To ask Her Majesty’s Government what is the justification for the projected increase in the United Kingdom’s net contribution to the European Community Budget to £6.5 billion in 2010-11.

My Lords, the level of UK net contributions to the European Community budget is affected by a range of factors, including the size of the in-year EC annual budgets, the rate of UK economic growth and the level of budget receipts. It is right that the wealthier member states are net contributors to the budget. Our net contribution across the current budget period is predicted to be in line with countries of similar wealth.

My Lords, I thank the noble Lord for that response. As he will know, the Government strove in vain to rectify the unacceptable regime of the EC, where the contributions to which the noble Lord referred are projected from accounts that cannot be justified, for reasons that were spoken to on 31 March. What are we to do about it—if we are not to walk away—other than apply to the federal court to seek to establish a reformed regime, acceptable to the Court of Auditors, which will give us a statement of assurance on the accounts so that the increases can then be justified?

My Lords, as the noble Lord did last time, when he asked a similar Question, he analyses the problem without producing a particularly constructive or helpful solution to it.

Oh!

My Lords, the House will appreciate that, if such a solution were available, all—or the majority of—European states would follow the strategy. However, the issues are more complex because the problems with accounting in the European budget are largely the fault of expenditure that is partly controlled by the member states; so it will not do to say that the issue relates directly to the European Commission or any other institution. Member states, too, must improve their standards of accountancy and effectiveness, which is exactly what the United Kingdom has been doing.

My Lords, does my noble friend agree that there is no great merit in voting for the enlargement of the European Union to take in all those poorer countries of what was central and eastern Europe unless we are prepared to pay some of the costs to help their economies meet the standards of the market economy that they committed to join. On the question raised by the noble Lord, Lord Campbell of Alloway, about the statement of assurance, has my noble friend made any progress on the suggestion that I put to him when this issue was raised a few weeks ago that we might approach the European Commission to see whether we can get a group of statisticians to look at the basis of the statistical sampling on which the statement of assurance is based?

My Lords, as my noble friend would expect, I moved with alacrity after he made that constructive suggestion when we discussed this issue previously. I am pleased to report that officials are meeting next week to take further the issue of the statistical analysis. My noble friend will be generous enough to recognise that this is a small dimension of the larger issue of the European accounts.

My Lords, does the noble Lord agree that there is one obvious reason for the increase in our contribution: the surrender by Tony Blair of part of our rebate, which he solemnly promised only two years earlier that he would never give away? Is it not also obvious that that surrender was for nothing? The noble Lord, Lord Tomlinson, mentioned enlargement, but that had been agreed, had it not, before the surrender by Tony Blair? Is it not an absolute scandal that the extra money raised, in part by the abandonment of our rebate, did not in the main go to the new entrants? Ireland got more per head than Lithuania, Slovakia and Poland.

Yes, my Lords, but is the noble Lord not guilty of straining at a gnat? Is it not the case that in terms of overall public expenditure in Britain by the Government, the rebate is a fractional point of 1 per cent of that? It is a useful stick for those who are root and branch opposed to Europe and its expansion, to which my noble friend alluded a moment ago. It brings us to the largest single market in the world but it is a useful stick for those who are opposed to that expansion to beat the Government with. Nevertheless, it is not real economics.

My Lords, is it not the case that the thesis, “We want our money back”, is demeaning for a country in our position in the world after the G20 and all the commitments that we have entered into? The Conservative Party policy, “We want our money back”, would mean that there would be no EU, which is what the Conservatives are driving at.

My Lords, taken to a logical conclusion, that would undoubtedly be the case, but did the party opposite ever take any of its policies to a logical conclusion? The issue is surely that of course we anticipated that there would be some increase in the size of the European budget to take account of enlargement, but those costs are properly borne not just by us but by the French, by the Germans and by other significant economies in Europe with whom on the whole in other respects we are proud to be aligned.

My Lords, will the Minister accept from these Benches that we support the European project but that we have not viewed with approval the way in which the Government have failed to get a more fundamental reform of the CAP? Can we have an assurance that the Government will continue pressing to reform the CAP on its merits and to demonstrate to members on the Conservative Benches that on balance the EU is very beneficial to the UK?

My Lords, the noble Lord will accept that there have been some improvements with regard to the CAP, but he is right that the reforms that have taken place in Europe fall far short of the ambitions of this country for a significant reform of the CAP which carries all the hallmarks of economies several decades past. The Government stay committed to the position that they intend to strive for reform of the CAP as soon as we can obtain it.

My Lords—

My Lords, we are in the ninth minute. It is time to move on to the Question on chronic pain.

To ask Her Majesty’s Government what plans they have to implement the recommendations in the Chief Medical Officer’s annual report of 16 March on the management of chronic pain.

My Lords, we welcome the recommendations on the management of chronic pain in the Chief Medical Officer’s 2008 annual report. Many of the recommendations are already in line with existing guidance and practice in the NHS. We will consider what further action may be needed in the context of advice from the National Quality Board on clinical priorities for the NHS.

My Lords, I am grateful to the Minister for that positive reply. Does she accept that the 8 million or so people of all ages who suffer from chronic pain can do a surprising amount for themselves to control their pain provided that they have access to multidisciplinary pain management teams? In view of the fact that only 14 per cent of them have access to any pain specialist, will she urge the Government to give the highest possible priority to implementing the Chief Medical Officer’s recommendation—to use his own words—

“to widen access to high-quality pain services”?

My Lords, I thank the noble Lord for bringing this important issue to the attention of the House and recognise that, in the tradition of the House, he has been persistent in his questioning and championing of this issue. He is absolutely right that we cannot have people accepting pain and using expressions such as, “I musn’t grumble” or, “I suppose I’m not too bad today”, as they have in the past. We are delighted that our Chief Medical Officer has taken this issue so seriously in his report, which is independent and will be received in the spirit in which it is meant. We are taking action already in line with his recommendations and we will definitely take them further after the National Quality Board has given its advice.

My Lords, my noble friend will know that I am an ankylosing spondylitis sufferer, which means that I live in constant pain. I wonder whether she has had time to consider the call by Anne Begg MP in the other place for a national advocate—a champion—who could deal with issues of pain and co-ordinate research by all the medical institutions and companies throughout the United Kingdom. These organisations are currently doing a lot of work but a lot of it overlaps.

My Lords, although I know that my noble friend has an aversion to words such as champion or tsar, I will use the word champion. We welcome the contribution that, for example, members of the British Pain Society have made to the improvement of chronic services, and this is one of their demands. We will consider the need for a national champion in the light of the advice which we receive on the priorities for clinical improvement that were outlined by our Chief Medical Officer. Our view is that such appointments need to be made very selectively as they inevitably raise expectations, but following a detailed national strategy and the possibility of ring-fenced funding. So we have not ruled this out and we will be considering it.

My Lords, are any specialist nurses trained to deal with chronic pain? If not, what plans do the Government have to introduce such training? Specialist nurses have been very helpful to patients in all sorts of fields.

My Lords, the noble Baroness raises a very important point. Indeed, the Chief Medical Officer’s report pointed specifically to the training that medical staff should receive in the treatment of chronic pain. We have discussed the CMO’s recommendations with the Nursing and Midwifery Council and asked it to consider putting new professional standards into its training on precisely this subject.

My Lords, do the Government recognise that there is need for an all-systems approach to improve the management of pain? Undergraduates in nursing and medicine all need to know that they have learning outcomes in the assessment and management of pain which are examined in their final exams and become part of the revalidation procedures. The public also need education in what to expect from analgesics and in how they can help themselves to cope with chronic pain. Postgraduate training is needed for the safe and appropriate prescribing of analgesics and the use of other therapies such as those championed by the chronic pain management programmes.

My Lords, as ever, the noble Baroness gives me more information than I am likely to give her. She is absolutely right. We accept that more needs to be done to ensure that all patients have access to high-quality pain services, including pain management, and we intend to grow the number of expert patients—that is, people who are supported in the management of their conditions and the pain that they experience.

My Lords, will the department enable staff of care homes and nursing homes to develop pain management skills above and beyond the administration of analgesic drugs?

My Lords, I think that the last time this issue was discussed in the House the noble Baroness mentioned the Help the Aged and Patients Association reports about older people. Of course, we believe that older people should be treated with dignity and respect and that they should receive appropriate and humane care in all care settings. Therefore, we welcome those two reports as important contributions to this debate. We will review the individual recommendations addressed to the Government in the light of advice and the discussion that is taking place with the National Quality Board.

My Lords, what note have the Government been able to take of the wide experience of hospices in the management of pain? Is there movement to take account of that experience in the proposals that are being developed?

My Lords, the right reverend Prelate makes a very important point. The guidance that we are preparing is being developed with leading pain clinicians and a large range of stakeholders. They include those in the hospice movement, who are very experienced in such matters.

My Lords, is the Minister aware that there is a new parliamentary pain group? A lot of people are very interested in this subject, including the issue of pain in children.

My Lords, I am aware of the establishment of the All-Party Parliamentary Group on Chronic Pain. It will be launched next week, on 11 May, and I hope to get along to the meeting. I am not at all surprised that the noble Baroness will be an active participant in this group.

To ask Her Majesty’s Government what action they will take to increase investment in the production of solar, tidal or wind power in the United Kingdom.

My Lords, the Government support renewable energy investment through a comprehensive programme of technology development funding and revenue support. This summer we will be publishing our renewable energy strategy, containing a range of measures to meet our renewable energy target.

My Lords, I thank the noble Lord for that Answer but perhaps I may suggest to him that on this issue the Government are self-satisfied and that it is time they moved into reality from dreamland. Is it not ironic that on the day of the Budget last week, when the Chancellor announced the first of his three carbon Budgets, Vestas Blades UK, the only wind turbine manufacturing plant in Britain, closed because of a lack of orders and, as the chief executive said, a lack of political initiative? At the same time, both BP and Shell have heavily cut their commitment to solar and wind power. Therefore, how can the Government possibly reach their new forecast of a 34 per cent reduction in greenhouse gases by 2020 unless they come forward with some new practical and far-seeing proposals?

My Lords, of course the Government are not complacent. The target that we have set for 2020 of 15 per cent renewable energy is very demanding. It is very difficult to comment on individual decisions by companies but it is worth making the point that the site on the Isle of Wight produced blades for the market in the US and not for the UK. In general, over the past few years we have seen a major improvement in the production of renewable energy sources. A considerable number of projects are in construction and have received planning consent. The renewable energy strategy will ensure that, where we need additional mechanisms to support renewable energy, those will be put in place. As I said, the strategy will be published in the summer.

My Lords, is the Minister aware that in many EU countries, especially in Scandinavia, a lot of investment is going into ground source heating. What is this country doing to promote ground source heating?

My Lords, we have a consultation on it at the moment. We are also looking at community heating—district heating—and all the other potential contributors to renewable energy sources. In the legislation passed last autumn, feed-in tariffs were introduced for microgeneration and there is a host of developments and activities in the renewables sector. We are not at all complacent, but I am confident that we have got the momentum going to enable us to meet what, as I have said, is a very challenging target.

My Lords, when the Government are looking at renewable energy, will they also pay attention to hydropower, in particular the role of microhydropower, bearing in mind that we have a turbine manufacturer of hydropower in Kendal, which employs a great number of people?

Yes, my Lords. I pay tribute to the work of the Forestry Commission, too, in looking at the potential of hydro on its many forests throughout the UK. In fact, hydro is responsible at the moment for about 1.3 per cent of electricity generated and we see it as having an ability to contribute more in the future.

My Lords, the Government keep going on about all their wonderful schemes, but after 12 years of a Labour Government, we still only get 5 per cent of our electricity from renewable sources. It is absolutely shameful to see on the league tables of European nations exactly where we are. This is Britain, and where are we on this list of 24? We are 18th, coming behind Latvia, Slovenia and Slovakia, let alone Germany and France. Surely the Minister is not going to tell me that he is proud of that record.

My Lords, it is not at all shameful. This country, for many years, was completely self-sufficient in its supplies from the North Sea. Clearly, other countries were in different positions. Considering Germany’s natural resources, it is not surprising that it has developed electricity through hydro. The point is, since we decided that we needed to encourage renewable energy sources, we have seen great progress. The figure was 4.5 per cent the year before the one the noble Baroness quoted; it is now up to 5 per cent. It took 14 years to produce 1 gigawatt of energy from wind and another 30 months to produce 3 gigawatts, so we are seeing considerable progress.

My Lords, is the Minister aware of Sir John Houghton’s belief that more than 50 per cent of our electricity resources could come from tidal technology, and do Her Majesty’s Government have the political will to do anything about it?

My Lords, indeed we do. There is no question but that tidal may offer huge opportunities for this country. My understanding is that the Carbon Trust has estimated that by 2050, tidal and wave power could produce 30 gigawatts of energy. The UK is in the lead in terms of technology and we are seeing some very exciting developments, such as the work in relation to the Severn. It is very important that we take advantage of the technology lead and ensure that the output is not just increased renewable energy, but that there is considerable spin-off in the supply chain market, leading to more UK jobs.

My Lords—

My Lords, I am sorry, we must move on.

To ask Her Majesty’s Government what is their assessment of recently published figures relating to stop-and-search operations undertaken by the police.

My Lords, stop and search is a vital tool in preventing, detecting and reducing crime. Increases in stop and search reflect the importance of these powers to support effective policing, enabling the police to intervene and disrupt. We are working with community groups to ensure that this power is exercised proportionately and fairly, and raises community confidence.

My Lords, I thank the Minister for that response. The figures show that black people are almost eight times more likely to be stopped than people from white communities. Furthermore, stop and searches under Section 44 of the Terrorism Act have trebled in the past year. The situation in relation to ethnic minorities is disturbing. Does the Minister agree that action must be taken to curb this unacceptable trend and that the police must exercise their powers with care and caution?

My Lords, the noble Lord asked two questions. On disproportionality, we are not happy with the figures that have been produced. We are working to improve them, the key to which, and indeed to effective policing, is community support. We have therefore put in place a package of measures as part of the police pledge to treat everyone fairly and with dignity. A new form of trial known as POP—problem oriented policing—has been used in Staffordshire which we hope to extend. On the noble Lord’s second point about the number of people who have been stopped under the Terrorism Act, those stop and searches are for reasons which are well understood, not least what my briefing calls euphemistically “the incident” in Haymarket in 2007.

My Lords, is the Minister aware that use of the powers under the Terrorism Act is putting a severe burden on young black men in this country? We are told by the figures that they are more than eight times more likely to be stopped. That trend was reversed after the Macpherson report. Does the Minister have any proposals to ensure that the police use their discretion wisely rather than pick on people who are usually much better citizens than criminals, and who are now being disfranchised of their right to walk the streets of Britain in peace?

My Lords, as I said in the previous answer, the community has a major part to play. Eighty-seven per cent of the stops were in the Metropolitan Police area. We have an extensive community programme which represents each of the 12 boroughs, with community involvement and independent advisory groups. Those involved meet each month and have before them all the figures on the three forms of stop and search that exist under Sections 44 and 60 of PACE. That is where we want to understand where there has been misuse of stop and search. Guidance is given to police officers, which is built up into a bigger picture. A quarterly meeting takes place with representatives from the entire Metropolitan Police area, including the Metropolitan Police Authority and community groups. Latterly, there has been set up at a national level a stop-and-search community panel chaired by Doreen Lawrence. It, too, meets quarterly and has representatives from the police, the Home Office, the Police Federation, community groups and others to ensure that, as far as possible, we eliminate any disproportionality.

My Lords, the Minister referred to a POP in Staffordshire. I am not sure that, if given a broader name, it would be known as the “West Midlands pilot”, but, if not, perhaps I may ask about the West Midlands pilot on stop and search, which was designed to reduce the number of forms being filled in and resulted, so the Home Secretary claimed, in a greater clampdown on knife crime. When will this pilot be reported on?

My Lords, the noble Baroness raises two questions. Perhaps I may deal first with the second one, on knife crime. The issue rightly came to great prominence in London because communities in which it was happening were very concerned and supported police in their stop-and-search programmes. Those have been successful in reducing crime in that area. We hope that we shall see an end to the killing of young people in London, or at least a reduction in serious violence towards them. The readiness to carry weapons seems also to have been affected because that, too, has reduced. We hope to maintain the support of communities and young people. I am pleased to say that Operation Blunt on knife and gun crime has had that support.

On the noble Baroness’s question about the pilot, it was of course Sir Ronnie Flanagan’s report which suggested that we should use the expensive but efficient electronic equipment that we have to reduce form-filling. That is ongoing and we believe that it will be successful.

My Lords, will the Minister indicate what level of stop-and-search figures there are for the Greater Manchester area and, in so doing, does he agree that the Greater Manchester police force has done sterling work in reducing the level of gun crime in that area in the past 12 months or so?

My Lords, I join the right reverend Prelate in congratulating the city of Manchester, its police force and the police authority on a very successful campaign against gun crime. I am afraid I do not have the actual figures for Greater Manchester, but I will seek them and make sure that they are sent to him.

My Lords, does the Minister accept that communities generally support the use of the Police and Criminal Evidence Act allowing police to stop people when they have reasonable suspicions, but that it is the misuse of the Section 44 powers under the Terrorism Act that upsets them? Will he make sure that that abuse, where it happens, ceases?

My Lords, there is a difference. Section 44 powers, which are policed heavily—a senior police officer has to be involved and the Home Secretary has to give approval within 48 hours—are used for a particular reason at a particular location and are therefore not targeted or profiled in any way. Because things do not happen, it does not necessarily mean that we have misused the power; it may well be that the use of the power has preventing things happening.

My Lords—

I am sorry, my Lords, we have hit the clock.

That the Bill be considered on Report in the following order:

Clauses 1 to 7, Schedule 1, Clauses 8 and 9, Schedule 2, Clauses 10 to 34 , Schedule 3, Clauses 35 to 38, Schedule 4, Clauses 39 to 46, Schedule 5, Clause 47, Schedule 6, Clauses 48 to 50, Schedule 7, Clause 51, Schedule 8, Clauses 52 to 57, Schedule 9, Clauses 58 to 60, Schedule 10, Clause 61.

Motion agreed.

My Lords, I return to the subject of direct payments. Noble Lords who followed the Bill in Committee will remember that although this is a policy that has strong support around the House, a great many questions remain unanswered about how the policy will work in practice and, in particular, about the effects it will have on continuity of service for patients.

Last week, the noble Lord, Lord Darzi, very helpfully shared with the Committee the range of submissions that have been received from primary health trusts and strategic health authorities for the sorts of services that might be provided to patients using individual budgets and direct payments. I thank him for sharing that information. I am moving Amendment 32 and speaking to Amendment 33 at the same time, which I hope will help the House move more speedily through our deliberations. When the noble Lord, Lord Darzi, revealed that there had been applications for services as disparate as maternity care and palliative care, I think that it became apparent that the potential scope of direct payments and individual budgets within the NHS was perhaps far wider than many had believed up to that point. Many who are strong advocates of the policy of giving people either a notional budget or an actual sum of money believed that we were talking about a very limited number of treatments for chronic conditions.

From the information which the noble Lord has shared with us, it is now apparent that these pilots have the potential to bring about enormous change in the way in which health services are planned and delivered. Noble Lords who took part in our deliberations in Committee will have noted that I referred in great detail to the IBSEN report on research into the pilot projects for individual budgets in social care. That was an extensive piece of research: perhaps one of the biggest pieces of research into social care that the department has done in recent years. Yet that report, detailed though it was, still could not answer a great many fundamental questions about the effectiveness and cost-effectiveness of individual budgets.

As I said in Committee, individual budgets in social care may well bring about provider failure. In fact, it is almost certain that they will do so, although provider failure may be less of a problem in social care than it would be in the NHS when we are talking about the potential for acute services to decline. I should inform the House that the noble Lord, Lord Darzi, was kind enough to enable me to meet the officials who will be responsible for commissioning the research into the pilots in health. I am most grateful to him for that.

I understand that the department intends there to be extensive research and believes that particular attention should be paid to the different demographics of people who will have individual budgets and to different conditions, but I still maintain that this is a policy of such potentially profound impact that there is a need for these pilots to be thoroughly and completely researched. Moreover, they should not, as the social care pilots were, be the subject of an announcement well before the research is completed. I remind noble Lords that in December 2007, before the social care pilots had been finished, the then Care Services Minister, Ivan Lewis, announced that individual budgets would be the way forward for all social care. That was misguided.

Amendments 32 and 33 should be viewed together. Amendment 33 would require PCTs taking part in these pilot projects in health to commission information, advice and support services. Noble Lords who took part in Committee will realise that the inclusion of the word “support” in the amendment is indicative of the fact that I took on board the comment made by the noble Baronesses, Lady Campbell and Lady Wilkins, that people who have individual budgets and direct payments often require more than information and advice.

I also listened to the arguments made by the noble Lord, Lord Darzi, in Committee when he stressed that the department did not wish to be prescriptive in its requirements on PCTs, but I believe that it is important that the House lays down a marker that says that information, advice and support must be provided. Individual users of services are free to ignore such a service and not to use it, but we need to say at this stage that the success of individual pilots depends on people who have individual budgets, and their carers, being able to access support and guidance that will enable them to find their way around a very complex service.

I have one final word to say in support of these two amendments. It is important to say again, as I did the other day, that the pilots in social care were introduced at a time when health and social care funding was being dramatically increased. These pilots will be introduced at a time when public services are facing unprecedented levels of demand. At such a time it would be perfectly understandable if commissioners and providers of services sought to make economies, some of which would be false. It is of the utmost importance for this policy, and for the service users, to include these two factors in the pilots at this stage. I therefore beg to move.

My Lords, if the noble Baroness, Lady Barker, is speaking also to Amendment 33 then perhaps I may say that I totally support her comments on the importance of support, advocacy and advice. Ensuring that these pilots go well and that any future direct payments in health are a success will definitely depend on ensuring that this amount of support and advocacy are in the Bill. Without that, and, as the noble Baroness says, with the economic situation ensuring that cuts will be made wherever possible, I fear for the future. I totally support her Amendment 33.

My Lords, Amendment 32, laid by the noble Baronesses, Lady Barker and Lady Tonge, would make it an explicit requirement to have an independent review of all direct payment pilots. There is no difference of principle here. We intend to commission a robust and comprehensive evaluation for the pilot programme as a whole. I know that the noble Baroness, Lady Barker, is concerned about the potential effect of personal budgets on other services, as we discussed last week on the first day of Report. We want this to be examined in detail and our recently published tender for evaluation makes that clear. When the time comes, we want the evaluation to help to inform our decisions about the future of direct payments and whether changes need to be made. However, I recognise the importance of the issues which have been raised both today and last week and I accept that there may be a case for being more explicit in the Bill about our intentions. I undertake to consider those concerns and to report back at Third Reading. I therefore hope that the noble Baroness will feel able to withdraw the amendment.

Amendment 33, which the noble Baroness, Lady Barker, also tabled, deals with the provision of advice, advocacy and support for recipients of direct payments for healthcare. It will allow the Secretary of State to require primary care trusts,

“to commission advice, advocacy and support services”,

from third parties such as the voluntary organisations. Our policy has always been that people should be properly supported. That is the core principle of personal health budgets, as I made clear in Committee and as we emphasised in our policy document, Personal Health Budgets: First Steps. Again, I am happy to consider these issues further in the light of this debate and the debate last week. I shall consult the noble Baroness and report back to your Lordships’ House on Third Reading. With that commitment, I hope the noble Baroness will agree to withdraw that amendment.

My Lords, I really am most grateful to the Minister for agreeing to look at both of these amendments. I agree that they may be technically defective, but I am immensely gratified that he has seen the importance of both issues. I beg leave to withdraw the amendment.

My Lords, the break between Committee and Report has allowed me to reflect on the debate we had on the unsustainable provider regime. I brought forward Amendments 38 and 39 in response to the insightful comments made by the noble Earl, Lord Howe. He said that there was a need for the Secretary of State to explain the reasons behind his final decision, particularly if he does not follow one or more of the trust special administrators’ recommendations. It is worth stressing at this point, given the transparent process set out in the Bill, that we expect that it would be unusual for the Secretary of State to depart significantly from the trust special administrators’ recommendations.

As I said in Committee, it was always intended that the Secretary of State would give reasons for his final decision. On reflection, I think that the noble Earl made a compelling case for including such a requirement in the Bill. I agree that the Bill will benefit from the clarification on the point to achieve a level of transparency that will help build confidence in this process.

These amendments would place a requirement on the Secretary of State to explain the reasons for his decision in the notice of his decision in proposed new Section 65K(2) and 65W(2). I hope noble Lords agree that this amendment increases the transparency of the scheme, and I thank the noble Earl for suggesting this important improvement. I beg to move.

My Lords, I very much appreciate the care and attention that the noble Lord has devoted to the points made in Grand Committee. I welcome these amendments and am grateful to him.

My Lords, with this amendment we move to perhaps the most controversial part of the Bill: Part 3. But I should like to bring us back—I hope briefly—to the debate that we had in Grand Committee on the provisions in Clause 18 relating to specialist tobacconists. Specialist tobacconists, as many noble Lords will know, are shops which, as their name implies, specialise in stocking cigars, pipe tobacco, snuff and other upmarket products for the connoisseur smoker. They are few in number: there are only about 50 such outlets across the country as a whole.

My reason for tabling this amendment is very straightforward. Section 6 of the Tobacco Advertising and Promotion Act 2002 includes an explicit exemption for specialist tobacconists from the legislation banning advertising. It does so subject to three conditions. These are that the advertisement has to be inside or fixed to the outside of the premises; it cannot be for cigarettes or hand-rolling tobacco; and—the part that concerns me most—it has to comply with regulations governing advertising in specialist tobacconists.

As regards this last condition, the actual wording of the section is very clear. It states:

“(1) A person does not commit an offence under section 2 if the tobacco advertisement … complied with any requirements specified by the appropriate Minister in regulations in relation to tobacco advertisements on the premises of specialist tobacconists”.

Clause 18 removes this explicit exemption by giving the Secretary of State the power to decide whether the exemption should remain. In other words, it removes the existing certainty for specialist tobacconists under the 2002 Act. Therefore, one very straightforward question needs to be asked. Why is this clause needed when Ministers already have a power under Section 6 of TAPA 2002 to specify requirements in relation to tobacco advertisements on the premises of specialist tobacconists?

We have had an assurance from the Minister that the Government have no intention of removing the exemption for specialist tobacconists altogether; rather, they say that they intend to use the regulation-making power in Clause 18 to—and I quote the Minister—

“maintain the general exemption but … for example to prohibit advertisements outside specialist tobacco shops or in shop windows where these are in view of the general public, including children and young people”.—[Official Report, 5/3/09; col. GC 352].

If that is the Government’s intention I have no problem with it. Incidentally, I hope the Minister can also confirm that there is no intention of preventing specialist tobacconists from displaying tobacco products inside their shops. I only ask why it is necessary to disapply Section 6 of TAPA, which already contains a regulation-making power, and replace it with another regulation-making power which would ostensibly enable the Government to achieve exactly the same thing. The Minister was kind enough to write to me on the matter but I would be grateful if she would briefly place her comments on the record. I beg to move.

My Lords, Clause 18 replaces the existing exemption from the tobacco advertising ban for specialist tobacconists with regulation-making powers, as the noble Earl outlined. Currently, such shops are allowed to advertise their specialist products provided the adverts are either inside or fixed to the outside of their shop.

The new regulation-making power would allow us to limit tobacco advertising to the inside of specialist tobacconists only—adverts would no longer be visible outside their shops. This is an important element of our approach to tobacco control. Along with Clause 19, these new powers will help to eliminate unsolicited tobacco promotion, protecting children and supporting those people who want to quit. The noble Earl, Lord Howe, is right that the 2002 Act provides regulation-making powers with respect to advertisements in or outside specialist shops. However, there is explicit provision in the 2002 Act for specialist tobacconists to have adverts fixed to the outside of their premises. Regulations made under the existing powers could only specify requirements about outside adverts, not prohibit them altogether.

We want to prohibit all tobacco advertising that is visible to people who have not chosen to see it. We propose using the new regulation-making powers provided by Clause 18 to ensure that advertising of specialist tobacco products is not visible outside specialist shops. However, the noble Earl is right that there is no intention to limit advertising inside shops within the current regulatory framework. We do not want to unfairly penalise specialist tobacconists. We recognise they are involved in a legitimate trade and need to be able to attract customers. They would still be able to use their window displays to inform customers about what they sell by advertising tobacco accessories, such as pipes, or by listing the tobacco products they sell. They would still be able to advertise specialist products inside their shops.

In reviewing Hansard, I have realised that in Committee I said that the clause would still allow advertising on the outside of specialist shops. While the existing primary legislation expressly permits advertising on the outside of shops, the new provision would only allow such advertising if regulations provided for it. I apologise for that and hope that I have made the position clear in my letter to the noble Earl, which I am happy to share with the rest of the House and place in the Library.

By removing unsolicited tobacco promotion, Clause 18 supports the Government’s aim to provide an environment in which not smoking is the easy choice, and I commend this clause to the House.

My Lords, is the noble Baroness nit-picking? She must have had the representations that Members of the Committee have had from the Imported Tobacco Products Advisory Council. The quotation in section 2 of the letter shows that in 2006 the TNS Omnibus survey indicates that in the UK 83 per cent of cigar smokers and 96 per cent of pipe smokers are aged 35 and over. What is the point of being allowed to advertise inside the shop if we cannot get people in from the outside? These are specialist, tiny shops, small in number. If they cannot get people into the shop, what is the point of being able to advertise within the shop? This is not correct.

My Lords, I take it that the noble Lord was intervening to ask a question before I sat down. I repeat that we do not wish to unfairly penalise specialist tobacconists. We recognise that they are involved in a legitimate trade. Regulations and the Bill are intended to allow them to continue to do that and to be able to attract customers.

My Lords, I am grateful to my noble friend for asking for that clarification; it was helpful to receive the Minister’s last assurance. However, I am also grateful to her for the assurances that she was able to give in the main part of her remarks, and I beg leave to withdraw the amendment.

My Lords, I also speak to Amendment 43. The government proposal in Clause 19—the most fundamental, significant proposal on tobacco in the Bill—is to prohibit entirely any and all displays of tobacco products in retail premises. The stated objective of Clause 19 is to protect children from the promotion of tobacco products and to support those adults who are trying to quit smoking.

Everybody will know that in both supermarkets and smaller retail shops there are, usually behind the counter, gantries. Gantries are units displaying tobacco products in retail outlets. The effect of the Government’s proposal in Clause 19 is that all those gantries and displays would have to be covered up in some way. My view, expressed in Grand Committee, was that Clause 19 should be removed entirely from the Bill. That proposal is shortly to be discussed under Amendment 46, tabled by the noble Earl, Lord Howe.

The Government’s case for Clause 19 is seriously flawed. It is, to a large part, dependent upon dubious and highly speculative evidence from various Canadian provinces and Iceland. It ignores the fact that the display must nowadays in Britain be heavily weighed down with health warnings, “Smoking kills” being the most prominent indication behind the counter that any customer can readily see. It also ignores the huge success, as vouched for by the Chief Medical Officer, Sir Liam Donaldson, of the ban on smoking in enclosed public spaces, in terms of both compliance, which is incredibly high, and improvements in public health.

Noble Lords will see that my Amendment 42 is a kind of compromise, intended to permit some form of limited display in shops where tobacco products are often for sale. The display under my amendment would be limited to one packet only for each tobacco product offered for sale in those particular premises. I got to that point in thinking about how some compromise might be achieved by studying closely the words of my noble friend Lady Thornton:

“This is not about preventing any viewing ever of a cigarette pack by a child. But there is a big difference between seeing a single cigarette pack and being exposed to a large, brightly lit and colourful gantry in your local corner shop next to your sweets”.—[Official Report, 9/3/09; col. GC 391.]

The noble Baroness went on to admit that some adult customers—although not all the time and not all that often—need a chance to see a particular cigarette packet before buying it. The rest—most—usually just go to the one that they are used to and which is their normal purchase. I have carefully followed the words of the Minister in drafting Amendment 42. The draft assumes that the Government wish to impose some regulations on the size of the area covered by a display to avoid any possibility of the “brightly lit and colourful” display coming in via a back door when the Minister, quite properly, is concerned about that.

My Lords, I very well appreciate that the noble Lord, Lord Borrie, has tabled this amendment as an attempt at compromise. However, the problem is that if one takes what he proposes literally, it would create enormous difficulty because since 1998 tobacco manufacturers have increased their ranges threefold within brands or brand families, with a popular brand such as Benson & Hedges increasing its brand family from four in 1998 to 12 in 2008. The amendment would persuade tobacco manufacturers to increase even further the number of different brands and brand variants available to maximise their brand presence in store. It would also make enforcement very difficult, even impossible, as it would mean that trading standards officers would have to check that only one pack of each branded variant was displayed. If prominent and colourful displays were still allowed, that would do very little to reduce attractiveness to children. I am afraid that I cannot support the amendment.

My Lords, I, too, cannot support the amendment. I want to home in on the point which the noble Lord, Lord Walton of Detchant, has just made. By extending brand families, one encourages more people to try each new part of those families. I have hands-on practical experience of that but through launching a product which is good for you as opposed to one that kills. When I was head of the Milk Marketing Board for England and Wales we decided to launch semi-skimmed milk. We launched semi-skimmed, skimmed and homogenised milks; I think about eight to 10 different types were launched. They gave consumer choice. Not one of them encouraged children to try something on which they could get hooked, and thereby create a health hazard for them for the rest of their lives. Let us not forget that 65 per cent of adults who smoke started smoking when they were children. It is children who are enticed into these CTN shops, as they are called—confectioners, tobacconists and newsagents. There are sweets there; they are just on the corner; they are a nice place for kids to meet friends after school. The children see these cigarettes and are tempted.

We all know what it is like to be tempted. I cannot even go into a cake shop because I know exactly what will happen. The reality is that these children think it is smart. The reason I do not go into a cake shop is that I do not think it is smart to eat too many cakes. Children are subjected to peer pressure. They think it is clever to go behind what we used to call the bike shed. They are impressionable. It is not the Marlboro Man any longer; it is something about being with their group and daring one another. Which one of us has not been subjected to, “Come on, don’t be so lily-livered, don’t be so stupid. Try it”? They try it. Perhaps they do not like the first few cigarettes, but then they get hooked. We all know that most adults do not want to smoke, but they are addicted. If you hook them at the age of 12, 13, 14, or 15, my goodness, you have got them pretty well hooked for life.

What damage are we doing to the health of the nation? The amendment is just a mid-way stop between the Government’s position and a free-for-all. I actually support the Government in this. I am sorry to say this, as I have the highest respect for him, but I think the noble Lord, Lord Borrie, is wrong.

My Lords, I have a great respect and, indeed, affection for my noble friend Lord Borrie, but on this amendment he fails to carry me. I find myself strongly behind the Government. We all know that packaging has become one of the principal techniques by which marketing is undertaken. It has much more effect in many ways than any other kind of advertising. In particular, new techniques are now being introduced which I find rather disturbing, such as the concept of power walls, where a carefully prepared display of different packets from different manufacturers makes a very attractive montage for the young. It also seems to me that the tobacco industry is surprisingly candid about just how important this is for it, the comments of the spokesman for Japan Tobacco International about Camel cigarettes really making the point. He said:

“The limited edition Camel packs have a fresh design in keeping with the brand’s long-standing reputation for innovation. Popular with style conscious adult smokers, Camel offers a high profit return for retailers so should be well stocked at all times”.

The Camel pack was also described as being popular with “adult student populations”, although I am not entirely sure how it is possible to target that particular adult section of the student community without affecting others.

The evidence is there. Our neighbours in Ireland, lately in Finland, and particularly in 11 of the 13 Canadian provinces have taken legislative action in this respect and seen a very significant fall in the number of young people smoking. I believe the Government are absolutely right on this and they have my full-hearted support.

My Lords, I agree with everything that has been said about the effect this amendment will have on young people. If tobacco products and cigarette packets are on display, they will be encouraged to smoke. For me there is no doubt about that. I do, however, understand the spirit in which this amendment was tabled.

I would like to put on record that we have heard from retailers arguments about the cost of adapting their shops, the chances of crime being increased while they are reaching for cigarettes that have to be hidden away, or the increase in smuggling, and I do not really see how this amendment will help in any way. They still have to reach for the main bulk of their supplies of cigarettes, even if they have only one packet of each brand on display. I do not think that this will help retailers. It certainly will not help to discourage young people from smoking. Therefore, I urge the noble Lord to rethink.

My Lords, I support the noble Lord, Lord Borrie, who has great experience of the world of competition. He will be aware, as am I, that the incidence of smoking among 11 to 15 year-olds has reached an all-time low. That is to be greatly welcomed. I imagine that the health education programme will continue on that front. Two sets of figures have been published. One set shows that 6 per cent of 11 to 15 year-olds have smoked one cigarette a week. Another government-supported survey shows a figure of 2 per cent. The Government are to be congratulated on the success of reducing the incidence of smoking among young people.

It remains a legal product. No Government have yet been brave enough to ban it. If it is banned, that is fine; but if it is a legal product, is your Lordships’ House so arrogant as to suggest that there should be no product development and no line extension? What was the Milk Marketing Board doing? Line extensions. That is a perfectly normal situation for a consumer product company. If we are by the back door suggesting that we want to kill off the tobacco companies by preventing them developing any form of line extension, why do we not say so openly? If it is not that, those tobacco companies that produce different variations of their products are, I believe, justified in offering them to the consumer. That is what consumer choice is about.

Some people are so dedicated to anti-tobacco—I understand that stance—that they would rather that nothing was offered. I repeat that, so long as this product of tobacco, cigarettes and so on, is offered legally to the consumer, it is a very brave Parliament that says that there shall be no line development of any product in that field. I support the amendment proposed by the noble Lord, Lord Borrie.

My Lords, I support the Government’s position and not the amendment proposed by the noble Lord, Lord Borrie. I am intrigued by the arguments made by the noble Lord about the tobacco trade. Clearly, there are two issues here. One is the large manufacturers, and the other is the plight of small businesses. We have all had a large number of letters from small businesses, and they deserve our understanding and sympathy.

My own village shop is absolutely crucial to the life of my village, and the whole community circulates around it. However, I doubt very much indeed whether this Bill will make our shop close. It is there for a wide range of goods and services. No one has yet banned the National Lottery, which seems to be a great joy for a large number of people in my village. I do not think that small businesses are going to suffer. We have heard a great deal about the costs of these gantries, with inflated stories on one side, and understanding that there are people who want to deliver these on the other. If noble Lords have not seen illustrations of these, I would encourage them to do so.

My Lords, I congratulate the noble Lord, Lord Borrie, on producing these two amendments, which are worthy of great consideration. Indeed, I have considered them closely; but I have come to the conclusion that they do not go far enough. We shall come to further amendments that do go far enough.

Clause 19 is a restraint in trade. It prevents retailers and all purveyors of tobacco exhibiting their wares as any other trade can do. I believe that is an unacceptable imposition on thousands of small and medium-sized shopkeepers who sell tobacco. Therefore I am opposed to Clause 19 per se.

The Government argue that it will not affect retailers because it will not cost much to hide the displays of tobacco. However, everything that we have heard from independent people and retailers themselves shows that the cost will be very high, and in some cases prohibitive. It will not only cause inconvenience and perhaps danger to tobacconists, but will also put them at risk of going out of business.

The Government will say that that is rubbish, but that is exactly what they said when they banned smoking in public places. We warned them that public houses would close down all over the country, but they said, “Of course, they won’t. The people who don’t smoke will flock to the restaurants and public houses as they have never flocked before”. But the truth is that we now have in Parliament a group for the protection of public houses because so many have gone out of business, robbing many of our communities of a social meeting place. Whether that was the Government’s objective, I do not know. They do not seem to like criticism and they certainly do not respond to reasonable argument.

Retailers sell not just tobacco but all sorts of other things that we are told by the medical people and other health experts are very bad for us. Many retailers also sell alcoholic liquor. In my view, that is the most dangerous drug that people can consume. Yet, it is perfectly all right to display alcohol in fancy bottles with very attractive labels. Presumably children will see those, but will they take to drink and become alcoholics because they have seen a bottle on display in some retailer’s shop? I do not believe it.

We are told from time to time that foods such as chocolate are bad for us. Chocolate products are about all you can see when you go into some retailers, so we are encouraging children to eat chocolate which the experts tell us is bad for us. Full-cream ice-cream is supposed to make you fat, yet in most retailers’ shops cornets and so on are on display. There are all sorts of ways you can fill yourself up on ice-cream. Cream cakes and all sorts of other sweets are supposed to be bad for us.

Where are the Government going? Will they stop at cigarettes or tobacco products, or will they go for all those things in the future? I warn all those who like eating chocolates, who like a little drink now and again or who like ice-cream that they may be next on the list. Before very long, if retailers are treated in the same way as they have been treated over tobacco, they will have nothing to display at all. Their shops will be the most boring places to go into.

I do not like going into the medical aspects, but I might do so on the next amendments. I keep newspaper cuttings, particularly on this subject. The Daily Mail on 27 February had a big headline stating:

“Our lifestyles are killing us”.

The report states:

“Almost 78,000 Britons develop cancer needlessly each year because of their unhealthy lifestyles. Researchers found that they could have avoided the disease by eating better, drinking less alcohol and exercising more”.

There is nothing about cigarettes, as a matter of fact.

Thus, 78,000 people are at risk from eating and drinking and not having exercise. There is nothing about smoking. But then today, I read an article in the Daily Mail headed,

“Why smokers are burning fat as well as cigarettes”.

The article states that when cigarette smokers stop smoking, they become fat. If they smoke cigarettes, they will not become fat. So what we really ought to do is to nullify the whole thing—because the figures are just about the same at around 80,000—by suggesting to fat people that they should smoke cigarettes in order to keep slimmer.

That is a logical thing to say, having read these articles. It to illustrate the fact that the anti-tobacco people concentrate on this one product which is supposed to be bad for us, but we really must be careful, because similar campaigns will be taken up against things that perhaps some of us like. I do not drink much alcohol, but other people enjoy it very much. We must be careful that the anti-smoking lobby, when it has completely got its way, does not turn on other people’s delights. Although I congratulate the noble Lord, Lord Borrie, on bringing this amendment forward, I believe that subsequent amendments will more effectively help the small retailers who are at risk of going out of business.

My Lords, like other noble Lords, I recognise the sentiment behind the amendments of my noble friend Lord Borrie. I assume that it is to achieve our public health objectives while minimising burdens on business; that is a laudable aim but, I fear, misplaced here. These amendments would seriously undermine the effect of removing tobacco displays. There would be only a partial display ban, which would not achieve the public health benefits but would increase the regulatory burden—something which I know would be of concern to my noble friend.

We know that the future of the tobacco industry depends on recruiting and retaining people to smoke. When we carried out our consultation on the future of tobacco control last year, we asked what, if anything, should be done about tobacco displays. There were three options: to retain the status quo, to introduce limited restrictions and to remove tobacco displays altogether. As noble Lords will be aware, we received overwhelming support for a complete prohibition. As may be expected, the tobacco industry opposed the ban, and many of those retailers who responded were also against change. But relevant here—

My Lords, was there any consultation on limited display?

My Lords, I have just said that one of the options was limited restrictions, or limited display.

My Lords, what consultation was there on that middle area?

My Lords, if the noble Lord would allow me to continue my remarks, he might learn.

Most relevant here is that there was very little support from anyone for a partial ban, or limited display. The main reason given was that it would not achieve the public health objectives. Display by its very nature constitutes promotion, and removing it completely is the only sure way to prevent tobacco promotion. There are also concerns that a partial display ban would increase the regulatory burden, making the legislation harder for a shop to comply with and for local authorities to enforce.

In their consultation response, the local authorities’ co-ordinators of regulatory services, known to the rest of us as trading standards officers, supported completely removing display prohibition. They argued that complete prohibition,

“presents a clear message to retailers and potentially would be more straightforward to enforce for local councils”.

Under Amendment 42, it would be lawful to display tobacco products if only one packet of each product were on view. However, the amendment would not achieve the public health objectives to which I have already referred, and I should like to consider the practical implications were it to be accepted.

My Lords, I am most grateful to all those who took part in this debate, despite the fact that most of them did not agree with the purport of my amendment. I am particularly sorry that the Minister produced a large number of arguments, only some of which, in my view, hold much validity, and many of which were highly speculative in referring to the practice and experience of other countries. But I am grateful to her for her serious consideration of the matter.

My proposal was, as I indicated, a compromise to give the Government the opportunity to come up with a less draconian proposition than is embodied in Clause 19. I obviously did not make myself sufficiently clear to the noble Lord, Lord Stoddart of Swindon, but I actually prefer the notion that we should vote down Clause 19 rather than pursue a compromise. As my compromise did not achieve more than a small amount of agreement, I intend to withdraw my amendment and look forward to the further debate we shall have in a short while. I beg leave to withdraw the amendment.

My Lords, I shall also speak to Amendment 45. Before we debate Clause 19 as a whole, I would like to turn noble Lords’ attention to a particular provision that it contains, which we debated at some length in Grand Committee. I refer to the provision which deals with so-called “requested displays” of tobacco. A requested display is defined in new Section 7B as being,

“a display to an individual following a particular request by the individual to purchase a tobacco product, or for information about a tobacco product”.

The individual concerned must be 18 years old or over. In an earlier debate we heard from the Minister that this provision is there,

“because it is right that customers should be able to see and handle a product before buying it”.—[Official Report, 5/3/09; col. GC 358.]

Leaving aside that some of us think that that is exactly what tobacco displays facilitate—they enable you to see a product before buying it—the provision gives rise to all sorts of practical issues. To what extent would a retailer risk breaking the law if a customer asked to see a packet of cigarettes and had a child standing next to them? In a supermarket, where one might have several requests to display cigarettes in quick succession, how problematic would it be for a shopkeeper to comply with those requests when there are children standing around? And how long a period is reasonable for viewing a packet of cigarettes before deciding whether or not to buy it?

All these questions are being asked. At the moment, we do not have any detailed answers because the draft regulations have not been published. That is regrettable because what is at issue here is how workable the regulations will actually be. Ministers may give us assurances now that it will not be an offence to make a requested display to an adult who happens to have a child with them, but we cannot know what difficulties may arise until we have seen the regulations.

Overprescriptiveness is another trap. It could be, for example, that the regulations will attempt to lay down a specific time limit for a requested display. If they do, I do not think that would either workable or enforceable. Nor could one envisage a rule that specified a maximum size for a requested display, because one could easily imagine a customer wanting to view more than one product at a time. Why should they not do so?

The Bill would prohibit someone under 18 being able to view a packet of cigarettes after making a request to do so. As the Bill is worded, a retailer could face a fine of £20,000 or six months in jail if he showed a packet of cigarettes to a young person, even though he ultimately refused the sale. That seems extraordinarily draconian and shows why the practical detail of the regulations really will matter.

There are systems installed in the tills of some shops which prompt staff to check for age, but they will kick in only once the product has been displayed and scanned. Making it an offence even to show the product will not allow the age verification system to cut in at an early enough point. It is perhaps worth saying that there is no parallel to these provisions anywhere else in the law in situations where there is a bar to selling to under-18s. Alcohol, knives, pharmaceuticals and fireworks may not be sold to minors, but merely displaying those products to minors is not illegal.

If requested displays are to constitute an exemption to the general display ban—and I emphasise that the devil will lie in the detail as regards the workability of the rules—they cannot surely be the only exemption. What happens, for example, when new stock is being delivered to the shop? The goods have got to come into the premises, at which point they may be visible to customers. They then have to be loaded on to the shelves. What is a retailer supposed to do? In many shops, the shelves can be restocked only during operational hours when customers may well be about. Will the regulations make allowances for this? We just do not know.

Another candidate for exemption surely has to be duty-free sales of tobacco at airports. I have been informed that there have been discussions between Department of Health senior representatives and their counterparts from the aviation industry, who are concerned about the negative impact of the proposed tobacco display ban on airport retail revenues. I understand that these discussions are focused on the possibility of establishing a specific regime that will allow duty-free retailing to continue funding our aviation industry without undermining the objectives of the Government’s policy. Is the Minister aware that when Canada framed similar legislation, it none the less recognised the unique nature and importance of duty-free and therefore decided to exempt duty-free retail shops from the display ban? It would be helpful if the Minister could confirm that the discussions to which I referred are taking place and that the Government recognise the need to prevent the loss of essential revenue to UK airports, which are already under extreme pressure due to the current recession.

I do not think that Ministers have quite realised how complex it will be for retailers to comply with the requested display regulations and how near-on impossible it will be to enforce them. If she is unable to fill us in today on exactly how the provisions will work, the only thing we can do is put down a marker for the other place to explore these issues when the Bill reaches it. On the other hand, we may be pleasantly surprised by the answers that we receive today. In the hope that we may be, I beg to move.

My Lords, I realise that the concept of requested display may require some clarification and I should like to explain our intentions. I note that the noble Earl seeks to expunge Clause 19 from the Bill but I hope that my explanations will help him reconsider.

The prime effect of Clause 19 is to make any display of tobacco products an offence but we need to make sure that shopkeepers are still able to sell cigarettes to their customers. It should not be an offence to show adults a product before they buy it or as they make their purchase. The requested display provisions mean that retailers would not commit an offence in such circumstances. We believe that this is a straightforward matter: an adult should be able to see a product before or when they are buying it. So, this clause is a very important safeguard for retailers. Without it, retailers may constantly risk committing an offence just by serving customers. Therefore, we felt that it was important for all concerned that this safeguard is in the Bill.

My Lords, I am grateful to the Minister for her reply as far as it goes. I can of course see why the safeguard was thought to be a good idea. But if the detail of the regulations will be available only after Royal Assent, we are, to all intents and purposes, working in the dark as regards their workability. Of course the Government consult on regulations—I appreciate that—but it would have been helpful if Parliament had been able to consider the proposal in the round at this point.

I am still worried about the potential for inadvertent displays to a child following an attempt by a child, let us imagine, to request to see a particular brand of cigarettes, and that that kind of inadvertent breach of the law could attract a hefty fine even where the retailer wakes up to the fact of what is going on and does not sell the product. I hope the Minister will take on board that these penalties have to be proportionate to the damage done in that kind of situation.

However, I wanted to put certain remarks on the record, I wanted to ask certain questions, I am grateful to the Minister—she has probably gone as far as she can go—and I think this is the right point to withdraw the amendment.

My Lords, we come now to the overarching issue presented by this clause and to what is, undoubtedly the most difficult and argued over part of the whole Bill. I am no advocate of smoking and I am conscious of the apparent anomaly that, as a health spokesman for my party, I should be proposing the removal from the Bill of a measure which appears, on the surface, to be conducive to public health. I do so, however, in the complete conviction that this measure is misconceived and that it will do considerably more harm than good, and I shall almost certainly ask the House to express its opinion about it.

The Government have proposed that displays of tobacco products should be banned in all retail premises. They have done so for one main reason; they believe that tobacco displays are directly instrumental in the take-up of smoking by young people. Their case is that tobacco displays have become de facto advertisements. They pray in aid research published by Cancer Research UK and others, and they believe that a display ban will send out an important public health message.

I believe that the Government’s position is wrong for two main reasons: the evidence base, and the likely damage that will be done to small shops. I have looked at the evidence base very carefully indeed, and I do not believe that a ban on the display of cigarettes in shops can be plausibly linked to the take-up of smoking by the young. Of the places around the world in which a display ban has been tried, Canada and Iceland are most normally cited. The province of Saskatchewan in Canada has had a display ban since 2002. In Saskatchewan, it is absolutely true that youth smoking has declined since the ban was brought in. The trouble is that the figures for the rest of Canada show that in provinces in which there has been no display ban, including provinces with quite similar characteristics to those of Saskatchewan, the rate of decline has been considerably steeper.

Youth smoking has gone down throughout Canada in the past few years; but in places such as Quebec, British Columbia, Ontario and Nova Scotia, which until very recently had no display ban, the rate of decline in youth smoking has been much steeper than in places in which a ban has been in force. That fact makes it very difficult to conclude, even tentatively, that the display ban in Saskatchewan was responsible for the decline in smoking.

Iceland introduced a display ban in 2001. Various statistics are available, some of which suggest that there has been a decline in smoking prevalence among the young since the ban was brought in, but what tends not to be mentioned is that, simultaneous to introducing the display ban, the Icelandic Government did three other things; they put up the price of cigarettes, introduced restrictions on smoking in public places, and introduced a positive licensing system for retail sales. Again, therefore, one cannot point to the display ban and say that it has brought about an improvement in smoking prevalence among the young. The statistics, in any case, do not tell a clear story.

A clear story is what Cancer Research UK maintains we have in the research that has been done into the link between brand awareness among young people and smoking behaviour. Noble Lords may have attended a presentation by Professor Gerard Hastings, which suggested that the causal link between displays, brand awareness and smoking was absolutely unarguable. I hesitate to criticise Professor Hastings, but I must. In the 1990s, the Department of Health commissioned two separate studies of their own into the reasons why adolescents smoke: one was by Elaine Goddard; and the other was by Clive Smee, who was then chief economic adviser to the DoH.

Goddard’s study was, and remains, the only longitudinal study in this area—that is, it followed the same students over three years in adolescence when they were likely to become smokers. It is one of the largest studies that has ever been done on adolescent smoking in the UK. Goddard found that the major predictors of whether an adolescent became a smoker are socio-economic; in other words, they are very largely to do with one’s family circumstances. Importantly, she found that brand awareness was not statistically significant as a causal factor. Smee’s study confirmed that. He found that being aware of tobacco advertisements does not reliably predict becoming a smoker and that there is no statistically significant relationship between tobacco advertising and adolescent smoking prevalence. So the Department of Health’s own research contradicts twice over the claim that advertising causes children to smoke; and if it is true of advertising then, a fortiori, it must be true of displays.

Where does Professor Hastings mention those two studies in the evidence that he presents? He does not. He omits them. I have to say that I am deeply troubled by that if what we are meant to be considering is a balanced and dispassionate analysis of the research. Moreover, the studies that he cites provide no evidence that anyone at all who participated in a study started smoking because of tobacco brand awareness or retail displays. All that Hastings reports is what he calls an intention to smoke at age 18. For many participants this involves being asked to project several years into the future and to say whether they will become a smoker. Hastings then takes these projections and links them to brand awareness, but that is where it ends: the research does not offer a single instance where one of the subjects has become a smoker because of their awareness of tobacco brands or displays. He assumes that if the adolescents say that they intend to be smokers in a few years’ time then they will be. The advice I have had is that social scientists routinely warn against this type of research. It is highly unreliable, because what people do is often at variance with what they say they intend to do.

But that is not all. The link that Hastings draws between tobacco display, brand awareness, prevalence and susceptibility to smoking has a confidence factor of between 1.02 and 1.17. Those figures are very low. They are well within the margin of error for being a chance finding. It is not a genuine association for statistical purposes. The association is even weaker because it fails to take into account potentially confounding factors, by which I mean the accepted and recognised causes of adolescent smoking. There are several of these: whether your family smokes, whether you live with a lone parent, how affluent you are, and so on. You cannot associate smoking with one particular causal factor, like tobacco displays, unless you have established that other factors, which may be more relevant, can be ruled out. So, for a whole raft of reasons, the research cited by the Government is shot through with weakness and leaps of logic.

I turn to my second and equally serious reason for opposing this clause—namely the damage that it is likely to inflict on small shops. There are about 50,000 corner shops in the UK, and the organisations representing those outlets have told me of their acute worry that a point-of-sale ban on the display of tobacco will do serious harm to their trade. The level of concern is very high. A year ago, the Tobacco Retailers Alliance had 16,000 members. The figure now is 26,000. These shops depend on tobacco sales for a large proportion of their turnover. It is not a high-margin business; the point is that it creates footfall. People who come in to buy cigarettes typically buy other things as well, which carry a higher profit margin. If those people cease to patronise small shops, the effect on trade in those outlets could well be terminal.

It is all very well for people like Professor Hastings to say, as he does, that footfall will not suffer because smokers will still know where to go to buy their cigarettes. With due respect to him, he has never run a corner shop. If you talk to the shopkeepers, as I have, they will tell you that as much as 50 per cent of their turnover can come from passing trade. These are not customers who would know in advance that a particular shop sold cigarettes or their favoured brand of cigarettes. On the other hand, they will know that they can buy their favourite brand from the local supermarket. It will be easier to go elsewhere. The fear is that the all-important tobacco sales will migrate away from small shops and quite simply make them unviable.

My Lords, I am not going to repeat a word of what was said by the noble Earl, my colleague on the Front Bench, other than to agree totally with every word, and to hope that your Lordships have listened carefully to his contribution. I want to concentrate on one point—the cost of implementing the clause. I had the privilege of serving on the Grand Committee. On 9 March at col. GC 394, the noble Baroness made it clear to the Committee, as was entirely appropriate, that she had been chair of the All-Party Retail Group before joining the Government and had worked for the Co-op. She went on to explain that the cost for the change was minimal and would be:

“15 Canadian dollars—around £8.40—per square foot of display covered”.—[Official Report, 9/3/09; col. GC 395.]

In other words, that is £120. The convenience stores viewed that figure with some incredulity. Furthermore, we on the Committee wondered why on earth anybody would take a quotation from a Canadian company when of course the change would have to be done in the UK.

Noble Lords have had representations from a large number of stores indicating that in their judgment the costs would be £1,500 to £2,000. We have on the record what the Minister said, and I think most noble Lords—certainly those of us who took part in the Grand Committee—will have received a letter dated 23 April from the Department of Health headed “Frequently asked questions”. Question 2 says that it is going to cost retailers thousands of pounds to remove displays. The Minister, in this case the noble Lord, Lord Darzi, signs this letter, which states:

“Removing displays need not be costly—in Canada, even professional covers cost as little as £120 for an area measuring 1 metre by 1.3 metres”,

et cetera.

I was amazed to read—I hope the Minister is able to answer on this point—in the Evening Standard of 1 May that:

“The Ministry of Health asked anti-smoking organisation ASH (which is hardly a disinterested party)”—

hear, hear—

“to check on the cost, and it claimed the figure for the gantries was just £120. This figure was sent by health minister Lord Darzi to every member”,

of your Lordships’ House. However, all of a sudden, 4 Solutions in Canada woke up to what is happening. It has issued a statement pointing out that the individual costs would be approximately £480—roughly speaking, four times the cost cited by the noble Baroness, Lady Thornton, who has experience of this world. She is a former retailer herself and knows all about the retail world.

Furthermore, 4 Solutions went on to say that the figure,

“did not include any of the insulation costs, which would be around £1000. They also pointed out the costs of the gantries for all the outlets in Britain could be over £30 million”.

That is a huge difference from what the Grand Committee was told. It was on the basis of what the Grand Committee was told that we have the clause before us. My question to the Minister is: was she totally misled by 4 Solutions, was she totally misled by ASH, or has she in effect totally misled the House? This is a serious point, as my noble friend on the Front Bench rightly pointed out. Here we are in a recession: 50,000 outlets have been affected by one of the key footfall creators, and the Government are facing costs not of £120 to implement the Bill but possibly the best part of £2,000, which comes out of their net profit. It is not a turnover point but a net profit. We are talking about a substantial amount of turnover to provide the figure. I hope that the noble Baroness has a good answer to this point. I am making a serious challenge to her. I am not alleging that she has misled the House, but I hope she has a good answer on whether the figure is £120 or closer to £2,000.

My Lords, like my noble friend Lord Howe I am no advocate of smoking. Until recently I was a trustee of Cancer Research UK. Before that, I was a member of the Imperial Cancer Research Fund, which was one of two partners that joined in a successful merger. Cancer Research UK is the biggest cancer charity in the world, bigger than those in the United States or anywhere else. To sustain that, it has to raise over £1 million every working day. As a result, it performs world-class research. The commitment that scientists and fundraisers have, both those who are professionally employed and the volunteers and the management, is inspiring, as is the commitment of the public who support cancer research.

I resigned because I have taken on the chair of the Association of Medical Research Charities and I felt that there was a conflict of interest. Quite a while ago, I visited Finland researching community nursing. We were taken to a remote part of the country. It was a vibrant town, quite large, and in the middle was an enormous wood pulp processing factory. It dominated that community. It spewed out fumes and the noise was considerable. We said to our hosts, “Why do you allow this enormous factory to dominate this area and do physical harm to your inhabitants?”. They said, “We thought a lot about it, and decided that it comes down to a balance of harms. We decided that employment is more important to the well-being of this community than the minimal effect that this can have on their physical health. Unemployment brings poverty, loss of self-respect, depression and mental illness, so it is more harmful to us to do away with this factory than to put up with the fumes and noise”.

I tell that anecdote because this debate is a judgment on the balance of potential harms. Nobody can deny that smoking kills. Nobody can deny that it is better for children, especially young teenagers—we know that young girls are particularly susceptible—not to start smoking. We know that it costs the nation a huge amount of money to treat smokers. We have had a policy of attrition. Step by step, we have tried to reduce the number of smokers. To some extent, that has been fairly successful.

I am not opposed to a policy of attrition, especially if it is based on sound evidence. Indeed, I supported the banning of smoking in public places because the evidence was robust and the practice was affecting a lot of other people. I am grateful to the noble Lord, Lord Stoddart, for mentioning in an earlier debate something that I did not know: what effect the ban had on the number of pubs that closed as a result. We now know that they are closing at a phenomenal rate. We do not know whether it is the smoking ban or cheap alcohol in the supermarkets, but every pub that closes is, on the whole, a tragedy for the local community. They are places where people want to meet, relax and have some enjoyment. They combat loneliness and depression in that community. They are part of the thread that holds the community together, as are shops.

In my community we have 2,000 people. We have fought really hard to keep the post office open, and we have succeeded. A few months ago, we fought really hard to keep our chemist shop open, and we succeeded. We keep a wary eye on the butcher, the baker and the two corner shops. They sell everything. They are our lastminute.com. More than that, they know us. They are not fearful to challenge would-be teenage smokers. They know the kids and the parents, on the whole. As my noble friend Lord Howe has said, they also get a passing trade. However, they are far more effective than the local supermarkets in challenging teenagers. Supermarkets simply process the shoppers who attend. What is more, we walk to our local shops. We do not pollute the atmosphere by having to drive. Our corner shops service particularly those who are old and infirm. They are part of a vibrant community that we need. We need an economic base if we are to support clubs, societies and everything from toddlers’ groups, and the lonely mothers who go there, to youngsters who are bored. We have Scouts and Brownies and all the rest of it—and tea dances for elderly people.

Listening to the debates in Grand Committee, and reading the enormous quantity of briefing that we have had from all parties and talking to parents of teenagers who smoke, I have come to a conclusion based on evidence. I am very grateful to my noble friend Lord Howe for setting out the spurious evidence—at least not robust evidence—which underpins some of the suggestions which have been put to us. In no way do I want to impugn the integrity of those who wish to ban the displays, but I believe that the evidence is rocky. I am not sure that banning displays will really make a difference. Parents tell me that their children rarely buy cigarettes over the counter and, if they do, they are pretty good at trading IDs. They are much more likely to get cigarettes passed around by friends. Sadly, sometimes it is their friends’ parents who buy the cigarettes or they use vending machines, which is another debate. Parents tell me that they feel that banning displays will not make any difference; in fact, it will heighten the desire of children, especially those who are going through a rebellious period, to get what they perceive as forbidden fruit.

My Lords, I oppose these amendments. If I were in any doubt about the Government’s proposals, that doubt would have been blown away by the incredible lobbying which has poured on us on this subject. I have been amazed at the professional quality of some of the lobbying letters which I have received, beautifully set out and specifically researched, showing an amazing grasp of obscure political comments, targeting, in my case, all the Liberal Democrats in my office, sticky labels and all. What is it about these letters that reminds me so strongly of the best paid public affairs outfits? Excuse my cynicism. If I am wrong, then a small shopkeeper from Chiswick who wrote to me and my colleagues this morning has a very bright future at the very top of a public affairs agency. He need not worry about what happens on the loss of his business.

We know the damage caused by smoking. I hope that argument has moved on; all now recognise that fact, although sometimes I wonder. All apparently wish to ensure that children do not start smoking. We have heard about the research and different practices in different countries. We are extremely familiar with the technique of the tobacco industry in confusing and casting doubt on research, even on that of Sir Richard Doll. Like the noble Earl, Lord Howe, I heard the presentation of Professor Hastings and that of Dr Gilmore. They made very persuasive cases. If we were to accept that the case has been inadequately made, what of the counterargument that damage would be caused by agreeing to this proposal? Here the argument is that banning point of display would damage small retailers and make it expensive or even dangerous for them to adapt their shops. It is extremely clear that, as in Canada, the tobacco industry will cover the cost of adaptation, which itself is not great, as it still has the incentive for these shops to continue to sell cigarettes. It may be a cost to the industry, but that is hardly a factor that we should consider.

All the proposals for how this can be achieved have very clearly shown that adaptation can be done without danger to the shopkeeper. That was fully addressed in Committee. The industry has been assiduous in stirring up small shopkeepers. We know that the information given on the impact on shops is very alarmist and that, too, was fully answered in Committee. What is the balance here? Do we go for the public health precautionary principle or for the case put by the industry? I understand the discomfort of the noble Earl, Lord Howe, on the position that he is in.

All the royal colleges, Cancer Research UK and myriad medical charities urge us to support the Government on this. On the other side, there is a campaign paid for and orchestrated by the tobacco industry, even if its involvement has had to be dragged from it against its wishes.

Smoking is an addiction. Our responsibility is to do all we can to protect children from starting to smoke in the first place. So for the sake of my kids and their peers, I will be supporting the Government on this.

My Lords, I am delighted to follow the noble Baroness, Lady Northover, because I agree with every word that she has said. I am delighted also that she has brought us back to the fact that this is a health measure we are considering. This is not an economic argument about small shops but about whether the health of our people, and particularly the health of children and young people, is going to be enhanced by what the Government are proposing.

I too was convinced by Professor Gerard Hastings; I shall say more about that in a moment. But first, I want to declare an unpaid interest, as a member of the board of trustees of Action on Smoking and Health. I shall answer the points made by the noble Lord, Lord Naseby, at the end of my remarks.

I agree wholly with the noble Baroness about the tactics of the tobacco lobby. It is attempting to use smoke and mirrors in order to confuse us—and it is spending a fortune in doing so. A major part of its campaign is to cast doubt on the evidence base. To those of your Lordships who have received representations from groups such as Responsible Retailers or the save our shops campaign, I offer one sentence of advice: be aware of who is behind these bodies.

I have received letters and e-mails from the Tobacco Retailers Alliance, to which the noble Earl referred, which is funded entirely by the Tobacco Manufacturers' Association. That association, in turn, is funded by three of the world's largest tobacco companies: British American Tobacco, Imperial Tobacco and the Gallaher Group. The same Tobacco Retailers Alliance also runs the save our shops campaign and Responsible Retailers.

Hiding behind front organisations is something that the tobacco industry has done for years. Another favourite trick is to fund pieces of work by apparently respectable research organisations, and then—provided that the findings are what it wants to hear—trumpet the results. Many of your Lordships may have received from the Tobacco Retailers Alliance two reports from a body called the Centre for Economic and Business Research. I checked with the CEBR, which eventually confirmed in an e-mail to me that the reports were produced for and paid for by the clients—in other words, the tobacco industry. I think it would be in the research organisation’s interest, if in the list of clients that it publishes on its website—there are 33 of them—it would somewhere refer to the fact that the tobacco industry is one of those clients.

I suggest that there are two questions that need answers. First, is there an evidence base for the prohibition of point-of-sale displays? Secondly, are the measures that the Government are proposing proportionate to dealing with the problem? I believe that the evidence does exist. It is rigorous and it stands up to scrutiny. There is an interesting report from Channel 4 called FactCheck, which describes itself rightly as:

“Impartial, empirical, reliable and dispassionate”.

It goes on to say:

“Channel 4 FactCheck scrutinises the claims and counter claims of those in the public eye".

In this case it looked at the evidence base for the prohibition of point-of-sale displays and advised that it,

“points pretty firmly the government's way".

Also, on the evidence base, the all-party Health Committee in the other place stated in its report on health inequalities:

“Smoking remains one of the biggest causes of health inequalities; we welcome both the Government's ban on smoking in public places, and its intention to ban point of sale tobacco advertising, as evidence indicates that both of these measures may have a positive impact on health inequalities”.

This issue of health inequalities is important, because the evidence points to the fact that smoking accounts for half of the differences in life expectancy between social class 1 and social class 5. It is imperative that we act to protect children; otherwise there will be a lasting legacy of inequality.

I turn to the evidence from the research conducted by Professor Gerard Hastings. I, too, went to the presentation, which I know that the noble Earl went to. I am disappointed that he was not impressed by what Professor Hastings had to say, because I believe that every other Member of your Lordships’ House who was there—with perhaps two exceptions—was convinced by him. His research on point of sale is based on a long-term study called the Youth Tobacco Policy Survey. This survey has taken place five times since 1999, and over a nine-year period almost 5,900 children between the ages of 11 and 16 from a variety of social backgrounds have taken part. There have been a number of peer-reviewed papers from this work, and Professor Hastings’s report of last August on point-of-sale displays forms an extension of previous papers. Crucially, this report encompasses not just one but four separate survey waves, of almost 4,500 young people between 1999 and 2006.

These are rigorous research techniques and, not surprisingly, the tobacco industry has tried to discredit them. In doing so, it has used exactly the same tactics that it used when it attempted to dispute that smoking causes cancer—Professor Doll’s original findings—that advertising increases tobacco use, that nicotine is addictive and, most recently, that second-hand smoke is harmful to health. It stuck to its script, which has been revealed in internal tobacco industry documents, that it would claim,

“that cause and effect relationships have not been established, that statistical data do not provide the answers and that much more research is needed”.

It is simply attacking this research because the implications of protecting young children and preventing 60,000 child smokers from being recruited each year are bad for business if you are a tobacco company that is desperate to recruit new young customers as you kill off the older ones.

There is more evidence. At the recent World Conference on Tobacco or Health, further evidence was submitted from New Zealand based on research with 25,000 young people. They found that 15 year-olds most exposed to point-of-sale displays are almost three times more likely to try to start smoking. It was identified that exposure to point of sale is a greater risk factor than even parental smoking.

I will say one word on proportionality. The Government have already given ground on their original proposals and will bring in the prohibition of point-of-sale displays two years later, in 2013, for smaller retailers, compared with 2011 for the larger ones. This will give an adequate lead-in time for retailers to prepare.

We know that low-cost solutions exist which are in widespread use in other countries, and these are entirely feasible in the UK as well. The recommended supplier to the Canadian Convenience Stores Association has produced a number of quotes—separately, not at the request of ASH, to ASH and to the Department of Health—for the cost of covers for a retail display gantry of the size found in a typical small shop in the UK. The covers are lightweight PVC, which the company stated should last a minimum of seven years. They are designed to fit behind the security shutters and be simple enough for the retailer to fit himself if he wants to.

Something has happened over recent weeks since the company was willing to give evidence to the Department of Health and to anyone else who asked for it, such as ASH. It appears that the Canadian Convenience Stores Association has been putting pressure on it to attempt to get it to backtrack on the ease and the low cost of providing displays in the United Kingdom. Noble Lords must make up their own minds whether they think that such pressure has been applied. I have no direct evidence of it, but something very strange has happened. The fact remains that the displays are in use in Canada, they have been installed properly in retail outlets and they are working fine there.

My Lords, will the noble Lord give way?

Of course.

My Lords, is he saying that 4 Solutions’ statement that the gantries will cost £450 and not £120, and that this figure does not include fitting costs estimated at £1,000, is absolute rubbish?

My Lords, on the contrary; there are very interesting negotiations to be had with any company prepared to supply these gantries. The company in Canada may be one of those that will tender for the contract. However, the experience of retailers working with the tobacco industry is that the industry will be more than ready to pay for these displays, because it wants to go on selling its products in these shops; so the retailers do not have anything to worry about.

We must avoid continuing the situation that Professor Hastings described in his letter to the Times on 27 April, in which he described corner shops being turned into shrines to tobacco. He also observed that the industry had duped small shopkeepers into doing its dirty work. I hope that noble Lords do not fall for a line that is coming directly from the tobacco lobby.

My Lords, this clause has a strong whiff of the Hunting Act: I do not think that a single noble Lord will have his mind changed by the debate on the clause this afternoon. I am convinced that there is not one Member of this House who does not support the intention of Her Majesty’s Government to stop young people from starting to smoke. However, the provisions in Clause 19 are not the answer.

We have all been inundated by letters from both sides of the argument. Like other noble Lords, I have been moved to tears by some of them. Small independent retailers, many of whom are from an ethnic minority, fear deeply for their livelihoods. Some busy retailers to whom I have spoken recently sell a packet of cigarettes every 30 seconds. If tobacco products are kept out of sight under the counter, the poor retailer will have to start performing like a circus juggler.

Noble Lords may remember that, during the course of the last Health Bill, I introduced an amendment to prohibit the sale of tobacco. The logic behind this was that if we should not smoke, we should not be allowed to purchase tobacco. As I said at Second Reading, I then discovered that 27 per cent of all cigarettes smoked in the United Kingdom are illegally purchased, doing the Treasury out of more than £3 billion annually. This is where many young people buy their tobacco, and this is where Her Majesty’s Government should be legislating, rather than depriving legitimate retailers of their livelihoods, earned by selling what is, after all, a legal product. If Clause 19 remains part of the Bill, it will be an expensive nightmare for retailers to implement. It will not achieve what Her Majesty’s Government want. I support the Motion of the noble Earl, Lord Howe, that Clause 19 should not stand part of the Bill.

My Lords, I believe that the protection of children should be at the heart of this legislation, and that proposals on the prohibition of point-of-sale displays for cigarettes represent a golden opportunity to improve the nation’s health in a spectacular way, by preventing ill health through reducing the impact of tobacco marketing on young people.

Not even tobacco firms now deny that smoking causes cancer, heart disease, strokes and a host of other conditions. However, let us not forget that for decades they spent millions on producing such denials; and that while so doing, they suppressed scientific and medical evidence. Prevention is better than cure; and the proposal to put tobacco out of sight will help to prevent our children and young people from taking up smoking, from becoming unwittingly addicted and from putting themselves at greater risk in later life of ill health and premature death.

I reiterate my firm belief that the protection of children should be at the heart of the legislation. To rob future generations of the chance to grow up free from the influence of tobacco marketing is just wrong. Let us remember that we have the awesome responsibility to formulate legislation that improves the health of future generations rather than the continuation of the burden of ill health which arises from tobacco.

In removing tobacco products from sight, we will be joining the growing number of other countries that are putting their children first; they are Australia, Canada, Iceland, Ireland, New Zealand and Thailand. I will admit that tobacco remains a legal product, but it is addictive and deadly, which is why its marketing has been subject to legal controls for many years—for example, through the ban of advertising on television or in cinemas. The proposal to prohibit tobacco displays is simply a further step in Britain’s journey as our awareness of the complex and enduring interaction between marketing and its impact on children increases. The prohibition of point-of-sale displays should also be seen as part of a comprehensive tobacco strategy, which was discussed in Grand Committee and welcomed on all sides.

This opportunity to secure better public health should be welcomed not weakened. It will be a sad day for us and, more importantly for our nation’s children if this House rejects the proposals to save future generations from the lethal addiction to tobacco.

My Lords, I shall make two brief points in opposing this amendment and in supporting the Government. First, even if the evidence on tobacco is incomplete or ambivalent, it is reasonable to err on the side of caution, such as by banning point-of-sale displays or, indeed, the availability of vending machines. Tobacco is not like other products, such as alcohol or foods high in salt, sugar or fat. For those products, there is a genuine role for education and advice to encourage sensible consumption that is balanced or moderate. We know what healthy eating looks like, what the sensible drinking message says, but there is no sensible smoking message. The nature and scale of the harm caused by tobacco means that there is no such role for consumer education. Perhaps there is conflicting evidence about the effectiveness of this proposed measure. Perhaps Saskatchewan and Iceland are not the perfect comparatives for the UK, but the certainty of the scientific knowledge that we have about the harm caused, together with the common sense that many of us feel, particularly as parents, lead me to support the Government.

Secondly, I agree that this is not the only measure that we need if we want to influence young people’s behaviour. It is about far wider cultural change and about socio-economic factors that have been mentioned. The ban on smoking in public places has shown that there is an interesting and useful relationship between legislation and culture change—often bringing about culture change more quickly than might have been expected. Very few people would now think it was either right or normal to smoke in a pub or a restaurant. I believe that it will not be long before the general public will also regard tobacco displays in shops and vending machines in the same negative way. I feel strongly that we should help this trend on its way by supporting the measure.

My Lords, the point that strikes me most forcefully in this argument is not only that we are protecting children—I am with the noble Baroness opposite completely on this—but that we are dealing with a killer. Tobacco is a killer, and we need to put it as bluntly and starkly as that.

The problem with all the rationalisations we have been hearing, particularly from the Opposition Benches, is that it results in confused messages being sent to vulnerable people in society. The message that this is a killer and that we will do nothing to promote it, directly or indirectly, is not clear-cut. The message is that, in certain conditions and in certain ways, we can promote it.

I simply ask noble Lords to look at the neurosis which the nation has worked itself up to on Mexican flu. Would we be hearing such rationalisations in that kind of sphere? Of course not: we would be saying that the nation must combine in making sure that what is necessary is done. I wish we could hear a united voice at this juncture.

I want to express one caveat about the general strategy. It has already been mentioned by noble Lords this afternoon. I believe that those who share the strong view I just expressed would be very foolish if they supposed that we could win the battle simply by prohibitions of this sort. There must be a comprehensive social strategy.

I take one example, and I want to challenge the Opposition very specifically on this. My own daughter worked with a team dedicated to persuading pregnant women and young mothers not to smoke. It was a pioneer project for the National Health Service and the Lambeth Borough Council. She was determined that this project should succeed, and, indeed, the team won a refunding, which was illustration that it was making progress. I am not altogether certain that she would be very happy with me talking about this, but her comments made such an impression on me that I am going to. She confided in me that one of the realities she had to face was that, for many of the young women within her sphere of responsibility, about the only break they got in a tough, unacceptable life was their fag. If that is the case, it seems to me that we have to address the issues of deprivation, disadvantage, and overstressed single parents. When I hear those arguments coming powerfully from the Opposition Benches, I will begin to listen to them in their other rationalisations.

My Lords, I think the argument put forward by the noble Earl, Lord Howe, against this clause was unassailable. He was, in fact, correct in everything he said, and he produced facts which we have not previously heard. Before I go any further, I should declare that, although I do not now smoke, I am a member of the Lords and Commons Pipe and Cigar Smokers Club. They tolerate me as an associate member.

One of the reasons I am opposed to such legislation is my belief that smokers, shopkeepers and the people who make cigarettes and tobacco products have been under a vicious attack for a very long time. Since I believe in individual freedom and democracy, I also believe that this attack has been unfair and, in many cases, not backed by real medical evidence and science. I will not, however, go into that now.

We have been assailed by a great deal of lobbying: we have had glossy magazines and letters from all sorts of people on both sides of the argument. In a democracy, where we have a free Parliament—at least, I hope that it is still free—people are entitled to lobby and they are entitled to be believed and given the benefit of the doubt that they are lobbying in good faith. It is altogether unfortunate that the noble Lord, Lord Faulkner, and others should have attacked the tobacco industry in the way that they did. The tobacco industry feels that it is under attack but, after all, it is an industry and it is entitled to use the profits that it gets from smokers to protect its own interests and those of smokers.

As I said, the tobacco industry uses its own money, but ASH, of which the noble Lord, Lord Faulkner, is a member, uses taxpayers’ money to promote its non-smoking agenda. Indeed, I can read out the figures. From 2005-06 to 2007-08, it received £556,400, and in the years before that it received more than £2 million. In addition, to help it with No Smoking Day, a further £750,000 of taxpayers’ money was used by anti-smoking organisations. If the noble Lord, Lord Faulkner, wishes to intervene, he may do so.

My Lords, I am most grateful to the noble Lord for allowing me to do so because he made exactly the same point in Grand Committee. On that occasion, I said that,

“the government grant to ASH is spent entirely on quit programmes and education programmes. None of the campaigning to which the noble Lord, Lord Stoddart, objects so much is funded by the Government. That comes from voluntary sources such as Cancer Research UK and the British Heart Foundation”.—[Official Report, 11/3/09; col. GC 467.]

My Lords, that is a pretty poor defence, if I may say so. If ASH really wants to be as pure as it wants the tobacco industry to be, it should refuse the government grants and, indeed, repay the grants that it has already received.

It is not only retailers and the tobacco industry that have lobbied your Lordships; I instance Unite, which is a very large trade union that pays a lot of money in affiliation fees to the Labour Party. It, too, is concerned about this legislation. I shall not take the House through the whole document that I have before me but will quote just the executive summary:

“The UK tobacco industry is highly profitable for the Treasury, generating tax revenue of £10 billion”.

By God, how we need that money at the moment; we should not refuse it. Unite did not say that; those are my own words. The second point is:

“There are currently 6,500 people working in the tobacco sector and supports a supply chain of 80,000 people in the UK alone”.

Thirdly, it says:

“The tobacco sector is the top contributor to the UK’s balance of trade, and exports goods worth £984 million”.

The fourth point is:

“The illegal trade in tobacco products is costing the UK tax payer and the public sector £4.3 billion”.

Fifthly, it says:

“Since 1970 job losses in the sector have amounted to 40,000 in the UK alone. Unite believes there would have been government intervention if this had happened in any other manufacturing industry”,

which now represents only 11 per cent of total GDP. Those final words are mine.

“The UK has one of the highest tobacco taxation levels in the world and this is clearly driving the growth in illegal unregulated tobacco products”;

and,

“There is a clear and insidious link between the illegal counterfeit tobacco trade and organised crime”.

I will not go on. I think that that is quite enough.

There have been attacks on the glossy magazines. I shall conclude my remarks by quoting in full a letter from ordinary tobacconists which appeared in the Daily Telegraph on 4 May 2009. It states:

“Ban on display of tobacco

SIR - The House of Lords will be voting on Wednesday to decide whether small shops like ours can continue to display tobacco products or not.

This is a matter of the greatest importance to 50,000 small convenience stores for which tobacco represents on average a third of trade. The Department of Health has suggested that hiding tobacco would reduce youth smoking, but sufficient evidence to support this theory has not been presented.

We are already struggling in the recession. A ban on the display of tobacco would deal us a new body blow.

Politicians talk about wanting to help hard-working families during the downturn. Not many people work harder than the proprietors of Britain’s small shops. Unlike the banks, we are not asking for bail-outs. All we ask is that any restrictions on our businesses are proportionate, evidence-based and absolutely necessary.

The government of New Zealand has abandoned plans to ban tobacco displays, because it does not believe that the evidence exists to justify the burden this would place on small businesses.

The Lords have a chance to ask the Government to think again about this ban”.

And I am going to read out the signatories:

“Ken Patel, Shopkeeper from Leicester; Mahendra Jadeja, Shopkeeper from London; Solly Khonat, Shopkeeper from Blackburn; Parminder Singh, Shopkeeper from Birmingham; Debbie Corris, Shopkeeper from Whitstable; John Abbott, Shopkeeper from Darlington; John McKeown, Shopkeeper from Ballymena; Fiona Barrett, Shopkeeper from Glasgow; Dev Aswani, Shopkeeper from Swansea; Paddy Paddison, Shopkeeper from Devon”.

Let them speak for me.

My Lords, my father died aged 57 and we always said that on the morning that he died, on the announcement of his death, both tobacco and drink shares went through the floor. We all know that smoking is the most disgusting habit ever—you cough up globules of green gunge; it makes you smell; and it probably kills you. But it is legal. My difficulty is that I have enormous sympathy with what my noble friend Lady O’Cathain said; I know that she is so right about stopping young children going to the green-gunge stage. Equally, the Government are raking in tonnes of money. Surely it would be more logical and more intellectually honest to say, “Smoking is banned. It does so much harm and therefore we should ban it altogether”, than to hit small shopkeepers. So I find myself seeing both sides of the question. I do not wish an iota of harm to the signatories to the letter read out by the noble Lord, Lord Stoddart of Swindon. Equally, I agree with the noble Baroness, Lady O’Cathain. So just to be really helpful, I do not know which way I am going to vote today.

My Lords, last week a friend my age died of lung cancer. Two months before he died he tried to give up smoking. He had started when he was 14. That is the problem: to the young brain nicotine is particularly addictive and young people remain addicted. It is very tempting when people trying to give up see large displays in their corner shop. It tips them over into having another cigarette and keeps the bargaining going.

The evidence is strong. We know that 340,000 children try cigarettes every year, 60,000 of whom go on to become fully fledged smokers. We know that those who are exposed to power wall displays are three times more likely to try smoking than are children who are not. That is why we want those big displays to go. It is worth noting that all these displays look remarkably similar. They are not put up by individual shopkeepers on their own; they are a matched design. We have not seen any statement from tobacco manufacturers that they will not support the costs of installing the display covers or the dispensing equipment that allows the shopkeeper to remain facing the shop when he is selling a packet of cigarettes to a customer. We know that shops are vulnerable and such equipment means that the shopkeeper does not have to take his eye off the ball.

It is bandied around that pubs have gone to the wall because of the ban on smoking in public places. I commend to your Lordships the BBC Wales programme entitled “Week In Week Out”, which launched a very good investigation into what is actually driving some publicans to the wall. The reasons are tied up with the franchise agreements into which they are locked by their contracts, meaning that the profit margin on all their products is incredibly narrow. It is false to blame a ban on smoking in public places as the sole cause for pubs going under.

This is a public health measure for the next generation. This amendment must be resisted.

My Lords, I, too, oppose the amendment for very similar reasons. I propose to speak very briefly because much of what I shall say has already been said.

Under peer pressure, I began to smoke at the age of 11 in a mining village in Durham County. By the time I was in the Army in the 1940s, I was smoking 25 cigarettes a day. I remember very well the agonies that I went through when the health problems caused by smoking arose and I tried to get rid of that addiction. We do not want that to happen to our children today.

Tobacco is the only product that if used according to what the manufacturers suggest, will kill one in two long-term users. The noble Lord, Lord Stoddart, asked why we are attacking the tobacco industry. We are doing so because it sells a lethal product. Tobacco remains the single largest preventable cause of cancer in the UK, and each year smoking-related diseases kill 87,000 people in England alone. I cannot forget a comment in the world tobacco industry journal which said, “If your brand can no longer shout from billboards or cinema screens, at least court smokers from retailers’ shelves”. And that is what these gantries are doing.

I am very much attached to my local convenience store in the village where I live in north Northumberland, and I have talked to the owner. He agrees that the provision would cause problems, but he believes that the problem is sufficiently important for him to go along with the idea of concealing his display.

Two nights ago, fairly late at night, I turned on the television and immediately switched to Ceefax, if only to find out the county cricket scores. I saw a great line across the top of the screen which said: “News: Children say, ‘Please hide tobacco on the shelves’”. Some of your Lordships may have seen the story. It was a very sketchy item, but it was obviously based on a study of children who felt that the display of cigarettes would attract them to smoking. That was the idea. I do not know its statistical validity, but at least it was an important contribution.

People have talked about Canada and other countries. It is important to realise that the president of the Canadian Convenience Stores Association, who has been arguing that many stores have closed in Canada, is a former executive of the Canadian tobacco giant RJR-MacDonald, which may well have influenced his attitude. I support many of the things that the noble Baroness, Lady Northover, and the noble Lord, Lord Faulkner, and others have said. We must oppose the amendment. This provision is a crucial public health measure to help our children not start smoking.

My Lords, there is one point that needs to be addressed. A number of noble Lords—among them the noble Lord, Lord Naseby, and the noble Earl, Lord Onslow—have said that if tobacco is so bad, the answer is to ban it. They should know that banning a highly addictive substance has no effect in reducing consumption; in fact, it may even increase it. The use of cannabis or ecstasy is very widespread although both are illegal, and it shows little sign of stopping. It is better to restrict the sale of a product such as tobacco as much as possible and, in addition to the other measures that the Government have passed, to reduce all forms of promotion, as this Bill will do. The product should also be highly regulated and, I suggest, available only through licensed outlets. At the same time, the danger of tobacco—and of cannabis, for that matter—should be widely explained and publicised, and facilities for encouraging people to quit should be made widely available. That, and not banning it, is the way to deal with it.

My Lords, I refer to two questions that came up earlier in the debate. One is whether there is any evidence that display at point-of-sale is advertising. We had a lengthy discussion about that in Grand Committee. It is accepted—there is plenty of evidence—that the industry uses display at point-of-sale as a means of advertising. The next question is whether that will affect people, particularly children, and influence whether they take up smoking. The evidence for that was questioned. I, too, was impressed by the evidence presented by Professor Hastings. I did not find it scientifically lacking. The paper that Professor Hastings published is a peer-reviewed piece of research which found that exposure to point-of-sale displays had a significant effect on young people. On the basis of the precautionary principle, it is completely appropriate to introduce a ban on point-of-sale display of tobacco. The evidence shows that the intention to smoke is strongly linked to taking up smoking. The other evidence quoted was by Smee. Smee was the author of a review which showed the link between advertising and smoking, which was the basis for the Government’s introduction of a ban on tobacco advertising a few years ago.

Now I come to the issue of whether or not small shopkeepers will lose their jobs. This is getting a bit personal. Although I expected the Gallery to be full of Patels today, it is not, because they are all busy selling cigarettes. Before this debate I telephoned my nephew, who runs a small shop selling, among other things, cigarettes. They were among the Patels who were thrown out by Idi Amin when he threw all the Asians out of Uganda. I asked him, “Today we are going to discuss this amendment, and if the amendment is defeated, you will not be able to display tobacco. Is that going to matter to you?”. He said, “Yes, it is”. I asked, “Are you going to lose a lot of business?”. He said, “I will, but I don’t know how much”. I asked him if he was going to go bust and he said, “You must be joking”.

Of course there might be small shops with small revenues for whom the sale of tobacco might be significant, but I believe that they are resourceful enough to find a means of making sure that they do not lose out on selling all products, including tobacco. I believe that it is right that tobacco display at the point of sale should be banned.

My Lords, I am afraid that I am totally unconvinced by the retailers’ campaign. I will not repeat the arguments, but I thought that they were very ably put by my noble friend Lady Northover. I, too, am a cynic and I have seen many such campaigns before. I am more convinced by the arguments of Professor Hastings, and particularly his surveys of young people’s behaviour, which is backed up by my observations of the behaviour of my own children and their friends and, indeed, the behaviour of the young people I dealt with when I was in clinical practice. It is also backed up—I do not think that anyone has mentioned this so far—by every medical body, medical college, NHS federation, nursing college and cancer research campaign. Every medical organisation you can think of is backing the Government’s position. That should not be dismissed lightly. If you have any doubt at all in your own minds, my attention was drawn to something that I found in my background reading: British American Tobacco’s guidelines on marketing. Those state that point-of-sale displays set out,

“to generate interest and excitement about the brand and to stimulate trial and re-purchase”.

To generate interest and excitement—that is what point-of-sale display is for. It is drug pushing, is it not? That is what it is about. They are pushing their product and they do not consider the consequences. The argument that we all have individual freedom and we must not interfere with individual freedom is all very well, but when the Government, with our taxes, are paying for a free health service at the point of delivery, is it not then the duty of that same Government to ensure as little disease as possible, so that our taxes are used wisely, so that they use their money on preventative measures too?

Finally, I will just share with you my advice—I do not know whether they took it, I think they did—to my own children when they were experimenting with smoking. They asked me why it was such a bad idea: Granddad had lived till he was 90 and he was all right and he smoked 60 a day—you know the story. I used to say, “That is fine; he was very lucky then, though he does have a much higher risk of Alzheimer’s disease”. Smokers do have a much greater chance of developing Alzheimer’s disease. I said, “When you are pregnant, dear, you are likely to damage your unborn child and make it much smaller and weaker than it otherwise would be. If you are lucky and you carry on smoking, you will probably die of a nice, swift heart attack—cardiovascular disease. It kills you but it need not be that painful. It can be quite quick and there are treatments nowadays, so there is a lot of hope. If you attend the doctors and the surgeons and they do lots of things to you, there is hope; but cardiovascular disease is something that could happen. If you are not so lucky, of course, you will get cancer of the lung, which is a very nasty business indeed. Again, there is hope. Some people can be cured, but the treatments are often pretty awful. They make you very ill and you are unlikely to live a normal life afterwards. If you still think that it is worth it, you should consider what is most likely to happen to you if you carry on smoking, even moderately”. The noble Lord, Lord Stoddart, mentioned all the things that are bad for us, and indeed they are, but they are not necessarily bad for us in moderation, whereas smoking, I am afraid, is bad for us in moderation, too. “If you carry on smoking, you will almost certainly get chronic obstructive pulmonary disease, emphysema and bronchitis. You will gradually suffocate for lack of oxygen and eventually drown in your own green sputum, as we have already heard. That is what will happen to you. It is your choice. You make up your own mind, but those are the options if you carry on smoking. I am easy about it”. None of my children now smokes.

My Lords, I make one very brief point in the hope of winning at least two votes from the Floor of the House—those of the noble Earl, Lord Onslow, and the noble Baroness, Lady Cumberlege. I address the noble Baroness directly because of her comments about the balance between potential harm and condoning exploitation in a visit. That is what this is about; we cannot condone potential exploitation because of another potential harm that we know is not a killer, because we know that smoking is a killer. I am a great respecter of the noble Earl, Lord Howe. In fact, I would have liked to have been persuaded by him because he is so persuasive, but I wish only that I could persuade him that this is a strategic health issue.

The noble Baroness, Lady O’Cathain, argued clearly for children, and the noble Baroness, Lady Northover, pointed out that it is not the small shopkeepers who will pay for the new displays. When I talked to another noble Baroness earlier, who is not in the Chamber but will vote in a particular way, she said, “I am not particularly in favour of this but I will vote for it, because we are at a point in history at which we will move to these kinds of gantries being seen as an historical incident, and we will move further towards less and less smoking and towards it becoming less attractive”. I hope that noble Lords will support this.

My Lords, I wish to speak for half a minute before the Minister replies. As vice-chairman of the All-Party Group on Children and Young People in Care, I remind your Lordships that, according to the Office for National Statistics, two-thirds of children in public care smoke. For many years, I have talked to professionals who work with such children, and it is very clear that what all children benefit from but which children in public care particularly need is a consistent, unified voice from adults. It is not helpful to have prominent displays of brightly lit tobacco products in stores that children visit, often daily, when one is trying to tell them that tobacco is a poison and addictive and should never be tried even once.

My Lords, I shall set out very briefly the formal position of noble Lords on these Benches and address one or two points that have not been covered in the debate so far. I will not take very long, because there is a danger that we will not reach two measures that most definitely will have a positive impact on youth smoking—banning vending machines, and plain packaging—if we continue this debate for a great deal longer.

I came to this debate as someone who strongly supported the tobacco advertising Bill of my noble friend Lord Clement-Jones. I also advocated the ban on smoking in public places. I, like the noble Earl, Lord Howe, came to the debate wanting to see evidence of what works. Perhaps my biggest disappointment has been that we have been bombarded from all sides of the argument by evidence which, as the noble Lord, Lord Borrie, rightly said, is dubious and highly speculative. I listened very carefully when the noble Baroness, Lady Howarth, started to talk about indicative evidence. I wanted evidence that this measure would work.

My Lords, we all knew that today would be a hard fought and passionate debate, and so it has been. The Smoking Kills White Paper of 1998, the Tobacco Advertising and Promotion Act 2002 and the “smoke-free” legislation of 2006 have educated people about the harms of smoking, have controlled tobacco advertising and have stopped people smoking in public places. These measures have been spectacularly successful in reducing the number of people who smoke; we now have the lowest smoking rates on record.

There was no way of knowing how far-reaching the good effects would be when we passed legislation on advertising and for smoke-free public places. The noble Lords, Lord Clement-Jones, Lord Walton of Detchant and Lord Patel, my noble friend Lord Faulkner, the noble Baronesses, Lady Howarth, Lady Finlay, Lady Emerton and Lady O’Cathain, and many other noble Lords fought hard against hostility, scepticism and misinformation to win these great reforms. We are asking noble Lords to do this again this evening.

The success of the past means that, since 1998, 2.4 million fewer people have been smoking and countless lives will be saved as time moves on. However, this success also means that the future of the tobacco industry depends increasingly on recruiting new people to smoke and keeping them smoking. We know that two-thirds of people who have smoked regularly started smoking before they were 18. We also know that if they had not started smoking before age 21, there is a very good chance that they would never have become addicted smokers.

It is to help ensure that our children and young people do not become addicted smokers at an early age that we want to remove tobacco promotion through cigarette displays. We do not want cigarettes in our corner shops alongside the sweets, the magazines, the soft drinks and the newspapers. The noble Earl completely failed to address that point, or the point about how susceptible children are to promotions; advertising, sponsorship and celebrity association are all tools that marketing agencies use to promote a product and to encourage young people to use it, to want it and to feel uncool without it.

It is true that we have stopped tobacco advertising; why, then, do we need to go further? It is because the tobacco displays in our shops constitute promotion in themselves. In 2002, when we debated the Tobacco Advertising and Promotion Bill, we were prepared to leave tobacco displays in stores alone, but we have since seen them develop with lighting, colours and features designed to draw the eye such as clocks and tower cases. There are glass containers strung from the ceiling, and transparent counter-top boxes on which you place your change. Display is enough to cause a problem on its own, without those fancy trimmings; it, along with in-store product positioning, is a central feature of marketing. Being close to the till is a prominent and highly valued position, which is exploited to great effect.

Cancer Research UK has clearly identified the role of tobacco displays in prompting young people to smoke in the UK. Even when the role of other, important factors that noble Lords have mentioned—including parental smoking, sibling and peer smoking, gender, age and social background—is taken into account then brand awareness, based on packaging and point-of-sale display, drives smoking among children who have never smoked before. The noble Earl tried to cast doubt on the research that has been mentioned; I will respond briefly to that. The Smee and Goddard reports were both conducted in the 1990s before measures were taken to limit tobacco promotion and, since 1998, we have had smoking prevalence fall from 11 per cent to just 6 per cent among 11 to 15 year-olds. The noble Earl, Lord Howe, is correct that smoking uptake does not depend on a single factor; that is why we need to continue to educate, to provide services for stopping smoking and to prevent tobacco promotion.

The Cancer Research UK report is based on a long-term study, which several noble Lords have mentioned. I shall not go into detail on that, but there is no doubt that a study that, over nine years, involved 5,900 children between 11 and 16 is one that we need to take extremely seriously. We have a responsibility to protect young people from tobacco promotion.

My Lords, before the noble Baroness continues, could she possibly help me to make up my mind? By how much does she reckon that banning those displays will reduce tobacco smoking?

My Lords, as I continue my remarks they may, perhaps, help the noble Earl, who was not here for the first part of the debate. I shall not repeat every detail that all noble Lords said earlier about the policy, but the national statistics on youth smoking show that, from 2002 to 2007, the proportion of children between 11 and 15 who ever smoked fell from 42 to 33 per cent, and the number who smoked regularly fell from 10 to 6 per cent. We know that our tobacco control strategy has been effective so far; we want to go further.

We also know that nicotine is highly addictive. It is easy for people to become addicted to smoking and, once addicted, someone who smokes is not making a choice to smoke—they are hooked. Research clearly shows that seeing a tobacco display when you are trying to quit makes it much harder to give up. It prompts impulse purchases, tempting people who want to give up smoking to buy cigarettes and carry on smoking against their will. We have a responsibility to do everything that we can to support those people who want to give up. We are satisfied that there are benefits to removing displays: it will remove the promotion of smoking to children and support those people who want to quit. We are convinced that removal is the right and responsible decision.

What, however, are the downsides? Plenty of information has been given to Peers suggesting that removing tobacco displays will be a doomsday, for all sorts of reasons. For example, we have heard a great deal about how covering tobacco displays in shops will make life difficult for customers who want to choose their brand, yet 90 per cent of smokers know exactly which brand they wish to buy before entering a shop and, as I have said in a previous debate, brands enjoy incredibly high brand loyalty. Whether a huge, well lit and colourful display is available will not deter the smoking customer, who will still make the additional purchases that are so important for the small shopkeepers. For those who want to check prices when buying tobacco products, the retailer will still have prices on show in their shop.

On the cost, over the past few months we have seen the tobacco industry and tobacco company-funded retail organisations attempting to panic shopkeepers about this proposed change. We are working closely with retailer groups, such as the Association of Convenience Stores and the British Retail Consortium, to ensure the most straightforward and cost-effective solutions can be found to remove tobacco displays. Frankly, I say shame on the tobacco industry scaremongers for unnecessarily panicking decent, honest shopkeepers who serve their communities well.

I turn to the points made on this issue by the noble Lord, Lord Naseby. We have not misled the House but given information in good faith, based on quotes received by the Department of Health from the vice-president of a Canadian company with experience of how Canada removed tobacco displays. The company told us that the cost of a permanent solution for a single business with 25 square feet of display, with magnetic flaps applied to existing gantries, was £8.47 per square foot. It would total £212 to remove that much display. The same quoted costs should be as little as £120 for a minimal display of around 14 square feet in a very small, independent newsagent. Those costs have been used to illustrate that other countries have used low-cost solutions; they are not, for example, the basis for the analysis of our impact assessment, which uses a more generous figure of £1,000 per shop, but have been used to combat the alarmist figures circulated by the tobacco industry.

We understand that the same company also provided quotes to the charity ASH, and my noble friend has answered that point. The costings given to ASH were not the basis of the letter to Peers from my noble friend Lord Darzi, or for the information given through debates and in other government briefings provided for Peers. The information given by the Government relates to the quotes received directly by us in good faith. I add that we understand that, in Canada, tobacco companies continue to pay for the tobacco gantries even after the display ban—meaning that the covers cost nothing to the retailer.

My Lords, can we be quite clear that this is the 4 Solutions company of Canada, which is now quoted as saying that it costs £420, and that that does not include the fixture of the particular gantry? Is that correct?

My Lords, I am giving the information that we were given when we asked how much it would cost to cover those gantries, and that is the answer which we passed on to noble Lords. Other noble Lords have pointed out that the Canadian company, although not owned by the tobacco industry, has as its major customers the tobacco companies and that there may be a conflict of interest. However, we are committed to finding low-cost solutions to this; we are certainly not in the business of frightening shopkeepers about it. We are also giving them a great deal of time for enforcing this.

There are a number of different ways in which tobacco displays could be removed from sight. Regulations would be designed to enable retailers to find the solution that suits them best. We would have a full public consultation on draft regulations. We will not force tobacco under the counter. I repeat that nothing here forces tobacco under there. That is more scaremongering. Solutions could include keeping the same tobacco shelving by simply adding covers, which could be cheaply designed while remaining professional in appearance, with the new blank space offering the opportunity for retailers to sell advertising space for other products at a key place by their tills. Even with the generous high estimate in our impact assessment, this policy remains cost-effective because the consequences of smoking are so dire.

We have been in the vanguard of tobacco control. Removing tobacco displays is the next important step in tackling the harms caused by smoking. Canada, Iceland and others have already done it. The Republic of Ireland has just agreed to do it from July this year. Further, I was delighted to hear today that Western Australia has just committed to removing displays.

I finish by commending the work of organisations such as Cancer Research UK, ASH and the British Medical Association, which have worked hard to provide us with the evidence we need to tackle smoking. Removing tobacco displays is another important step towards a tobacco-free world, one where children are protected and people who want to quit are supported to do so.

I thank noble Lords who have spoken in support of this policy. I have to confess that I am disappointed and regret the position taken by the noble Baroness, Lady Barker, but I urge her colleagues to follow the exhortations of the noble Baronesses, Lady Northover and Lady Tonge. I therefore commend Clause 19 to the House.

My Lords, those of us who are very concerned about children who smoke do not feel convinced about removing displays. What does she say about a matter raised in the debate—cigarettes that are smuggled into the country, which we believe are the real source of the problem? Will she deal with the issue of illegal sales of cigarettes over the counter and the lack of severe penalties?

My Lords, we have taken the illicit trade of tobacco very seriously and have made great progress in dealing with it. It remains a priority for the Government. We have published our Tackling Tobacco Smuggling Together, we have seized 14 billion illicit cigarettes and over 1,000 tonnes of hand-rolling tobacco, so far we have broken up 370 criminal gangs, and we have successfully prosecuted 2,000 people. We will continue to do this. We believe that using that issue in this argument is a red herring.

My Lords, this has been a very good debate. I thank those noble Lords who have taken part from whichever perspective. I am particularly grateful to the noble Baroness, Lady Barker, for presenting the official view of her party with such persuasiveness. Like her, I take a simple view of this sort of proposal, which is that a Government can only justify imposing costs and burdens on business if the evidence is unarguably there to do so. I believe that in this case the evidence is very weak.

I say to the noble Lord, Lord Faulkner, that the research I quoted, which directly contradicts the Government’s position, was commissioned by the Department of Health. It was not anything to do with the tobacco companies. Many things drive young people to smoke. I agree with the noble Lord, Lord Judd, that social deprivation is one of the major things. I simply do not believe that tobacco displays have been shown to be remotely equivalent as an influence on behaviour.

Those whose business it is to campaign on cancer and health matters are naturally on the side of any measure that might have the slightest effect of reducing smoking prevalence. I understand that but, if we look at what is being said by Ministers, there is more than a flavour of the ends being used to justify the means. I do not think it is right to do that here. The Government could take all sorts of measures that would have nothing like the same damaging effect on small businesses, but which nevertheless usefully contribute to the anti-smoking drive. A ban on proxy purchases by adults for children would be one of them. However, they have rejected those alternatives and chosen instead to take a route that brings with it what I see as unacceptable collateral damage. The evidence from Canada is there, including the evidence that children are turning ever more frequently to smuggled tobacco. I agree with the noble Lord, Lord Cotter, that that is what we really should be worrying about.

It is already illegal to sell cigarettes to children—it is a criminal offence—so deterring them from buying cigarettes in shops is an aim with questionable dividends in terms of child health. I believe that we should think about the people and the communities whom this measure will affect most if small shops start to disappear, as I fear they will. I also believe that we owe it to ourselves to sign up to a policy only if the evidence supports it. I do not think it remotely succeeds in doing so. I therefore think it is right for me to test the opinion of the House.

My Lords, we have heard the arguments about health for children and those against having temptations for children. I now want to address vending machines. It is said that less than 1 per cent of tobacco sales are from vending machines. The British Heart Foundation estimated that in 2006, more than 46,000 children acquired their cigarettes from vending machines. Forty-five million cigarettes were sold to 11 to 15 year-olds through vending machines. There are 22 countries in Europe that have already taken the step of banning vending machines. Banning vending machines will not restrict smokers’ choice at all; in fact, it will support those small shopkeepers on whose behalf we have previously heard arguments.

If someone is desperate to get their packet of cigarettes and there is not a vending machine in the club, they will go to the small local corner shop, most of which are open until late at night. However, the reality is that among adults, only about one in 20 uses a vending machine. Underage children and teenagers can easily obtain cigarettes from vending machines. They are meant to be installed in the eyesight of whoever is manning the bar in a pub, but “within the eyesight” sometimes means not facing the majority of customers and serving the majority of customers.

There have been several studies of young people going in and flagrantly buying cigarettes from vending machines. It has been argued, “If the ID was enforced more closely, they could be monitored more closely”. The reality is that all one has to do is to type “Fake ID” into Google and it can be bought for £25. It looks remarkably like any normal ID. Someone serving in a pub or bar with many customers will not be able to tell the difference. Indeed, when I was shown a so-called European driving licence, I did not spot that it was fake until my nephew quite cannily pointed out how I could recognise that it was. However, if that was flashed up at somebody who was busy serving, believing it would be completely understandable. We know that age verification is not sought in any case.

I can see no argument for maintaining vending machines. It has been said that the vending machine manufacturers might feel under threat, but they would not be. They can easily put other things in boxes of that size. I have a couple of commercial suggestions for them: a “his and hers” refresher pack; his containing aftershave, a toothbrush, some breath freshener and deodorant; hers containing deodorant, a personal wipe and a toothbrush. They could also contain other things or become lucky-dip vending machines. There is no sound commercial argument for maintaining cigarette vending machines, but there is a sound health argument to remove a large source of cigarettes for the underage when we know that 17 per cent of children get their cigarettes through vending machines.

My Lords, I will tell your Lordships a story about what happened recently in a survey in the north-east of England. Child smokers as young as 11 were found to be able to buy cigarettes easily from vending machines. The tests were carried out by trading standards officers across the north-east using a range of volunteer purchasers aged from 11 to 16, who went into bars, pubs, amusement arcades, bowling alleys and other outlets across the region. On most occasions the children were able to buy cigarettes from machines unchallenged by bar or other staff. The staff even helped on some occasions, when the children were having difficulty getting the money to stay in the slot. One 15 year-old was given change by the staff to ensure that he could buy from the machine.

The results were 99 attempts made and 58 successful purchases. The North East Trading Standards Association has recently called for cigarette vending machines to be banned, and undertook this work to show just how easy it is for children to buy this dangerous product even though the legal age of sale for tobacco in the UK is now 18. Surveys show that 17 per cent of regular smokers aged 11 to 15 usually buy their cigarettes from vending machines, whereas, in contrast—as my noble friend has said—in 2008 only one in 20 adult daily smokers said that they had bought cigarettes from vending machines in the previous six months.

The evidence makes it clear that the measures in law to control the purchase of cigarettes from vending machines are being widely flouted. This comes from studies undertaken in Newcastle, the county of Northumberland, Middlesbrough, south Tyneside, Durham, Sunderland, Gateshead, Hartlepool and Stockton-on-Tees. I cannot but say that the evidence to ban the sale of cigarettes from machines is compelling. I support the amendment.

My Lords, I can bring your Lordships a little closer to home than the noble Lord, Lord Walton. Yesterday, I hosted a meeting in a Committee Room upstairs on behalf of the British Heart Foundation, which showed a film that had been shot in three pubs very close to your Lordships’ House. The identities of the pubs were carefully concealed and, in them, there were two 14 year-olds, a boy and girl from a school in Luton, who were commissioned to see if it was possible to buy cigarettes from the vending machines in each of those pubs.

The answer, of course, was that it was very easy indeed. The children succeeded in each pub. The bar staff on the premises had no interest whatever in the fact that the children were in there and buying cigarettes; indeed, they may not have even seen them doing it because the vending machines were not directly in their line of sight. When the boy found it a little difficult to put money into the machine, a customer helpfully said, “I shouldn’t do that, it thinks you’re underage”. Indeed he was, but he had no difficulty in getting the cigarettes out.

I am a little disappointed by the Government’s timidity on this issue. The Bill gives us an opportunity finally to remove vending machines from Britain. If we did so, we would be complying with the WHO Framework Convention on Tobacco Control and following the example of 22 other countries in Europe. It is a great pity that this opportunity has not been taken, and I am afraid that I must tell my noble friend the Minister that, if the noble Baroness pushes this to a vote, I shall be voting with her.

My Lords, I do not wish to detain the House for long, not least because there is yet one more important item on the agenda which I sincerely hope that we can get to.

Unlike the previous debate, the evidence base here is quite clear; in fact, I will add to it. A wholly unscientific poll of every adult smoker I have spoken to in the past month has come up with a 100 per cent result: they all think that vending machines are a complete anachronism. They belong to the time when the whole of Wales shut on a Sunday. Well, it no longer does, and all they therefore are is, as other noble Lords have said, a way for young people to get around that scrutiny and supervision which some of us believe is important in cigarette transactions. I hope that the Minister will accept the amendment; if she does not, I assure the noble Baroness, Lady Finlay, that I and all my colleagues will be with her in the Lobbies.

My Lords, my name is on the amendment, which I strongly support. I see no reason why we carry on with vending machines that dispense cigarettes to children. The film that the noble Lord, Lord Faulkner, mentioned is compulsive viewing, showing two children so easily obtaining cigarettes from vending machines near the Houses of Parliament.

My Lords, I have a simple view of this. If one starts from the position of wanting to protect children from the effects of smoking, we should make it more difficult for them to obtain cigarettes. Vending machines are an easy way in, as we have heard. I cannot think of any rational reason why we should not get rid of them.

My Lords, this group of amendments would compel the national authorities in England, Wales and Northern Ireland to ban tobacco vending machines. The amendments would also require the Government to consult those people affected by such a ban. As I stated in Grand Committee, the Government recognise that there is a serious problem with young people accessing tobacco. Noble Lords will know how sympathetic I am to the amendment.

Noble Lords will also know that we raised the age of sale for tobacco to 18 in 2007, and may be aware that, from 1 April this year, trading standards authorities have new powers to tackle underage sales. From now on, those caught persistently selling tobacco to children could be prevented from selling tobacco to anyone for up to a year. We continue to work closely with trading standards officers and the business community to raise the profile of this issue and to ensure that retailers and vending machine operators are fully informed about their duties under the law.

We know that most vending machines do not have age check mechanisms in place and often they are sited away from the bar or where staff cannot see them, meaning that no one is supervising their use. Although we know that vending machines are easily accessible to young people, the Government believe that we should take a staged response to the problem. Age-restriction mechanisms applied to vending machines could prevent underage access to cigarettes, while maintaining the source of cigarettes for adults.

We are committed, as we have just illustrated, to protecting children from the harms of tobacco. We are already working with key stakeholders such as the National Association of Cigarette Machine Operators and trading standards to develop regulations. We would specify how vending machines need to be operated and managed to prevent underage sales and we are committed to consulting on draft regulations as soon as possible after Royal Assent.

We understand the concerns of those who are unconvinced by age-restriction mechanisms. We are already looking to the experience abroad and to new mechanisms being trialled here in the UK to ensure that the most effective approach is taken to tackle this problem. Should it become necessary, we are committed to using the power in this Bill to prohibit cigarette vending machines altogether. We intend to introduce requirements on vending machines from October 2011 and to measure their efficacy over a period of two years. Should underage sales from vending machines remain a problem after that period we will move to ban them.

The Government are committed to protecting our children. I welcome the support we have received in this House and I hope that, in the light of our commitments, the noble Baroness will feel able to withdraw the amendment.

My Lords, I would like to have been able to thank the Minister for her reply, but I cannot. I am not at all convinced. What she has outlined is lamentably weak, particularly in the light of the recent victory. Therefore, I feel I must test the opinion of the House. I cannot see an argument put forward here to maintain these anachronistic vending machines.

My Lords, my apologies, but it appears that someone has inadvertently removed my papers. My amendment relates to plain packaging. In summary, the amendment is about providing the Secretary of State with powers to make regulations which will restrict the use of branding, including the shape and colour of tobacco products and their packaging. The pack will retain the brand name of the product displayed in a standard font and the volume of the product; for example, “20 cigarettes”. The pack will retain features required by statute, including health warnings, tar and nicotine yields and a duty stamp.

Before making these regulations, the Secretary of State shall consult with affected parties. The regulations will be subject to affirmative resolution. The measures are necessary because the current branded packaging constitutes a highly effective form of tobacco advertising. Tobacco branding is particularly potent in the recruitment of young people into a lifelong and lethal addiction. Design features including colour-coding give the misleading and illegal impression that one type of cigarette is less harmful than another.

I reintroduced the amendment because since Committee plenty of new evidence has emerged from a variety of sources. I have also amended it in response to the objection of the noble Lord, Lord Stoddart, that it should provide for an affirmative instrument. Greater clarity has been provided by the Minister on the forthcoming tobacco control strategy which could include a planned review of the evidence. The Committee stage of the debate coincided with the World Conference of Tobacco or Health on the very day Members debated plain packs, and new research was presented that showed that plain packs are an effective means of controlling sales to children.

There are other issues relating to plain packs, which I believe the new amendment addresses. I hope that the Minister agrees to include it in the tobacco control strategy. If young people and smokers are to be given a real, free and informed choice about whether they should smoke or not, we should prohibit the branding which misinforms and inhibits choice. I beg to move.

My Lords, I express opposition to this amendment from the noble Lord, Lord Patel. In Grand Committee, when the noble Lord, Lord Patel, introduced a plain packaging proposal, which was similar to, but not exactly the same, as this Amendment 60, he admitted that:

“Large, bold, written health warnings are effective in motivating smokers to quit, and new picture warnings may be even more effective”.

He went on to say:

“However, tobacco branding lessens the impact of the warning message, as colourful branding detracts attention from health warnings”.—[Official Report, 11/3/09; col. GC442.]

I find that last sentence very difficult to accept. It seems to me a major assumption that the brand detracts seriously from the health warnings. The phrase, for example, “Smoking kills”, which when looking at the gantry one sees again and again because it is on each packet, and the visually unpleasant pictorial warnings are far more vivid than any logo or brand, whether coloured or not. Even the Government—at least when last in Grand Committee—who seemed only too willing to impose further restrictions on the promotions of tobacco products, have not been impressed by evidence that the introduction of plain packaging would reduce the number of young people taking up smoking.

Since the Tobacco Advertising and Promotion Act 2002 banned most methods of promoting and advertising tobacco, brand differentiation is one of the few methods left to compete in the market place—apart from reductions in price. Presumably, neither the noble Lord, Lord Patel, nor his colleagues who favour this amendment, would want competition to consist entirely in lowering prices. That, of course, would encourage young people to buy. In Grand Committee, the noble Lord, Lord Naseby, and I expressed concern that Amendment 60, or something like it, expressly opened up the possibility of prohibiting by regulation the use of trademarks on cigarette packets—and trademarks are specifically mentioned in subsection (2) of Amendment 60.

To obtain a trademark on any product you have to pay application fees, you have to pay registration fees, you have to pay renewal fees; all paid to the state. In return, you get a property right, which of course is absolutely useless unless you can affix the trademark to the relevant product. In Grand Committee, I quoted an expert on intellectual property law, Mr Christopher Morcom QC, who expressed concern that such a proposal would contravene international law, European law, and British national law. Since our debates in Grand Committee, he wrote a letter to the Times, 24 April 2009. The last sentence in his letter reads:

“The House of Lords should have none of it”.

My Lords, I very much support the noble Lord, Lord Borrie. Although I shall not repeat what he has said, I totally concur because the legal dimensions of this are, frankly, awe-inspiring or frightening, whatever the right phrase is. We do not need to cover them again; they were clearly placed on the record in Grand Committee.

I will mention a couple of other new dimensions. First, the very existence of a brand, whether it be a cigarette or anything else, gives the customer a reassurance of quality. We know already that, roughly speaking, a third of our tobacco products are imported from somewhere or other and, without a brand, my friends, you will find that the importation of other products in plain packaging will dramatically increase. Canada has already seen that since the display ban the importation of products to Canada has risen to 50 per cent of the market. From a health point of view, relating just to tobacco, it is important that those who decide to purchase know that they are getting a product of guaranteed quality and not a bit of grass that has been put together somewhere in the world.

The other dimension that I want to mention concerns looking at what other countries have done. Occasionally in this country, we need to look at what others do. Both the Canadian and Australian Governments, having weighed up the legal advice, have decided that they are not going down this route. The reasons for that are partially because of the points that the noble Lord, Lord Borrie, raised; partially for the reasons that I have just given; and not least that because companies right across the consumer goods market value their brands—and they have a tremendous value—any Government tempted down this route will find themselves having to pay enormous compensation for the loss of a brand.

My Lords, I will speak briefly to oppose the amendment. I do not know what is worrying the noble Lord, Lord Patel, about what is already on the packages. Is it the phrase:

“Smoking seriously harms you and others around you”?

Is it, “Smoking kills”? Is it, “UK duty paid”, which is in large letters, to prevent smuggling? Is it:

“Smoking causes ageing of the skin”,

with a lurid picture provided by the Government? Is it:

“Smoking can cause a slow and painful death”,

with a lurid picture of someone’s neck falling out, which is also provided by the Government? Is it:

“Protect children—don’t make them breathe your smoke”,

with another lurid picture?

What is the noble Lord objecting to? Is it the tar content, which is on the packet? Is it the nicotine content, which is on the packet? Is it the carbon monoxide content, which is on the packet? Is it just that the brands display their brand name, and do so, as they are entitled to do? What is bothering the noble Lord?

My Lords, since the amendment stands also in my name, perhaps I might, with the leave of the noble Lord, Lord Patel, answer that question on his behalf. It is none of those things, which would remain on a plain package—the health warnings and all of that. It is the use of colours and effects on packets to make them attractive to young people and to imply some kind of value and quality. That is what packets do. That is the distinction. I happen to have lost my point earlier. I think that those signs that were put on to tobacco packets as a result of the Bill introduced by my noble friend Lord Clement-Jones should remain. I happen to think that having them on display is far more effective than what the Government have provided.

I say to the noble Lord, Lord Borrie, that I am not going to take him on in areas of law; I cannot do that. The reason why I was happy to put my name to the amendment tabled by the noble Lord, Lord Patel, was because it gives the Government a power for a future date. It anticipates the fact that there will be a great many technical and legal arguments which will have to be settled. The noble Lord is absolutely right, and the noble Lord, Lord Naseby, is right, that any Government who were to go down this road without having taken due legal advice about TRIPS and about advertising would be unwise. I want to see us have the power to do this, and I want to see the British Government have the power to do this, not because we have to comply with some treaty or some piece of European legislation, but because we believe that it is right, as part of our comprehensive tobacco strategy. I have no problem with making the packaging as unattractive to young people as possible; it is important that we do that.

My Lords, on this amendment, I am happy to follow the noble Baroness and to say that I agree with what she said. I disagree with those who are opposed to the amendment proposed by the noble Lord, Lord Patel. The reason I do so is because we have to understand how important to tobacco promotion the pack has become. The Tobacco Journal International in its fourth issue of 2008 wrote:

“An increasing focus has been put on the ever more elaborate design of cigarette boxes. Exclusive packaging is an instrument to communicate brand image and differentiate premium, high-priced brands from value cigarettes; while the cost of production is roughly the same for both and, according to analysts, the difference in quality is barely perceptible, the profit margin of premium brands is considerably higher than that of low-priced cigarettes”.

There are a number of examples of tobacco companies that have chosen to introduce new brands in a way that appeals to particular markets. Camel Natural Flavour is a youth-oriented brand variant which was launched in 2007. In speaking to the trade press, Gallaher’s communications manager said:

“Camel is the smoking style statement for young adult smokers”.

A new range of Silk Cut cigarettes is,

“aimed at females and will initially feature a limited edition to make it stand out on the shelf”.

These are now an important part of tobacco advertising and promotion. I support very much the concept that there should be required to be plain packaging.

To pick up the point made by my noble friend Lord Borrie about Mr Christopher Morcom, I do not dispute that he is a very distinguished trademark lawyer, but he is not an entirely objective witness. The tobacco papers to which a number of us have had access show, for example, that in 1993 he made a direct appeal to British-American Tobacco for financial support for the Bach Choir. A gentleman called Mr Clarke from BAT said:

“I am … anxious to help Christopher if at all possible as he is currently the best and most experienced trade mark lawyer in practice at the Bar at the moment and I want to keep him sweet”.

When people have close connections with the tobacco industry, it is important that we are aware of those connections when they are speaking up on its behalf. That very much applies to his letter to the Times.

My Lords, I welcome the intention behind the amendment, which is to protect children from the marketing of tobacco products and to make completely clear the relative safety or otherwise of tobacco products.

As I said in Grand Committee, the Government’s position on this issue was set out by the Secretary of State’s Written Ministerial Statement made in the other place, which stated:

“We believe that more needs to be done to develop our understanding of how the packaging of tobacco products influences smoking by both adults and young people. The Government will therefore keep tobacco packaging under close review”.—[Official Report, Commons, 9/12/08; col. 47WS.]

Evidence presented during the tobacco consultation suggests that the packaging of tobacco products may encourage young people to start smoking and may undermine health messages about the dangers of smoking. We want to strengthen and build on this evidence base.

We are committed to introducing a new tobacco control strategy by the end of the year. In Committee, I mistakenly said that the strategy would be for both England and Wales. I take this opportunity to clarify that the new tobacco control strategy will, unfortunately, be for England only.

Further action on tobacco control in Wales is being addressed through the Welsh Assembly’s Our Healthy Future framework.

My Lords, I thank the Minister for her comments, and the noble Baroness, Lady Barker, for putting her name to my amendment. I also thank all other noble Lords who spoke in favour of it.

The comments about intellectual property rights made by the noble Lord, Lord Borrie, were mistaken. The World Intellectual Property Organization, the director-general of trade for the European Commission and the DTI have all commented that these arguments are wrong. The noble Baroness, Lady Golding, asked what I want on the package; but what I do not want is more important. I do not want fancy colours, fancy packaging and holograms that detract from the important messages that she referred to.

I thank the Minister for her answer and look forward to a tobacco strategy that includes evidence-gathering and consultation on plain packaging. On that basis, I beg leave to withdraw the amendment.

My Lords, the Framework Convention on Tobacco Control is an international treaty of the WHO to which the UK is a party. Article 5.3 seeks to protect public health policy from tobacco industry influence. The amendment seeks to ensure the implementation of Article 5.3, which states that when parties are setting and implementing public health policies related to tobacco control, they shall,

“act to protect these policies from commercial and other vested interests of the tobacco industry in accordance with the national law”.

The amendment received widespread support in Committee. The Minister said that she considered the UK Government to be bound by it, and explained the practice of the Department of Health in an encouraging way. However, it is not clear that other departments are as aware of their responsibilities. Furthermore, additional evidence has emerged about the use by the tobacco industry of proxy organisations to lobby on its behalf. We have seen much evidence of that in the long debate this afternoon.

It is not just the Department of Health that is covered by the treaty, but other departments such as DBERR and the Treasury. The Foreign Office—the only department with a published policy on the matter—has demonstrated that such guidelines need not be onerous. I am encouraged and grateful to have received this morning a letter from the Minister telling me that the Secretary of State, Alan Johnson, wrote last week to all his colleagues, including the Prime Minister, reminding them of their obligations under the treaty.

Engagement with the tobacco industry should be limited to areas where it is strictly necessary; for example, to regulate tobacco products and the industry itself. The engagement must be transparent, and I would like a legal obligation on the industry to declare when something is industry-financed, as is the case with the Save our Shops campaign. Before I hear from opponents that this is grossly unfair, let me counter one or two points.

The amendment does not prevent the tobacco industry speaking to the Government, but it does define the terms of engagement. The tobacco industry has been shown to subvert the public policy process and public health objectives. As such, it must be obliged to work within a transparent framework when communicating with the Government. This is an agreement that we have already signed up to. The amendment is designed to drive forward not the principle, which is already agreed, but its implementation. I beg to move.

My Lords, I welcome the sentiment of this amendment. The Government are fully committed to implementing the articles and guidelines of the World Health Organisation’s Framework Convention on Tobacco Control. The UK Government’s policy on engagement with the tobacco industry is to abide by the guidelines for implementation in Article 5.3.

We take seriously our responsibilities under the FCTC. Indeed, we have already contributed as a partner country to the development of guidelines for Articles 8 and 11, which concern protection from second-hand smoke and the packaging and labelling of tobacco. We continue as partners in the development of guidelines for implementing Articles 9 and 10, which regulate the contents and disclosures of tobacco products, and we are formally facilitating the development of Article 14 guidelines on demand reduction measures concerning tobacco dependence and cessation.

Article 5.3 guidelines were agreed at the third conference of the parties to the FCTC in November last year, and the UK worked with EU counterparts to refine, improve and gain consensus for the final guidelines. The UK Government abide by their responsibilities under the guidelines for implementing Article 5.3.

Guidelines for implementing all FCTC articles are available on the Department of Health website, alongside an update on progress since the third conference of the parties. However, after discussion with the noble Baroness, and to raise awareness across all departments of government of the responsibility to abide by Article 5.3 guidelines, the Secretary of State for Health has written to his counterparts across Whitehall to remind them of their obligations, providing a copy of the guidelines and giving contact details of Department of Health officials who can provide further advice on implementation.

I hope that with this reassurance and the determination that we have shown, the noble Baroness, Lady Northover, will withdraw her amendment.

My Lords, will the Minister confirm that what she has stated abides by the five principles of the Better Regulation Commission—that regulation should be proportional, accountable, consistent, transparent and properly targeted? Do those principles inform the criteria for the new missive that has gone to all departments?

My Lords, I am happy to make available to the noble Lord both the contents of the letter and the guidelines, so that he can see that they are proportionate and that they allow appropriate discussions with the tobacco industry to take place.

My Lords, this provision is clearly proportionate. It is something that we have already signed up to; I was pressing on the question of implementation. I am extremely encouraged by the reply of the noble Baroness and I beg leave to withdraw.

That the order laid before the House on 30 March be approved.

Relevant Documents: 12th Report from the Joint Committee on Statutory Instruments and 14th Report from the Merits Committee.

My Lords, in moving that the House approves the first of these statutory instruments, I will also speak to the second.

The purpose of these statutory instruments is to implement provisions in the Banking Act 2009 relating to building societies and the financial services compensation scheme. They were made on 29 March to facilitate the actions taken by the Treasury and the Bank of England with regard to resolution of the Dunfermline Building Society on 30 March 2009. These instruments are being debated under the “made affirmative” procedure in accordance with the Banking Act. As the relevant powers in that Act are being exercised for the first time, and given that the circumstances surrounding the resolution of the Dunfermline did not allow for sufficient time to lay a draft of these instruments in advance, I should say that I am content that the use of this procedure is appropriate in this case.

Both instruments were made on 29 March to ensure that appropriate action could be taken under the Banking Act as part of the resolution of the Dunfermline Building Society. However, they are standing instruments—they are not specific to Dunfermline and, subject to their approval by this House, will remain in force until they are revoked or changed. We will be consulting on these instruments before the Summer Recess and, if appropriate, will bring forward amending instruments at the end of the year, which will also tidy up minor drafting errors. Any amending instrument will be subject to the full draft affirmative procedure.

Members in the other place have asked why we did not lay specific orders to cover Dunfermline at this stage, and standing orders later. If we had done this, any future use of these powers prior to introduction of the standing orders would need to be approved by the House by affirmative resolution. Given the extremely short period for taking action in such cases, this would severely limit our ability to use these powers in this period, limiting our capacity to protect depositors, consumers and public funds if such protection was required. I am confident that this procedure allows the maximum possible opportunity for consultation on these standing orders without limiting the Treasury’s powers to act in the interim if necessary.

The order is made under powers in Sections 130 and 158 of the Banking Act to apply Parts 2 and 3 to building societies. It ensures that the bank insolvency and bank administration procedures are available in relation to building societies. These procedures are an essential part of the special resolution regime toolkit established by the Banking Act. As applied to building societies, these procedures are termed “building society insolvency” and “building society special administration”.

The first procedure is building society insolvency. Under Part 2 of the Banking Act, as applied by this order, the FSA or the Bank of England may apply to the court to put a failing institution into building society insolvency on one of a number of grounds. The second procedure is building society special administration, which was used in the Dunfermline case. Under the Banking Act, the Bank of England has powers to transfer a failing building society to a private sector purchaser or to a bridge bank. What is left of that society may then, on application to the court by the Bank of England, be put into building society special administration. The special administrator has two objectives. The first is to supply services on behalf of the residual society to the private sector purchaser or bridge bank so that it may operate effectively. The second is normal administration—that is to rescue the society as a going concern or to achieve a better result for the society’s creditors and members than would be achieved if it were just wound up. This measure was considered by the Joint Committee on Statutory Instruments in its meeting on 29 April. Counsel to the committee identified a number of minor drafting defects in this and the Amendments to Law (Resolution of Dunfermline Building Society) Order, to which we will turn. The Treasury has agreed to correct those defects, if necessary with an amending order, when an appropriate opportunity arises.

I turn now to the Financial Services and Markets Act 2000 (Contribution to Costs of Special Resolution Regime) Regulations, which were made under new powers in the 2000 Act inserted by Section 171 of the Banking Act 2009. Allowing the Financial Services Compensation Scheme to contribute to the costs of resolving a failing bank has always been a key feature of the special resolution regime. The SRR provides the authorities with new tools to facilitate dealing with banks or building societies that get into financial difficulties. The Government believe as a point of principle that the financial services sector, through the FSCS, should contribute to the costs of the SRR.

In the case of Dunfermline, the FSCS will make a payment on a net basis at the end of resolution, so it has had to pay no money up front. This is different, therefore, from the situation of Bradford & Bingley, Heritable and Kaupthing Singer & Friedlander, where the FSCS made up-front contributions to the costs of transferring deposits that it had to fund with loans from the Bank of England and which have been refinanced by the Treasury. I hope that noble Lords will agree to both these instruments.

My Lords, I thank the Minister for introducing these statutory instruments, and I apologise in advance for my intervention being somewhat longer than the Minister’s introduction. When I looked at these instruments in detail in preparation for the debate, I realised that they raised rather a lot of issues. I shall be dealing with issues of both process and substance.

I shall start with a point that is common to both the order and the regulations. They have been laid under Section 259(4) of the Banking Act 2009, which as the Minister has explained, allows the first orders to be made as made affirmatives if the Treasury is satisfied that it is necessary to make the order without laying a draft for approval. It is the Treasury’s use of this procedure that I wish to explore.

We fully understood that when the 2000 Act was considered, some orders would need to be made very quickly after Royal Assent, so that there was a complete body of law available for use and to ensure that there was no uncertainty, which could have been damaging to the market. When the first orders were debated on 16 March we accepted that the made affirmative procedure was necessary.

I was never clear on why the Treasury was allowed to keep the made affirmative procedure open once the urgency of the initial orders had passed. Both statutory instruments that we are debating cover generic issues that the Treasury should have got on with as soon as the Act was passed. I can see that the Treasury needed to customise the special resolution regime for the Dunfermline Building Society to deal with the issues that arose, and that if it wanted the Financial Services Compensation Scheme to absorb some of the costs, it needed to amend the FSCS. But I do not see why we should let the Treasury sit on its hands, wait for an emergency to come along and then use the made affirmative procedure as if that were the most natural thing in the world.

Alternatively, if the Treasury wants to use the made affirmative procedure after the first opportunities have passed, the orders should be restricted to the Dunfermline Building Society or sunsetted. It would have been perfectly obvious that both these instruments would be needed even if they were not necessary literally on day one, as some of the others were. The right course would have been for the Treasury to have issued draft orders and consulted on them with a view to bringing them before Parliament in the customary way. The Treasury has had since Royal Assent in early February to work on this. It had at least seven weeks before the end of March in which at least some consultation could have taken place if it had been bothered.

I do not believe that Parliament gave the Treasury the power in Section 259 to use the made affirmative procedure as an optional alternative to using the proper processes of consultation and laying in draft. The Treasury has merely said in its documentation that it is “necessary” for it to have acted in that way, but it was necessary only because it had not commenced the normal course for making orders under the Act.

It is particularly telling that paragraph 3.6 of the Explanatory Memorandum to the insolvency and special administration order notes that the order includes more than is necessary to deal with the Dunfermline Building Society solely to use the draft affirmative procedure because a later order would not be able to take advantage of that power. The Minister repeated that a few moments ago. The Treasury intends to milk the Section 259 power for all it is worth, regardless of necessity. I do not believe that Parliament intended to give the Treasury that kind of power.

Will the Minister now say how many more opportunities the Treasury will have to play fast and loose with the normal parliamentary procedure for statutory instruments? Taking the orders that we debated in March and the statutory instruments that are now before us, how many further first-use opportunities will the Treasury have left? Does it intend to use the made affirmative procedure for those orders or will it allow the normal processes to go forward?

With these orders and regulations, the Treasury has invented a new approach to consultation, namely consultation in arrear, coupled with a vague promise to amend the orders at a later stage if it considers it necessary. In the case of the FSCS order, the Explanatory Notes say that a permanent replacement for the order will be consulted upon before the Summer Recess. In each case, of course, the Treasury will hold the whip hand: it has got its orders through by these made affirmatives, and will change them only if it suits, whatever emerges from consultation.

When we consider the first batch of orders under the Banking Act 2009, there had been consultation on earlier drafts, which does not apply here. Despite considerable work within the expert liaison group, there remained a number of issues outstanding. Will the Minister update the House on the resolution to those matters we discussed in March? The Minister told us that they would be considered by the Banking Liaison Panel, and that the Government stood ready to alter the orders if necessary. Has there been a resolution to the issues that I raised in relation to the partial property transfer safeguards order? Those concerned the definition of excluded rights, and also transactions with small companies. I am looking here for evidence that the Treasury is prepared to amend these made affirmatives, because there are many who suspect that they will just ignore problems that are raised.

Will the Minister also say what will happen in terms of consultation on both these instruments? How will it be conducted and how long will the consultation last? I am sure that the Banking Liaison Panel will be used, but will the consultation go any wider than that? Importantly, will Parliament be informed about the consultation and its outcome? When we debated the Banking Act 2009 orders in March, I raised this with the Minister and he undertook to look again at how consultation would be shared with Parliament.

This may in turn depend on the transparency of the Banking Liaison Panel’s proceedings, which I raised in March and during the passage of the 2009 Act. I asked the Minister to update the House on that. He will recall that it was not even clear in March whether the minutes of the Banking Liaison Panel would be released. Given that building societies generally are a relatively small part of the totality of the issues addressed by the Banking Act, is the Banking Liaison Panel the appropriate forum for dealing with the relevant technicalities so far as they relate to building societies?

I now turn to some substantive issues in relation to these instruments, starting with the building societies insolvency order. The Merits Committee of your Lordships’ House queried with the Treasury the amendments made by paragraphs (9) to (11) of Part 2 of Schedule 1 to the order. These deal with who may make an insolvency order under Section 95 of the 2009 Act. For banks, the Government may make an order, but this is disapplied for building societies. The Treasury explained this in terms of the FSA being the registrar instead of the Government, which applies for companies, but that seems to me a difference without a distinction. Can the Minister explain why, given the evident fact that the Treasury was in the driving seat over the Dunfermline Building Society, the powers to initiate the insolvency process within the special resolution regime is restricted to the FSA or the bank? It seems to me no more than a convenient fiction, possibly to make it clear that no blame can be laid at the Treasury’s door.

My second point in relation to the building societies order relates to the status of building society members, where they may receive a distribution but are not able to vote. This is explained in the Treasury’s response to the Merits Committee in rather obscure terms. It is acknowledged that shareholding members have an interest that is equivalent to debt, but the difficulties of working out how they should vote seems to be the justification for their disfranchisement. I put it to the Minister that this is not a sound approach to making law. Can he say how many and what value is attributed to any Dunfermline members remaining after the partial property transfer? Or to put it another way, who, precisely, has been disfranchised by this order?

Turning to the FSCS order, the Minister has promised consultation before the Summer Recess. This indicates that the Government are not overconfident that they have got it right. I would like the Minister to say a little about how he expects this to proceed, and whether there has been any consultation thus far on the detail with, in particular, the banking industry. The Minister will, of course, be aware that the policy did not receive the support of the banking community when it was introduced in the 2009 Act and, therefore, some significant issues may well need to be discussed.

I have three areas on which to question the Minister. The first concerns the definitions set out in Regulation 2. In many cases, they refer to documents issued by the FSA, such as the COMP source book. These definitions are qualified by the phrase,

“as amended from time to time”.

That is basically okay, provided it is clear what document is referenced at any point in time. There is no other reference that I could see to ensure that, if a source book or other document is changed, the version that is relevant is the one that was applicable at the time the relevant event occurred. We clearly do not want the FSA’s rule book to be capable of being applied retrospectively—at least, I hope we can agree on that. I hope that the Minister will explain how these references are supposed to be applied.

Secondly, I spent a long time trying to work out the difference between amount A and amount B, the scheme’s liability and the amount of the recovery, all of which terms are used in the regulations. In another place, the Minister said that amount A was about £1.6 billion, which was the amount provided to Nationwide as part of the deal. I am not sure that that is correct; it seems to ignore any other costs which will accrue to the Treasury, which, in this instance, appear to include interest costs. Will the Minister say precisely what amount the Treasury has specified provisionally as amount A under Regulation 4? This is what the Treasury is required to do, and I assume that it has done it.

The Minister in another place said that the FSCS has not yet informed the Treasury of amount B. I am puzzled by that. Can the Minister explain why that has not happened? Does the FSCS not have the relevant information and, if not, why not? What is the problem?

Under paragraph (5) of Regulation 6, the scheme’s liability is to be “further reduced” by, inter alia, the amount of the recovery set out in the independent valuer’s determination under Regulation 8. The amount is reduced to amount B, if that is less than amount A. Why is this described as a further reduction? If there has not been a reduction from amount B to amount A, can anything else be described as a “further reduction”? I did not understand how these calculations were expected to fit together.

Clearly, the independent valuer’s opinion of the amount of recovery will depend on whether the valuer calculates the amount of recovery under Regulation 8 in a way which reflects the deal the Treasury actually made to transfer the protected deposits and anything else. If the valuer considers that the Treasury should have got a higher amount for good will or the branch network or whatever when transferring the deposits, that will reduce what it can get back.

My honourable friend Mr Mark Hoban asked the Minister in another place how much Nationwide paid for the ability to acquire the Dunfermline business, but I could not find an answer from the Minister yesterday. Will the Minister give that information today?

Obviously, much more rests on the credibility of the independent valuer, who must reach an independent view of value and not merely endorse the Treasury’s weekend deal-making skills. All eyes will be on him. Can the Minister say any more about the independent valuer? When will one be appointed; what skills sets will be required; and what appointment process will be followed?

My third question on the FSCS order relates to the independent verification process set out in paragraph (7) of Regulation 5. In Regulation 8 there is a reference to an independent valuer—that is, the qualities of the valuer are crucial. However, when we get to verification, the Treasury can appoint any person, whether or not he is independent. The process of verification is described as independent but not the person. That would leave open the possibility of using an insider on the pretext that he would carry out an independent process. The FSA used exactly that fiction for the only published report to date on its conduct in relation to Northern Rock, where its internal auditor was used for a so-called independent review. We do not think that that amounts to sufficient independence for the verification process. Will the Minister explain further?

As I said at the outset, I apologise for the length of my intervention but I felt that these issues needed to be covered fully.

My Lords, I am grateful to the Minister for setting out the purposes behind the order and regulations, together with their content. When we passed the Banking Act, we did not envisage that its first use would be for a building society, and we probably did not envisage that it would have to be used quite so quickly.

I note that the noble Baroness is very concerned that we have generic provisions in front of us, rather than ones that relate specifically to the Dunfermline Building Society. However, it seems to me, particularly as the consultation that has been discussed does not finish until July, that we may well need these powers again before July. If, replacing these two orders, we had specific powers just for the Dunfermline Building Society and then another building society got into difficulties, which is by no means impossible, we would be back to square one, before the consultation was finished, debating almost identical orders. I am not sure that that would make a whole amount of sense, and I understand why the Government have proceeded in the way that they have. It would obviously have been better if the Treasury had consulted in advance, but I cannot whip myself up into a lather of indignation in this case because I think that there is general support within the financial sector, not least within the building society sector, that the Government’s action in respect of Dunfermline Building Society definitely made the best of a bad job. So far as I am aware, no one has come up with a better set of proposals for dealing with that immediate crisis. Indeed, I had a discussion with the Building Societies Association only today and that is very much its view. It made no criticism of either the substance of the way in which the Dunfermline Building Society transfer took place nor, as far as I could ascertain, the instrument before us tonight.

Partly guided by that, I do not intend to subject the Minister to quite such a vigorous viva as that from the noble Baroness. However, I have one or two questions. The first relates to the consultation and ongoing application of the special resolution regime to building societies. The Treasury memo which accompanies the Merits of Statutory Instruments Committee report referred to the fact that the Banking Liaison Panel was going to advise on the application of the special resolution regime to building societies. Given that building societies are very much a world of their own, can the Minister say to what extent they are represented on the panel? Unless they have pretty strong representation, the panel is not an ideal vehicle for undertaking that kind of consideration in matters relating to building societies.

I have a couple of questions about costs. The first relates to the extent to which the Financial Services Compensation Scheme is funded by the building society sector. As the Minister will know, and as I think we discussed during the passage of the Banking Bill, there is a sense of injustice among building societies about the amount—which is not based on risk—that they have to pay into the Financial Services Compensation Scheme. It seems rather extravagant that Nationwide has had to pay as much as £235 million into the scheme. That is a substantial figure for a building society, even of that size.

As the Minister will know, building societies have suggested that contributions to the scheme should be based on risk, as happens with the pension protection scheme. Do the Government have a view on whether that might be a better way forward? One problem that the building society sector faces is that, whenever the societies’ affairs are discussed in your Lordships’ House, we hear warm words from the Government about what a terrific lot they are, but the truth is that they are not prospering as well as they might at the moment for a number of reasons, a contributory factor being the amount that they have to put into the scheme.

As we are talking about who will meet the costs, I have a final question on that subject. One cost involved in any procedure such as that undertaken with the Dunfermline Building Society is that advisers tend to be used by government to help with the process. In some cases, the costs that have at least been reported as being paid by the Government to advisers from the financial services sector and to lawyers appear little short of extortionate. What assurances can the Minister give us that the Government are getting good value for money from their professional advisers, who clearly at a time of stress themselves see the Government as a good cash cow when it comes to this kind of business? To a limited extent at least, I think that it undermines the good will towards some of the activity that the Government undertake in this area, and it certainly suggests that the City, in its various guises, has yet to come to terms with the fact that we live in a rather different world compared with a year ago.

My Lords, unashamedly using the order, I want to say a few words at this stage about the Dunfermline Building Society. I declare an interest in that for a number of years I was its Aberdeen manager 30-odd years ago. The Dunfermline Building Society is not, and was not, Scotland’s oldest building society. That privilege endures to the Scottish Building Society. Nevertheless, the society formed in 1869 with a branch network which spread to the Orkney Islands. It was led by successive chief executives of the stature of the late Robert Stoddart and Mr Walter Hutchison.

In those days, and until recent management became apparent, the Dunfermline traditionally borrowed short, lent long, and held the capital ratio as it should be, with liquidity clearly established. It was prudent in matters of lending but also careful in matters of offer of investment. It was, therefore, traditionally a building society. It seems to me, now as an outsider looking in, that the recent management was squeezed by the Royal Bank of Scotland and the Bank of Scotland lending vigorously and competing for investment in a very aggressive manner, prompting the idea that you must keep up with the financial Joneses. So it wandered into the field of commercial lending with the result that we now all know.

These few remarks were merely an act of self-indulgence by an elderly peer, who has been around here for about four decades, but who felt that the Dunfermline Building Society’s name might at least get into Hansard in a Scottish vein.

My Lords, I am grateful to those who have contributed to this debate. I will start with my noble friend Lord Kirkhill because it is important to realise that we are talking not about abstract concepts, statute and legal complexities, but about a real society with a long, proud history and a strong membership in Scotland, which has played an important role in the Scottish economy. I sincerely hope that it will continue to do so as part of the stronger Nationwide and as a consequence of the ultimate resolution of the social housing business.

It is attractive to believe that the behaviour of the Dunfermline Building Society was a consequence of increased competitive intensity from the Royal Bank of Scotland and HBOS. I am not entirely persuaded that that is the case. I certainly do not think it excuses the failures of the society. Quite simply, the society decided two or three years ago to increase its scale by acquiring books of mortgages from investment banks and others which had warehoused such mortgages, and, at what turned out to be rather a poor time in the cycle, to increase its exposure to commercial property development and lending. As a consequence, it began to suffer problems in terms of its capacity to comply with its threshold conditions. These problems were exacerbated by some rather disappointing experiences, to put it mildly, in connection with a major information technology programme, which did not deliver the results that the board had anticipated. It would be nice to say that this was due to the external pressure of competition, but the ultimate resolution of how to address that competition lay in the hands of the board and management of the Dunfermline Building Society. The noble Lord, Lord Kirkhill, was right, however, to indulge us with his observations in respect of the Dunfermline, given his particular closeness to that society over such a long time.

I will endeavour to answer the many questions asked by the noble Baroness, Lady Noakes, who has excelled her reputation for the detail of her questioning. If I fail to answer them all, I will, as always, write to her, or she will jump up and remind me that I have missed some. First, we need to remind ourselves that this society found itself in very tricky situations, as the noble Lord, Lord Newby, said, when we passed the Banking Act 2009. I doubt if any of us expected that it would require action quite as quickly as this, or that it would be the first building society in the queue. It is good that we had that legislation in place, and it is important to remember that we can continue to say that no retail depositor with an FSA-regulated entity has suffered a loss as a result of the difficulties the banking industry is facing. That is one of the reasons we are seeing a distinct recovery in confidence in the industry.

The noble Baroness asked about the use of the 28-day affirmative procedure. Why were orders not made earlier and why was the consultation not started earlier? The Treasury’s intention was to consult fully on these orders. However, this order was prepared to be used, if needed, on a contingency basis, and it speaks well of the Treasury that it prepares on such a basis. We had to deal with insolvency and special administration in respect of an institution which found itself in considerable difficulty, as a result of which these instruments were made. HMT can use the 28-day procedure once for each power and this is, therefore, the only opportunity to use it. I can assure the noble Baroness that, from my perspective, there is no question of officials or Ministers sitting on their hands or playing fast and loose. There is every intention to have an open and transparent consultation, carried out in accordance with best practice. The assurance I have already given to the House—that we will come back with the consequences of that consultation—is not a vague promise to revisit the issue but rather a clear statement that it will be the intention to inform Members of the House of the process and outcome of the consultation. If the consultation is open and transparent, it should be apparent to noble Lords that there is no sleight of hand involved, and that it is an exercise that is carried out with appropriate sincerity of intention.

My Lords, I apologise to the Minister for intervening. My question was not on getting access to what changes were made to the rulebooks; it was in relation to the definitions in the order which refer to a source book or other FSA documents, which could be changed from time to time. I was saying that the order does not seem to make it clear what version applies at the time of a relevant event. I am not concerned about accessing the FSA’s rulebook; I know how to do that. It is a question of which version is relevant.

My Lords, I shall now with some excitement pick up my briefing note to find whether I have an answer to the question that the noble Baroness has asked, or whether it is one where I shall beg her indulgence and say it is a matter of detail and ensure that the information is shared with her—which is the answer that I am now confirming that I have given.

The noble Baroness asked also about amount A. HMT specified the exact amount paid to Nationwide, which is about £1.6 billion—there is some rounding to it, but it is the figure that we have always declared. She also asked about the FSCS order and whether there has been consultation. There has not been consultation so far, but a public consultation exercise will commence before the Summer Recess.

The noble Baroness also asked questions relating to amount B. The FSCS is calculating amount B, the compensation that it would otherwise have paid depositors. I have already said that HMT has notified the FSCS of amount A. HMT will appoint an independent valuer to estimate the recoveries that the FSCS would otherwise have made from winding up. Amount B, reduced by recoveries, FSCS compensation actually paid to depositors, if any, and FSCS contributions to compensation paid to owners of transferable property, third parties et cetera, gives rise to the FSCS’s total liability, otherwise known as the cap. The total liability is then audited and HMT sends a final notification to FSCS. If amount B is lower than amount A, amount B equals the FSCS’s total liability, and payment at the end is made by the FSCS in respect of the total liability.

It is worth reminding noble Lords that the amount paid by the Treasury to the Nationwide in respect of the actions taken by the Nationwide to take responsibility for Dunfermline’s retail deposit liabilities represented the gap between the assets and the liabilities that were transferred to the Nationwide. That gap will be filled by the proceeds from the administration and disposals and any residual claim that might be made on the FSCS.

The noble Baroness asked why amount B was reduced by compensation actually paid out to eligible claimants. This would happen theoretically in two circumstances. The first would be if the loss that the FSCS was asked to contribute to was not in respect of all the failed banking institution’s depositors and some depositors made claims against the FSCS under the normal procedure. The second circumstance would be if the banking institution in resolution had to put into the bank or building society insolvency procedure and depositors paid out through this. This provision ensures that the FSCS would not have to pay out twice in respect of a single banking institution.

The noble Baroness, Lady Noakes, asked whether the verification process would be independent. Independent verification simply means auditing the numbers. I probably should not say “simply” to preface “auditing”, given the noble Baroness’s professional standing as an accountant. Perish the thought that I was suggesting that auditing was a simple box-ticking exercise; of course, it is not. However, we will appoint independent auditors to do this work.

That the regulations laid before the House on 30 March be approved.

Relevant Documents: 12th Report from the Joint Committee on Statutory Instruments and 14th Report from the Merits Committee.

That the order laid before the House on 30 March be approved.

Relevant Documents: 12th Report from the Joint Committee on Statutory Instruments and 14th Report from the Merits Committee

My Lords, I beg to move that the House do approve the third draft order standing in my name. In speaking to this order, I am mindful of the concerns raised by Members of this House regarding Section 75 during the passage of the Banking Bill, including the welcome contributions made to the debate by the Constitution Committee and the Delegated Powers Committee, among others. I am grateful for the opportunity to demonstrate how we have stuck to both the spirit and the letter of the agreements that we made through the process of developing and passing the Banking Act in the exercise of this power. In keeping with the assurances that we gave this House through the passage of the Act, the powers exercised in the order before the House today were necessary to ensure the execution of the Dunfermline Building Society transaction. Their scope is reasonable.

Members of the other place asked whether it would not have been better to put powers that may be replicated in every resolution into the Bill rather than repeating their use in orders relating to each subsequent resolution. As noble Lords will, I am sure, be aware, it is not uncommon for consequential changes, in the broader sense of the term, to be made by way of an order when a new regime is introduced into a complicated field of law. The Treasury will certainly consider whether it is appropriate for such provision to be made. In this instance, a number of the changes that we have proposed in the order are specific to the Dunfermline Building Society situation.

On the order, Section 75 was included in the Banking Act 2009 so that provisions of primary and secondary legislation and common law could be amended to facilitate the resolution of a failing firm in accordance with special resolution objectives such as promoting financial stability, protecting depositors and ensuring the efficient use of public funds. In this case, these amendments to existing legislation include: making effective the transfer to Nationwide of shares in a subsidiary of the Dunfermline Building Society; and, in Part 3, making provision about the Dunfermline bridge bank—for example, exempting the institution from the Freedom of Information Act, and conferring qualified immunity from litigation on its directors. As such, the substance of the order is largely technical.

Reflecting the new responsibilities assigned to the Bank of England under the Banking Act, the order supports the property transfer instrument made by the Bank, which transferred the Dunfermline Building Society’s member business to the Nationwide Building Society, and the social housing portfolio to a bridge bank owned by the Bank of England. The rump Dunfermline Building Society was then placed into building society special administration following an application to court and by court order.

Article 3 of the order supports the transfer of shares in Dunfermline Building Society nominees—a transfer that was effected by the property transfer instrument—by modifying certain provisions of companies’ legislation in consequence of the nature of the transfer. It ensures that the transfer to Nationwide of this subsidiary was effective from day one.

Article 4 of the order makes provision in relation to employees. Most employees would transfer to Nationwide automatically by the operation of the Transfer of Undertakings (Protection of Employment) Regulations, otherwise known as TUPE. This provision ensures that all employees of the Dunfermline Building Society are transferred to Nationwide irrespective of whether they would fall within the scope of TUPE. Accordingly, they enjoy the protections of this legislation.

Article 5 makes it clear that liabilities in respect of the Dunfermline Building Society pension scheme are not assumed by Nationwide, in accordance with the terms of the transaction.

The position of the members of the Dunfermline Building Society’s pensions scheme was raised in Questions in the other place yesterday. My colleague, the Economic Secretary to the Treasury, will write to Members of the other place to put this on to the record. All Dunfermline Building Society employees were transferred to Nationwide on 30 March 2009. The Dunfermline Building Society’s defined benefit pension scheme was not transferred to Nationwide. However, the 160 employees who were members of the defined benefit pension scheme will be offered membership of the Nationwide group personal pension arrangements. No new benefits will accrue under the Dunfermline Building Society’s defined benefit scheme.

As the Dunfermline Building Society is now in special administration, the pension scheme is a creditor in the administration and is expected to make a significant recovery from the winding-up of the estate. These recoveries will be used to meet liabilities to pension holders. However, special administration is classed as an insolvency event for the purposes of Chapter 3 of the Pensions Act 2004. Therefore, the Pension Protection Fund will assess whether the assets of the scheme are less than the protected liabilities of the scheme. In the event of a shortfall of assets, the Pension Protection Fund would assume responsibility for the scheme.

I have already mentioned the provisions made in Part 3 in relation to the Dunfermline bridge bank, which have been a feature of previous banking resolutions under the Banking (Special Provisions) Act. Articles 9 and 10 again make the technical provision about the FSA’s rule-making powers that has been made in previous resolutions.

Article 11 makes provision for the treatment in insolvency of the claims that the Treasury will acquire against the Dunfermline Building Society in the special administration in consequence of the Treasury entering into the funding arrangement with Nationwide. It provides that the Treasury’s claims shall have the same priority in insolvency as the claims they replace. That is, the claims which replace those of the shareholding depositors will rank behind ordinary unsecured creditors, reflecting the present position of shareholding depositors in insolvency proceedings in respect of building societies.

During the passage of the Bill, Members of this House raised their concerns about the potential for Section 75 orders to be made with retrospective effect. Once again, the powers we have taken in this case demonstrate how we intended to use the powers as framed in the Act and as set out in the detailed code of practice. In this case, the order was made at 9.45 am on 30 March, but had effect from 8 am, so that it came into force at the same time as the property transfer instrument that executed the transaction. That was necessary, as the order needed to reflect the provision of the property transfer instrument and the transfer needed to take place prior to the opening of the Dunfermline’s branches on Monday morning. I understand that took place at 8 am, which speaks highly of the work ethic in the Dunfermline Building Society, if nothing else. I hope that noble Lords will agree that this was an appropriate use of the Banking Act in quite extraordinary circumstances. I commend the order to the House.

My Lords, in his opening remarks, the Minister referred to the report of your Lordships’ Select Committee on the Constitution on what is now the Banking Act, particularly on its Section 75. At the time of the debates that were held then, nobody quite had in mind the circumstances that have arisen in the case of the Dunfermline Building Society. The Minister has, with his usual assiduity and expertise, kindly engaged me in correspondence since the report was published; that will form the basis of our supplementary report, to be issued shortly. The only question arising tonight is: would he confirm that he believes the actions of the Government in respect of the Dunfermline Building Society to be consistent with the undertakings given by him, and by the Chancellor of the Exchequer and others, about the use of retrospective powers?

My Lords, the Minister will be pleased that I do not have quite as much to say on this order as on the previous two that we debated, but he will also be aware that I asked for this order to be debated separately from them, specifically because of it being made under the Section 75 powers that were the subject of much attention during the passage of the 2009 Banking Bill, not only in your Lordships’ House but in the other place. Indeed, while Clause 75 was amended during the passage of the Bill, many remained uncomfortable at the end with the powers in that clause. During that passage, we constantly pressed the Minister for examples of why the retrospective element was necessary, in particular in Clause 75; we never had a satisfactory answer.

When I saw this order, my reaction was twofold. First, if the Treasury could come up with over six pages of usage of the Section 75 power only two months after the passing of the Act, why during the passage of the Bill could it not have articulated more clearly what the power was there for? Did the Treasury not know then how it was going to use the power, or did it withhold from Parliament its intention on how to use it? Neither possibility would reflect well on the Treasury or on the Government.

The Minister has referred to my honourable friend Mr Mark Hoban pressing the Minister in another place on why the Banking Act was not used for many of the issues that are dealt with in this order. With respect, those questions were not answered, either then or today. The exemption from the Freedom of Information Act, or the issue about shadow directors, for example, have not suddenly popped up in the case of the Dunfermline Building Society. They were identified when Northern Rock was nationalised and when Bradford & Bingley was processed, but it seems that no satisfactory answer has been given on why they were not dealt with in what became the Act. Now that we are getting quite used to nationalising things, why do we have to use Section 75 all the time to change the law for things that appear to be routine? The Minister said that this shows why we needed the retrospective element of Section 75. However, as I see it, the only degree of retrospection is between 9.45 am and 8 am on 30 March. I am puzzled why the Government, first, did not articulate why they needed the power of retrospection when they took Section 75 of the Act and, secondly, why that was necessary for one hour and 45 minutes. When the orders were made under the Banking (Special Provisions) Act 2008, which has no power of retrospection—that is, in respect of Northern Rock and Bradford & Bingley—they did not have a problem about one hour and 45 minutes needing a special power for retrospection. Therefore, I am mystified as to why that is necessary.

Will the Minister confirm the precise retrospective effect of the order, as that is not made clear either in the order or in the Explanatory Notes? Having taken the power to retrospectively take the law, I feel that it is incumbent on the Treasury when it uses the power which contains that element of retrospection—and when it solemnly recites in the order that it is both necessary and desirable to have retrospective effect and that the Treasury has had regard to the fact that it is in the public interest to avoid retrospective legislation, which is in Section 75—to go beyond those recitations and say what degree of retrospection has been taken and why it has been taken. Perhaps it is really only one hour and 45 minutes, in which case the matter can be dealt with straightforwardly. I hope that the Minister will agree that it is right, if such orders come forward in future, that the retrospective element and the reason for that element of retrospection should be clearly identified.

I raise one issue of substance in relation to the order. It concerns the pension aspects, which are dealt with at paragraph 5. The Minister has partly explained this issue, which was also raised by my honourable friend in another place yesterday. Why were the powers in Section 71 of the Banking Act not used in relation to the property transfer instrument? When we considered the Bill, we were led to believe that the widely drawn Section 71 was there to deal with all consequential pension matters. That power is specifically for dealing with consequential pension matters. We were also assured during our consideration of the Bill that there was no intention to use the power in Section 71 to affect the accrued rights of members. We now find that Section 75 has been used to deal with the pension issue, but it achieves a result that strands those members within the defined benefit scheme. It may be that employees will move over to a group pension plan, but their defined benefit scheme and any liability in there which is not funded has been stranded.

Related to that, will the Minister explain why the staff and, indeed, any deferred pensioners of the Dunfermline Building Society have been treated more harshly than those of Northern Rock and Bradford & Bingley? The effect of what the Government have done is that if there is a shortfall the scheme will end up in the Pension Protection Fund; and the consequences of that are that pensioners will get less than they would otherwise have got. That has not happened with either Northern Rock or Bradford & Bingley, as I understand it, where pensioners and employees with pension rights were protected. The Minister claimed credit for protecting the retail depositors. Is it now the Government’s intention that depositors will be protected to a greater extent than employees in relation to their pension rights? A definitive statement from the Government on that would be helpful.

Lastly, the order refers to the property transfer instrument which the Bank of England issued in respect of the Dunfermline Building Society. A footnote to the order refers to this being published on the Bank’s website, but, as the Minister will recall, in response to amendments that I tabled, the Government tabled amendments at the Report stage of the Banking Bill so that the Treasury also has to lay a copy of the property transfer instrument before Parliament. When was that done? I searched the Parliament website but could find no relevant reference. I hope that the Minister can tell me that it has been done and when it was done, so perhaps I can locate it within the parliamentary system. Will the Minister also agree that when dealing with orders coming before Parliament it would be helpful to give a parliamentary reference, rather than one on an external website, since we now have the procedure in the Act to ensure that these instruments are laid before Parliament?

My Lords, we spent a long time during the passage of the Banking Bill discussing Section 75. It was argued by a number of noble Lords on the Conservative Benches that we should not have it at all and that the Government should just do things and then be sued if the people to whom they had done them had any objection to them. It was argued that we have Section 75 because one cannot predict everything in advance and we needed a catch-all provision. It seems to me that this order demonstrates why we need Section 75 and it has been used in exactly the way that the Government set out during the Bill’s passage. I suspect, as the noble Baroness says, that some of the Bill’s provisions would be replicated pretty much verbatim if a subsequent building society or bank went through the same procedure, but the fact that we now have them here in no way reduces the usefulness of having them here and I am happy to support the Government.

My Lords, I thank all noble Lords who have participated in this debate for their useful and at times challenging contributions. The noble Lord, Lord Goodlad, asked a broad but important question: do we in Government believe that the use of Section 75 powers here is in accordance with the explanations that we gave when seeking those powers? As noble Lords know, I come new to these issues. When Henry VIII powers were first mentioned in my presence, I could tell from people’s body language that I needed to take them seriously. When they were explained to me I realised why that was the case. I recognised that they are not powers that any Government should seek unless they really believe that they are necessary and that they should always use them with great care. That applies in this case and I take some comfort from the noble Lord, Lord Newby, in that respect.

The noble Baroness raised a number of questions, including about pensions. I noted what was said in the other place by the honourable Member for Fareham, whose work I study with great interest and whose contribution to debate in the other place on matters in connection with finance and banking is of a high order. She asked why Section 75 and not Section 71 was used to deal with pensions. Section 71 was used to make the provision in paragraph 9 of the banks’ property transfer instrument. The order makes further changes to legislation in consequence of the arrangements made with Nationwide, which do not affect accrued rights. In respect of pensions, the noble Baroness made some observations about an apparently different treatment between the approach adopted at the Dunfermline Building Society and that in respect of Northern Rock. I believe that the answer here is the different standing of the pension fund of a bank compared with a building society. Because of the nature of the capital structure of the building society and the depositors being members of the society ranking behind senior creditors, and the pension fund constituting a senior creditor, the situation of members of the defined benefit pension scheme of the Dunfermline is rather good. They have a significant claim ahead of others on the assets of the Dunfermline Building Society, which should give them considerable comfort in contemplating their retirement.

My Lords, on a point of clarification, I did not quite understand why those members of the pension scheme might have a preference ahead of others. Can the Minister briefly develop that point for me?

My Lords, the answer relates to the nature of the deposit account holders of a building society, the shareholders also effectively being unsecured depositors and subordinate to the preferred creditors and the pension fund in respect of having a deficit, counting as a preferred or senior creditor in that respect.

My Lords, is this the only case to date—including Northern Rock, Bradford & Bingley and, now, the Dunfermline—where a pension fund liability is effectively being left to go into the Pension Protection Fund if there is not enough money? I understand that this is the only one that has been “stranded”—the word I used when I spoke. The Minister has not quite answered that point. He has said that they have preference, but that is not the point. The point is what happens to the deficit in the pension fund, if there is one.

My Lords, I am endeavouring to suggest to your Lordships—and I will correct this if I am myself misdirected—that there is considerable security in the situation of the defined benefit pension scheme of the Dunfermline in terms of its members’ access to additional funding in respect of any deficit. Put simply, there is little likelihood of this defined benefit pension scheme having to have recourse to the Pension Protection Fund. So, while the term “left stranded” might describe how they are left geographically, they are stranded in quite a pleasant place compared to members of a scheme in a failing company.

The noble Baroness asked where the retrospective effect was, and specifically referred to the 8 am to 9.45 am. I assure the noble Baroness that there was no suggestion of people being dilatory. I was quite closely involved with the transaction. It was announced on a Monday morning. Negotiations with the Nationwide, the outcome of an auction process, took place throughout the night. I was there myself late on the Sunday evening and again early on the Monday morning, although I must confess that, unlike officials, I did not work throughout the night. The delay of an hour and 45 minutes was just a matter of sequencing.

The noble Baroness also repeated the points that have been made by the honourable Member for Fareham in the other place on FOI and shadow directors. This will tend to be a feature of such instruments and orders should we seek them in the future, but we should not approach them lightly. On each and every occasion, we should ask ourselves whether an exemption from freedom of information, or protection against the possible suggestion that somebody is acting as a shadow director, is something that we should look at freshly in the light of each circumstance. We have come to understand from resolution processes, under the special Act and now under the 2009 Act, that they may appear to be similar but when you get into the detail of them, each and every one is very different and, therefore, needs to be judged on the specifics.

I am sure that, again, I have failed to answer every question asked. If so, I apologise and shall seek to rectify that by writing or giving way.

My Lords, I asked about the property transfer instrument.

My Lords, I shall write to the noble Baroness on that.

My Lords, I shall speak also to Amendment 65. In Grand Committee, a number of us raised concerns about the rolling out of pharmaceutical needs assessments and, in particular, what we saw as the lack of readiness within PCTs to implement the new system in the way that the Government clearly intend. The noble Lord, Lord Faulkner, and I expressed the worry that PCTs are not yet well equipped to gauge the needs and preferences of those who live in rural and less densely populated areas.

A few months ago, the Government published a White Paper, Pharmacy in England: Building on Strengths—Delivering the Future. I thought that it was a very well written document but in it the Government made a very frank admission about PCTs in relation to pharmaceutical needs assessments. They said that there was,

“considerable variation in the scope, depth and breadth of PNAs”.

We can read between the lines on that. They went on to say:

“The Government, however, concludes that commissioning development within PCTs is not yet at a stage where PCTs can be charged with full responsibility for contracting. A different approach is required while important developmental work to build commissioning systems and structures is under way”.

My concern is that the Government now appear to be formalising a process that is not yet fit for purpose. Unfortunately, I do not think that it is being oversensitive or overcritical to sound a note of warning about PCTs’ competence in this area. In Grand Committee, I highlighted the concern about the ability of PCTs to commission enhanced and advanced services. Data from the NHS Information Centre tell us that between 2006-07 and 2007-08 the number of out-of-hours services commissioned by PCTs from community pharmacy declined by 9 per cent; in the same period the number of home delivery services commissioned from pharmacy declined by 47 per cent; and only 138 community pharmacies out of more than 10,000 were commissioned to provide prescribing services to GPs. Those figures do not tell one that PCTs are very adept at implementing change with the necessary element of speed.

Noble Lords who read the Pharmaceutical Journal may have seen a recent article which lambasted two particular PCTs in the Home Counties, which I shall not name, for the snail-like pace at which they deliberated and then further deliberated over the provision of emergency hormonal contraception, a service that is already accepted as an enhanced community pharmacy service to be rolled out nationally. The same PCTs came up with a bizarre formula for promoting smoking cessation services, which made no sense at all to the local LPC.

On PNAs, I am worried that we simply do not yet know enough about how the needs assessments will actually work. It will take time for PCTs to get up to speed with them, just as it has in other fields of activity. The amendment that I spoke to in Grand Committee would have obliged PCTs to take into account the needs of rural populations when carrying out a pharmaceutical needs assessment. One runs into difficulties when trying to define what “rural” really means in this context, so I have not brought that amendment back again. Instead, I have tried to reflect the underlying concern voiced by a number of noble Lords, which was the perceived risk to dispensing doctors posed by the PNA process. We know very well how highly valued the services of dispensing doctors are to communities in less densely populated parts of the country. The fear is that, in allowing a new pharmacy to open in a particular area, a PCT may not fully take into account the impact that that may have on existing services delivered by dispensing GPs. About 4 million people are currently looked after by such GPs and, while I would not want to suggest that the livelihoods of dispensing doctors should be insulated against all possible competition, the knock-on effect of a narrowly based PNA decision could be very serious.

Three months ago, the Commission for Rural Communities published a bulletin in which the special challenges of delivering healthcare in remote rural areas were well articulated. Although on average those who live in rural areas have a high quality of life, the poorest and most disadvantaged residents, of whom there are many, experience consistently lower levels of physical and mental health. To make life more complicated, much of this rural deprivation is hidden. The rural elderly are not only more reliant on health services but also reluctant to use them because of the long travel times involved. Public transport, as we know, can be quite poor. It is significant that GPs and community nurses undertake more home visits in rural areas and see a lower number of patients per day than their urban counterparts, largely because of travel distances. Also, out-of-hours services may be located further afield than is ideal.

At the back of it all is the funding formula: per capita NHS funding for more affluent rural areas is 30 per cent lower than it is for more deprived urban areas. That is because the age profile of different areas has considerably less weight in the funding formula than is perhaps appropriate and right.

This is not an amendment that is appropriate to press to a Division. However, I would ideally like an assurance from the Minister that the regulations to be published on this subject will include a mandatory requirement that the needs of rural populations, the needs of the elderly and the needs of the disabled must be fully taken into account in future PNAs. I hope that this is something that can be considered. I beg to move.