister said in his reply.

The noble Lord said that it was wrong to put a time limit as close as 2010. Would that not be a good test for Ofcom, to see whether it could do it? If it cannot do it in the time, it will have to admit failure and we will have to accept that, but we should have a target. I have been told so often by Ministers and the Government that it is imperative to get this right. Let us give Ofcom a test and tell it to get on with the review.

My noble friend has said a number of things that need a bit of study and understanding. We now know that we will be back here in a fortnight for Report, so there will be time for amendments, but for the moment, I beg leave to withdraw the amendment.

This amendment returns to the question of the basis on which the levy is to be imposed. I very much welcome the noble Lord’s justification of Clause 39 and I am pleased to see the requirement for a separate, audited and transparent review of the financial burden, but this amendment would include a further safeguard on efficiency.

The imposition of a levy will obviously have a significant impact on the postal operators forced to subsidise Royal Mail under it. The Government have at least noted the potential for a levy actively to undermine competition in Clause 40, but I do not believe that they have satisfactorily addressed the possibility that it could also have the detrimental effect of subsidising inefficiency. If the costs used to calculate the financial burden are not adjusted to exclude ongoing inefficiencies the review will recommend a higher levy than is necessary, and one that would ensure that efficient private sector operators are forced to maintain the less than efficient practices of the universal service provider.

Ofcom has indicated its unwillingness to use unadjusted costs when calculating access costs under Clause 34. Instead, it envisages a glide path ensuring that incentives remain to encourage postal operators to move towards efficiency. Even greater stringency should apply in the case of a compulsory fee. I beg to move.

Amendment 89Q would require Ofcom to estimate from a benchmarking exercise the inefficiencies of the universal service provider and exclude it from the costs of complying with universal postal service obligations. The noble Lord understandably seeks to make sure that competitors are not unreasonably required to subsidise existing inefficiencies through the existence of a compensation fund. I tried to answer this question in part earlier, but let me restate that the Government fully agree with the noble Lord that the compensation fund should not subsidise inefficiencies. It is absolutely the Government’s intention that the fund should be used only as a last resort. It is there to protect the universal service if future market changes mean that an efficient and modernised Royal Mail is unable to do so fairly on its own.

In addition, Ofcom will be able to impose a compensation fund only if it determines that the burden sustained by Royal Mail is unfair—that is, if the costs of delivery outweigh the benefits. That is not a simple question of costs, as the costs are often, as we know, clearer—although not currently, it is sad to say—and the benefits are often more intangible. But it is clear that there are enormous benefits to being the universal service provider.

Finally, as I said in answer to the previous amendment, any compensation scheme will be required to be objective, proportionate and transparent, to avoid undue discrimination and to prevent or minimise any distortion of competition. Ofcom will also have to take into account the universal service cost calculation mechanism set out in annexe 1 to the postal services directive. That would require national regulatory authorities—Ofcom in this case—to consider all appropriate incentives for postal service providers to provide the universal service obligations cost-efficiently. I can reassure noble Lords that the amendment is genuinely not necessary. We agree with the noble Lord that the compensation fund should not act as a subsidy for inefficiency but we consider that the legislation and the directive already provide effective mechanisms to ensure that this will not happen. I therefore invite the noble Lord to withdraw his amendment.

While listening to the Minister, I was reminded of the need constantly to refer back to the excellent review by Richard Hooper and his team. Paragraph 103 states:

“We also believe that while Royal Mail’s competitors should be required to pay a fair price for the use of its delivery network, they should not be penalised for the company’s inefficiency”.

Richard Hooper’s recommendation was that an industry-based compensation fund should be rejected in current circumstances. I detected from what the Minister said that he agrees with the purpose behind the amendment but does not think that it needs to be in the Bill. I shall reflect carefully on the points that he has raised and in the mean time I beg leave to withdraw the amendment.

It will be helpful to move to the more general proposition on the levy. I believe that this amendment is fairly self-explanatory. I am not sure that it is perfect drafting but I hope that the Minister will see the point behind it. In essence, it would ensure that no levy is imposed on postal operators without the approval of Parliament.

As the Bill is drafted, Ofcom, as the Minister has just explained, can decide that there is a financial burden in providing the universal postal service and then impose a levy completely independently of even the Secretary of State, let alone Parliament. I have just quoted an extract from Richard Hooper’s review, which confirmed that under present circumstances there is no justification for a levy. There certainly can be no case for imposing one before the market assessment has been completed, so we are not talking about a provision that needs to be implemented any time soon. Indeed, one would hope that such a levy need never be introduced.

The Bill defines the USO on the basis of what is generally desirable from a postal service rather than limiting itself to those aspects of a postal service that the market does not supply on its own account. With the proper application of regulation to ensure postal operators do not cherry pick the most profitable parts of the universal postal service, there is no reason to believe that Royal Mail will not be able to run the UPS profitably. Indeed, the main rationale behind the first two parts of this Bill is to ensure that it can do just that. The Secretary of State’s defence of part-privatisation and the absorption of the pension deficit is that, without them, Royal Mail cannot maintain the UPS. If it is later shown that Parts 1 and 2 were insufficient, and that even more money must be found, that would represent a significant failure of government policy. In all these circumstances Parliament should be involved, and a proper debate and discussion should take place in this Chamber before any such move. Against that background, I beg to move.

I do not feel that I can comment on the quality of the drafting of the amendment. As I understand it, it seeks to restrict Ofcom’s powers to protect the universal service as circumstances develop. The noble Lord is absolutely correct that Hooper makes it clear in his report that in current circumstances there is no requirement for a compensation fund. Hooper also makes it clear, based on what we know now, that there should be no cross-subsidisation of the universal service until we have a credible and accurate strategic market review. In this instance, the noble Lord’s proposal would require Parliament to approve formally any proposals put forward by Ofcom before it could create such a fund, were we to find ourselves in a situation where the regulator, based on analysis, had judged it to be appropriate.

The Government’s view is that the Bill provides adequate direction to Ofcom on the conditions and processes governing the creation of a compensation fund. To build in further checks would delay Ofcom’s ability to take action in what by definition would be different circumstances from today’s. We believe that this is unwise and unnecessary.

First, the Bill provides that, before any scheme can be established, Ofcom must undertake a review of the costs of providing the universal service. Such a review would have to be published and its calculations audited. Details of these requirements are in Clause 39.

Secondly, Clause 40 sets out a two-stage test that Ofcom must undertake to determine, first, whether the universal service represents a burden to Royal Mail and, secondly, whether such a burden is unfair. Thus the test is not merely the identification of a burden. These determinations will be made transparently, and in line with regulations made by Ofcom.

Thirdly, the Bill requires Ofcom to ensure that any compensation fund operates in an objective, proportionate and transparent manner that does not distort competition or discriminate against particular users or operators. These provisions are also in Clause 40.

Fourthly, Section 403 of the Communications Act 2003 sets out the procedure that Ofcom must adhere to in making regulations. Among other things, this requires the regulator to publish notice that it intends to regulate and to consider any representations that it receives.

Clause 40 is based on Section 71 of the Communications Act, which relates to the setting up of a compensation fund in the context of a universal telecommunications service. In common with Clause 40, Section 71, approved by your Lordships' House and another place, does not include parliamentary procedure for the making of those regulations. I remind noble Lords that the Bill’s delegated powers have also been scrutinised by the Delegated Powers Committee, which did not recommend any changes.

I hope that I have provided the noble Lord with reassurance that there are already strict tests that Ofcom will be required to pass before imposing regulations, and that to tie its hands now could put the universal service at risk in future, subject to market changes; and also that, in relation to the creation and allocation of any compensation fund, there are a number of hurdles that the regulator will rightly be required to jump before it can create one. I therefore ask the noble Lord to withdraw his amendment.

We are in complete agreement that nothing must put the USO at risk. That is agreed on all sides of the House. We are now debating whether to allow significant changes to be made without further debate in this place. That is the point of the amendment. Richard Hooper’s report is a good reminder that, at the moment, there is no case for the compensation fund. Paragraph 102 states:

“More importantly, we believe that compensation, from any source, would be counter-productive in the present situation. It would considerably weaken the incentive for Royal Mail to adapt to changes in the market. It would not address the fundamental issues undermining the financial health of Royal Mail”.

The report also points out, among other issues, that the amounts that could be recovered are tightly prescribed under European law. These issues ought to be considered if Ofcom decides to go down this route. However, at the moment, as far as one can tell from the Bill, there is no opportunity for the Government to have a view, let alone for Parliament to debate the pros and cons of such a situation. That is why I tabled the amendment, and why I still hope that the Minister and his colleagues will consider whether Parliament should not have the opportunity for a full debate on this, were the situation ever to arise. In the mean time, I beg leave to withdraw the amendment.

In view of the sympathy shown to me by several noble Lords, it is perhaps appropriate to disclose that my right eye is in this condition not because my noble friend Lady Bonham-Carter hit me during what might be termed a “domestic”, but because, while playing cricket with the Lords and Commons on Thursday, I was struck in the eye by the ball.

Amendment 94 is small, but raises a significant point. Obviously it is a probing amendment, and the purpose behind it is straightforward. If Her Majesty’s Government are going to introduce what the noble Lord, Lord Clarke of Hampstead, likes to call privatisation, but which clearly involves the Royal Mail not being owned 100 per cent by the taxpayer, is there any reason why the Royal Mail should not be entitled to borrow money from capital markets? Clearly there is liberalisation going on here, so why should that not include the ability to borrow from capital markets, to further whatever capital investment the Royal Mail or the universal service provider wishes to effect? That is the purpose of this amendment and I look forward to the Minister’s response.

I commend the noble Lord, Lord Razzall, for tabling the amendment. If the Secretary of State tells us that it is not needed in the Bill, I will be even more grateful. Not only would this give an option to the Royal Mail in the case of either continued public ownership or partial private ownership, it would also give the Government some negotiating strength in relation to potential partners and anybody else who has the future of the Royal Mail in their sights. The noble Lord, Lord Razzall, has a point: if it is not needed, it would be useful for the Secretary of State to put that on record.

I was tempted to keep quiet, but the noble Lord, Lord Razzall, has given an opening to people like myself who oppose the privatisation—I shall continue to use the word, whether it offends people or not—of the Royal Mail. One thing that the Royal Mail has needed for some time is flexibility in its financial dealings. This short amendment has a lot to commend it. If the Royal Mail were given the freedom to borrow from capital markets, we could perhaps do away with the element of privatisation that seems to obsess the Government.

As I mentioned earlier when we were discussing this matter, I could not agree more that Royal Mail should have the opportunity to borrow from the capital markets if it needs to do so. As my noble friend said, if it had that right, there would be no need at all for this partial privatisation. There is no need for it anyway, but this measure would certainly strengthen its hands. I, too, thank the noble Lord, Lord Razzall, for bringing this matter to the Committee’s notice.

I am sure that we all extend our sympathy to the noble Lord, Lord Razzall, for the terrible injury that he has incurred in pursuit of a very good cause. I am delighted to see that he remains ready to do anything to prevent being beaten by the other place.

Amendment 94 relates to Royal Mail Group Ltd, which we expect to be designated the universal service provider, borrowing from the private sector. There is absolutely nothing in legislation to prevent Royal Mail Group borrowing. Indeed, the Government have made available loan facilities of £3.5 billon over eight years. Royal Mail Group currently has borrowing facilities of £1.2 billion from the Government on commercial terms. It expects fully to utilise these facilities over the next two years.

The source of Royal Mail’s borrowing, whether private or public sector, makes no difference to its legal, accounting or financial treatment. Whatever the source, the borrowing must be at a commercial rate. It scores against the public sector debt and has the same impact on the public sector affordability. The only difference is that any borrowing from the Government, in particular from the National Loan Fund, is cheaper for the public sector as a whole, rather than the company, because it uses the cheapest source of funds for the public sector; that is, gilts. If Royal Mail borrowed directly from the private sector rather than through the Exchequer, it would be the same cost for itself but the marginal cost to the public sector would be higher. It is, of course, possible that in value rather than pure cost terms this could be worth while in certain situations because of the specific disciplines it could bring to the borrower. However, as I say, the cost would be higher.

As regards the Treasury’s role, as any borrowing by Royal Mail scores as public sector debt, it is important that Her Majesty’s Treasury retains some controls over that borrowing. This amendment would prevent the Treasury exercising any control over Royal Mail’s borrowing. The amendment does not set a limit on what could be borrowed or any other controls. This is not desirable and could be damaging to the public finances as a whole. However, the key fundamental message is that the ability to borrow is not, as I say, a constraint on Royal Mail Group; the source of its borrowing is not constrained in legislation at the moment but that source is actually irrelevant and the terms that it borrows at are always equivalent to commercial terms. That is the essence of the matter.

In the context of the legislation, I understand what lies behind the amendment but we must not forget that partnership and what we are seeking to introduce to Royal Mail is not solely about introducing money into Royal Mail Group. I take this opportunity to stress that again. As importantly, a partnership is required to bring in the expertise and experience of transforming a postal or network business that would come by introducing a minority stakeholder from the private sector into Royal Mail. This represents the best route to accelerate modernisation and to enable Royal Mail to diversify and expand its operations. In the light of what I have said, I ask the noble Lord to withdraw his amendment.

Before the Secretary of State sits down, for the sake of clarity and because I am such a simple person, will he confirm that he is saying that Royal Mail can borrow from the market but only if the Treasury agrees?

That is correct.

I thank the Minister for that response. I wish to make two points. First, the overall point I was making was that if Royal Mail had a minority shareholder going up to 49 per cent, such as TNT or Deutsche Post or all the other people who are forecast as possible minority partners, clearly that entity will become a different sort of company. It will become a different entity. In those circumstances, it seems to me and to other noble Lords, particularly on the Labour side, that it would be appropriate for it to be free to borrow without the Treasury’s approval. If TNT owned 49 per cent of Royal Mail—in the Government’s view, 51 per cent should be owned by the public sector and in our view, half should be owned by the employees and half by the Government—why should that new entity not be freed from Treasury restrictions in terms of giving consent?

Secondly, I completely take the point that Royal Mail management as presently constructed can borrow 100 per cent from the Government at cheaper rates than would apply in the capital markets today. But bearing in mind how much money Her Majesty’s Government will have to borrow, will that necessarily be true over the next few years? In the mean time, I beg leave to withdraw the amendment.

This is probably the most fundamental amendment that we have moved from these Benches. Those noble Lords who were present at Second Reading will appreciate that the major point is that if we are to go down the route of having some element of private investment in Royal Mail Group, and if we are to divest the Post Office, this is a one-off opportunity to secure not only the future of Royal Mail but that of the Post Office network. If the Government want to get their Bill through to bring external investment into Royal Mail and separate the post office network, this is the moment to ensure that that network is secure for the foreseeable future.

I was extremely pleased that, when discussing earlier amendments, the Minister gave a certain commitment, which was the first time that the Government have done so. I choose my words carefully because the commitment was not that no post office will in the future be closed but that Her Majesty’s Government have no programme to close post offices. That is an extremely important commitment on the part of Her Majesty’s Government, and those who have campaigned to secure post offices will undoubtedly be very grateful for it. However, it seems to us that we should endeavour to secure the future of the post office network in the Bill.

We have inserted the figure of £2 billion in the amendment. I have no knowledge or information regarding the exact amount of investment that the post office network will require. The important point is that it is not just a case of subsidising the existing post office and sub-post office network but of what the cost will be of doing the things that are necessary to ensure the long-term future of that network. We have tried to include some of them in the amendment. I have no idea what investment will be required in order to set up a post bank, which everybody is in favour of, as, I think, is the Minister. However, investment will clearly be required. Therefore, we feel that this measure should be included in the Bill. I am sure that if the Government agree with the principle of the measure, they will produce a much better amendment on it than I have done. We consider that this is an important moment for the future of the post office network. I beg to move.

Amendment 95ZA (to Amendment 95)

I shall speak also to Amendment 95ZB. I want then to speak to Amendment 95 generally. All I am doing is saying something that Members on all sides of the Committee will agree with. I was pleased when my noble friend said that he would not approve any future programme of post office closures and I want to tie that down in the Bill. I want to ensure that there will be no future programme of post office closures because that is important. Most of us will agree that the Government have already gone too far. It is therefore important to write into the Bill the fact that there will be no further closures.

Generally, I agree with what has been outlined in the new clause and accept that we do not know how much will be required to implement it. However, while we are talking about no more closures, we are talking in the Bill about opening post offices. We can think of many areas in which post offices have been closed and where there is a growing demand for them to be reopened. I welcome the proposal for a Post Office bank, and the Government’s commitments that that will go ahead; the sooner that happens the better.

My noble friend Lord Clarke will no doubt talk about Girobank. I have talked in the past about the possibility of a merger between the Co-op Bank and the Britannia as being a suitable vehicle for a post bank. I welcome the general spirit of what has been put in the clause and my amendment is designed to ensure that there are no further closures and that we get a firm commitment to that in the Bill.

I support my noble friend’s comments and I share his joy. There must be communities all over the country that are relieved that the Secretary of State has given an undertaking that there will be no more closures. I think of the people who protested in London, in Bristol and in almost every part of the country when their much-valued post office was closed as a result of pressures put on the Post Office by the Government. I hope that that commitment will appear in the Bill, as my noble friend Lord Hoyle proposes.

I will resist the temptation once again to rehearse what happened to Girobank. The history will one day be written. The Alliance and Leicester, now part of another bigger banking group, got the benefit of what I have said many times was a giveaway. I will not go over it all again today, but I want to speak about post banking, proposed in the amendment tabled by the noble Lords, Lord Razzall and Lord Cotter. It appears clearly in subsection 3(1) of their proposed new clause. I am sorry that I did not table such an amendment. I received a letter from the Public Bill Office after asking whether I could table an amendment proposing a post bank. I was told nicely and politely by the clerk in the Public Bill Office that this was not within the framework of the Bill as presented. I am therefore delighted that it has been proposed by the noble Lords.

However, Amendment 95 gives us the opportunity to talk about a post bank. I believe that it should be aimed at tackling financial exclusion and supporting small businesses and local economic activity. In turn, this will strengthen the financial position of the post office network. I believe that the post bank could be the vehicle to provide the universal banking obligation. Appropriate and trustworthy financial service should be available to all through the banking system. I was harking back there to the Girobank when people received chequebooks for the first time in their lives.

I support my noble friend and colleague Lord Razzall in his amendment. He rightly said that we see this as an extremely important key amendment as regards the Post Office and postal services. We are very pleased to have the support of the noble Lords, Lord Hoyle and Lord Clarke. My noble friend said that we are not excluding other ideas or proposals. As the noble Lord, Lord Clarke, said, the post bank is a very important ingredient for the future. He talked about the many different ways in which post offices can help their communities.

I am sure that the Secretary of State will recall that there have been trials of the provision of local and central government information centres. Unfortunately, I did not look up the detail before I came in, but I think that up north or somewhere there was a trial a year or two ago. The provision of these services is a viable and possibly important part of our amendment.

The Secretary of State will know that I am very keen to support small businesses. In subsection (1)(b) of the amendment we refer to “training in business opportunities”. It is extremely important to help post offices and small businesses, which is very often what post offices are, to look for business opportunities. Nowadays, we talk about increasing people’s skills, which is an important ingredient of what we are proposing.

I hope that the Secretary of State will seriously consider what we, with the support of colleagues, have put forward, and we are very open to the addition of different ideas. There are templates here of what could be part and parcel of such support. We very much look forward to hearing what the Secretary of State has to say.

I declare an interest as chair of Consumer Focus, which last year inherited the powers of Postwatch in relation not only to Royal Mail services but to the post office network. This is an important point in the Bill, because as far as consumers are concerned, yes the services of Royal Mail and the universal service obligation are very important, but of much higher salience is often the post office network itself—the local post office, the services it provides and the effectiveness with which it provides them. I am not talking just about those who Postcomm rather disparaging referred to as “social consumers”—that is, you and me—but a wide range of business consumers who use their local post office for various purposes.

Therefore, as I said at Second Reading, it is important that in parallel to any changes in the Royal Mail side of the Royal Mail Group, some assurances are given in relation to the post office network. Those assurances should be not only on the size of the network but on the services it provides. I am strongly in favour of a post bank, and I should say that I had interpreted the Government’s view on this slightly more positively than my noble friend Lord Clarke. I hope that I am right in thinking that they are strongly going down the road of considering a post bank and trying to bring back other services to the Post Office. I commend the work of Pat McFadden in this respect.

However, if this Bill is passed without there being reference in it to providing additional support for and defending the post office network, we will find ourselves in the same situation in which my predecessors in Postwatch found themselves during the previous closures, when the consumer organisation’s only job was to decide whether that post office or another should close. That is not a sensible position, except in a few limited circumstances. By and large, consumers and communities want an effective post office network.

We are in a happy position. It is not just the Secretary of State and the Government who have declared, “We do not want to see another swathe of closures in the post office network”, the two opposition parties have made similar declarations. I am afraid that out there is a certain degree of cynicism that says, “They would, wouldn’t they, at this stage before a general election”, but it would be helpful, if my noble friend the Secretary of State is to sell the total package that he is proposing, were there to be a reassurance on the Post Office side in statute, whereby it should not have been episodic declarations by all three political parties at this stage of the political cycle, but that it was written down in the law of the land that the post office network would be sustained and various supports built into it.

Whether or not I agree entirely with the formulation of the amendment or the amendments to the amendment, it would be useful for the Government to come forward with a version which gave that kind of assurance.

We feel strongly about this, but although we share the concerns of the noble Lord, Lord Razzall, and other noble Lords that the post office network be maintained and, as we have said, that some of the recent closures be reversed, we are as yet unconvinced that Amendment 95 is the best way to achieve that. I might hazard a guess that the Government will be similarly unconvinced.

It is clear from the Hooper review that the problems of Royal Mail and the post office network go deeper than just a shortage of funds. When considering Part 1, we had some useful debates about other ways that the Government could support the post office network, including sending more government business its way and looking at expanding the services that post offices can provide. The noble Lord, Lord Clarke, spoke eloquently about that.

In passing, on the new scheme with the Bank of Ireland referred to in the press over the weekend, is it true that it will not be covered by government-backed depositor protection? I should be interested to hear from the Secretary of State on that.

The amendment of the noble Lord, Lord Razzall, makes some reference to our earlier debates but sets an arbitrary figure on the amount of investment that he feels is needed to ensure that these services are provided. As I read it, it might also hold up the much needed reorganisation of Royal Mail until the post office network has been sorted out too. We do not agree that such a sum of money should be thrown at the problem without a proper assessment of the network, the problems that it is facing now and the potential opportunities that it could develop, and so on. Although we agree that something certainly needs to be done to help post offices, it is Royal Mail that needs our urgent attention. I am sure that we will return to this issue on Report.

Before I address the original amendment moved by the noble Lord, Lord Razzall, perhaps I may respond to one thing that he said. He suggested that we were divesting the Post Office but, just to be clear, the two businesses are not being separated. Post Office Ltd will remain in the same corporate group as Royal Mail Group Ltd. The Government’s stakes in Royal Mail Group Ltd and Post Office Ltd will be owned via their 100 per cent-ownership of Royal Mail Holdings plc.

The original amendment moved by the noble Lord, Lord Razzall, is grounded in an admirable sentiment: the wish to maintain, modernise and improve the nationwide post office network. As noble Lords know from previous sittings of this Committee, that is a wish that I share. The future of both Royal Mail and the post office network needs to be secured, and that is the purpose of the Bill.

Through Amendment 95, the noble Lords, Lord Razzall and Lord Cotter, call for a commitment to invest in the post office network. Over the past 10 years, this Government have provided unprecedented financial support to the network. Between 1999 and 2005, we provided some £2 billion, and we are now providing up to £1.7 billion to support the network to 2011. Without that funding, some 7,500 branches might not survive. That is a measure of our financial commitment, which is unwavering.

The National Federation of Sub-Postmasters set out in a recent report its views on how we could further improve the sustainability of the post office network. In many ways, the report echoes the Government’s own efforts, and I want to describe how. Before I do so, perhaps I may pick up the point that the noble Lord, Lord Cotter, made about Post Office-trialled local information centres, because this relates to the Post Office’s relationship to central and local government services. The Post Office has a vital role in our communities and, as I have said, there are significant opportunities for it to undertake new work for Her Majesty’s Government, to which I shall come in a moment. However, we must remember that, if a new service is to support the viability of the post office network, it must provide commercial income for Post Office Ltd and, vitally, for its essential sub-postmasters. We need to bear that in mind in the context of our discussion on the future of the network.

On central and local government services, I asked the Business and Enterprise Select Committee in another place to identify new business opportunities for the Post Office. I am also leading discussions within Whitehall to identify new services that Post Office Ltd can provide. The Department for Transport announced last month that the Post Office would provide the face-to-face service for the 10-year renewal of photo driving licences. This will allow Post Office Ltd to undertake a multi-million pound investment in ID verification technology and is a major step forward. As the new generation of passports is developed, there is, similarly, a large potential stream of work for the Post Office.

On financial services, I understand and agree with the idea that the Post Office should expand its range of banking services. It will be an important area of new custom. However, sometimes this debate ignores the fact that the Post Office has already been growing in this field considerably in recent years. Alan Cook, the managing director of the Post Office, told the Business and Enterprise Select Committee on 21 April that, in effect, a post bank already exists. Post Office Ltd offers a wide range of financial services and products: savings, insurance, mortgages and cash machines. Therefore, the Post Office already plays a vital role providing access to financial services through its network of 11,500 branches—a network still bigger than all the UK’s banks and building societies put together.

I know that interest has been expressed about the Post Office’s relationship to the Bank of Ireland—a point to which my noble friend Lord Clarke and the noble Lord, Lord De Mauley, referred. However, noble Lords will appreciate that the Government do not comment on the financial position of individual banking institutions; nor are we in the habit of commenting on entirely hypothetical situations. It is, however, worth noting that Post Office savers who have Bank of Ireland accounts benefit from the protection of the Irish deposit guarantee scheme and the Irish Government’s guarantee covering retail deposits until September 2010. The Post Office, as we know, has confirmed its complete confidence in the success of its financial services joint venture with the bank.

In that context, perhaps I may pick up the point made by my noble friend Lord Clarke about the need for the Post Office to do more in relation to financial inclusion. The Post Office already plays an important part in reducing financial exclusion, particularly in the current economic conditions. The Government subsidise the network of branches so that there is a branch within reasonable reach of everyone, providing access to cash and benefits throughout the UK. The Post Office provides almost 1,700 free-to-use cashpoints. Thanks to this Government, the Post Office will continue to operate the Post Office card account. The Chancellor also announced at the Pre-Budget Report last November that the saving gateway scheme would be available through the post office network. Post Office Ltd is also in discussion with the Association of British Credit Unions Ltd to see what opportunities there might be for the two organisations to work together more closely. I hope that that will go some way towards reassuring my noble friend about the concern of the Government and the Post Office to maximise financial inclusiveness through the operation of its services.

On mail services, I understand how critical the contract between the Post Office and Royal Mail is for the post office network. The existing commercial arrangements between Royal Mail and the Post Office will of course be maintained. We will ensure that the Post Office is not adversely affected in any way by the introduction of a strategic partner for Royal Mail. However, the Post Office is not simply standing still in the mails market. Last week, it announced a contract with DX Group which will allow DX Group’s customers to collect their mail from their local post office. This is the first time that a private mails company has offered access to its services via the post office network, and I am sure we can all welcome that.

On support for local retailers, the Government are about to consult on a range of measures to sustain town centres and on the provision of retail services in both urban and rural communities. Those include changes in planning policies to make them more flexible and to facilitate the future sustainability of local economies.

On government support for the network of post offices, as I have made clear, we shall continue to subsidise the network beyond 2011 and we shall not support any further programme of post office closures. The next funding deal for the Post Office will require discussions within government and with the company. I cannot at this stage pre-empt the detail of those funding discussions, but I expect to be able to make further announcements later in the year.

A great deal is being done to improve the sustainability of the post office network, particularly in the specific areas identified by the National Federation of Sub-Postmasters. The Government have been, are now and will continue to be committed to subsidy, to investment and to the expansion of post office services. I want to work constructively with the federation and the Post Office on a strong agenda for the future of the network. Although much of the federation’s agenda is not directly related to the Bill, there is clearly a link between a more secure future for Royal Mail and for the Post Office. I would go further and say that in many ways the one depends on the other. If Royal Mail is not transformed and fails to maintain its position in a competitive marketplace, that would be damaging to the Post Office as a company and to the viability of the post office network.

The success of the two businesses remains very much connected. If the Post Office required even further subsidy to make up for a decline in Royal Mail’s business and if we had not been successful in reversing that decline, that funding for the Post Office would clearly need to be balanced against other spending priorities, not least any extra funding required to support an untransformed Royal Mail. So it is certainly in the Post Office’s interests and its network’s future to see the finances of the Royal Mail turn round and the business transformed. That makes the implementation of this Bill and its impact on Royal Mail all the more important for the Post Office and its network.

Finally, through their amendments to Amendment 95, my noble friends Lord Clarke and Lord Hoyle seek to provide that the Bill will not come into effect until I have laid a Statement before Parliament that I will not support a further programme of post office closures. As noble Lords will have heard, I have given that commitment to the Committee tonight and at previous sittings, and I shall continue to make that commitment, so I have already fulfilled the requirement. I have made the statement and provided the assurance on the Government’s behalf that noble Lords seek through the amendments. In light of everything that I have said about the Government’s commitment to the post office network, the importance for the Post Office of Royal Mail being turned round and the commitment I have made to the future network, I hope that noble Lords will feel able to withdraw their amendments.

I thank the Minister for that lengthy reply. As I explained, this is a probing amendment and, as I indicated, I have no clue whether £2 billion is the right amount to secure the future investment in the Post Office. My objective is to ensure that before the Bill leaves your Lordships’ House we have sufficient undertakings from the Government that the future of the post office network is secure. The Minister has made some extremely interesting observations about what the Government intend to do. I shall read what he has said in Hansard and in the mean time I have pleasure in withdrawing the amendment.

First, may I be clear that Amendment 95ZA is to be withdrawn?

Yes, I shall withdraw it. I shall take into account what my noble friend has said but I would still like to have seen this provision on the face of the Bill.

On the face of it, the amendment is rather general and is not dissimilar from what the noble Lord, Lord Tunnicliffe, would remember as the Argyll and Bute amendment. It relates to the impact on the universal pricing structure in northern Scotland. The Royal Mail is the only provider of a universal pricing structure; therefore, the cost of sending a parcel anywhere in the UK is the same. However, other providers of delivery services do not operate on that basis and, as a result of postcode districts, they draw an arbitrary line north of Perth which in effect makes it cheaper to send a parcel from Perth to Penzance than from Inverness to Kirkwood.

This amendment seeks to give Ofcom control over the setting of minimum charges for all national providers of delivery services as defined as servicing more than one country in the United Kingdom. Small businesses in northern Scotland are, in particular, discriminated against by this process. In many cases it is cheaper for them to get stock by buying up goods next time they physically cross the arbitrary line drawn by some companies, as opposed to utilising delivery services themselves. I am sure that the Minister is familiar with the detail of that problem. I beg to move.

Although the amendment draws an important distinction between courier services and postal services, a distinction which may be worth exploring further at a later stage, in the context of the proposal to widen the scope of regulation, we have reservations. The law already requires a registered and insured service to be provided at a uniform tariff, and that is provided by the Royal Mail special delivery service. That is a political decision and forms part of the USO. In recognition of that USO, Royal Mail has certain benefits such as the unique right not to charge VAT, as confirmed by the European Court of Justice on 23 April. We consider that it would be an unacceptable interference with normal business economics to extend that to other operators.

It costs more to deliver to areas where there is a low delivery point density and mileage is not the biggest cost driver. As the costs of delivery are broadly speaking unaffected by crossing a border within the UK, there is no logic to make a distinction between such services and other services, as that might have the perverse effect of dissuading operators from serving parts of the UK. Parcelforce offers non-fixed prices to its current customers for, for instance, non-universal services. Royal Mail actively seeks to be paid different amounts from large customers and other operators for deliveries in rural areas to help them fund the universal service through zonal pricing. The amendment would stop that important evolution of Royal Mail’s business.

I thank the noble Lord, Lord Razzall, for raising this point. As he may not be aware, I have parents who live in, for these purposes, the wrong part of Perthshire, so the reality of this point is not lost on me. However, Clause 42 is one of a series of clauses which allows Ofcom to impose requirements on all postal operators. This new clause proposed by the noble Lord, Lord Razzall, also seeks to impose requirements on all postal providers operating across the three nations of mainland Britain. I understand that the noble Lord’s intention is to prevent private operators charging different prices for using courier or postal services in different parts of the country. I suspect that he is trying to protect against unfair pricing in particular parts of the nations.

The amendment would also specify the minimum charges. These must be fixed through either a price-per-mile pricing structure or a fixed rate. I assume that the noble Lord would like to make the pricing structure of private providers slightly more transparent, as well as preventing excessive differences between the costs of courier or more traditional postal services.

We share the noble Lord’s concern that members of the public should have access to a universal, uniformly priced postal service. As the noble Lord, Lord De Mauley, has already pointed out, that is provided through the universal postal service, which is already secured by the Bill up to a certain size and particular shape. The uniform tariff—the “one price goes anywhere” tariff—is the assurance that wherever you send an individual letter in the United Kingdom you will be charged the same price. The Bill requires Ofcom to ensure that a “one price goes anywhere” service is provided as part of a universal service in the future.

The universal postal service protects first and foremost individual members of society, but also small and medium-sized enterprises. The Bill already requires Ofcom to consider what services are needed to meet the reasonable needs of users, and Ofcom has a duty to exercise its functions generally. Such consumers are currently, and will continue to be, able to post letters and other parcels up to a certain size at a uniform price across the United Kingdom and to use the registered service.

Beyond that, I am afraid to say to the noble Lord that the provision of courier and postal services is a competitive area of the market. Businesses can use many different postal providers to send packets to each other and their customers or, indeed, alternative forms of distribution. Competition and those alternative forms of distribution, not regulation, provide customers with alternative choices for their services and, we hope, provide an incentive for lowering prices and developing innovative products meeting customers’ needs, wherever they may live within the United Kingdom. Conversely, restricting the way charges are set restricts courier and parcel companies’ ability to compete with each other. We believe that that may be damaging to the postal market, rather than the opposite.

Importantly, the amendment would extend the ability of Ofcom to impose price controls. It might therefore radically and, we believe, disproportionately expand the scope of regulation. That, too, is not to the benefit of the postal market. Regulation should be targeted in an objectively justifiable and proportionate manner so as to allow companies to meet the needs of their customers without unnecessary regulation. The amendment would require regulatory intervention that is in our view neither justified nor proportionate.

In any event, Ofcom will have a power to investigate anti-competitive behaviour in specific circumstances—for instance, if it is suspected that postal providers abuse a position of dominance wherever that market dominance may appear, or enter into anti-competitive agreements to maintain artificial pricing levels.

In practice, the amendment also does not seem to have the effect intended. The noble Lord’s laudable intention is to protect customers in particular areas. Importantly, requiring Ofcom to set minimum charges does not prevent postal providers setting prices above those minimum charges.

On balance, I invite the noble Lord, Lord Razzall, to withdraw his amendment, safe in the recognition that there are those close to my home who recognise the points that he makes.

I am sorry that a small amendment designed to protect the interests of the Minister's parents has required such a lengthy and dispiriting answer, but I will read what he said in Hansard and in the mean time beg leave to withdraw the amendment.

Our amendment in this group again looks at the scope of Ofcom's powers. Clause 44 gives the regulator the power to impose a condition requiring the postal operator to give access to another operator not just to services within the scope, which is understandable, but also to an operator's infrastructure. As I read it, the clause as drafted would allow Ofcom to insist that an operator who provides absolutely no services within the scope must open up its infrastructure to another operator. Surely that cannot be the intention. Does not the Minister agree that any access condition should be imposed only on services within the scope? If it is necessary to enforce access to the infrastructure, it should similarly be only on infrastructure relevant to services within the scope. I beg to move.

As the noble Lord says, the amendment would reduce or limit Ofcom’s ability to impose access conditions on certain types of postal operators by removing the reference to postal operators’ infrastructure from the general access conditions. In the Government's view, the amendment is not necessary and could be contrary to our obligations under Article 11a of the postal services directive, which deals with access conditions to the infrastructure of the universal service provider.

Clause 44 sets out general access conditions that apply equally to all postal operators, including the Royal Mail. The amendment would allow Ofcom to impose access conditions on postal operators only for services that they are providing within the scope of the universal postal service. As the market develops, it is important that Ofcom, as the industry regulator, can intervene when it considers it appropriate, allowing access between other postal operators as well as Royal Mail. Confining the clause to services within the scope of the universal postal service risks limiting appropriate and sensible regulation and setting it in one particular moment.

Article 11a of the postal services directive requires that, whenever necessary to protect the interest of users and/or to promote effective competition, member states are required to ensure that access conditions are available to elements of postal infrastructure. Clause 44 gives effect to our obligations under that part of the article. Noble Lords may be reassured by the fact that the clause provides the power to Ofcom for appropriate general access regulation in future. Although the condition of necessity is a stringent test—far more stringent than it often appears on reading—it is one that I hope will provide comfort that the appropriate checks and balances are in place, however remote the possibility of it being used.

In the light of that clarification, I hope that the noble Lord will consider withdrawing his amendment.

I am very grateful to the Minister for his clarification, which I will carefully consider. In the mean time, I beg leave to withdraw the amendment.