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Lords Chamber

Volume 710: debated on Friday 8 May 2009

House of Lords

Friday, 8 May 2009.

Prayers—read by the Lord Bishop of Salisbury.

Bank of England (Amendment) Bill [HL]

Second Reading

Moved by

My Lords, I thank the usual channels for arranging the time for this Bill to be heard today. It is a privilege to have the opportunity to introduce this legislation into your Lordships’ House.

Shakespeare taught us that human beings can have a fatal flaw. So, too, can legislation. The Bank of England Act 1998 has a fatal flaw: it has three words too many. The Bill aims to delete those from the statute book, and here is why. When things go wrong, it is a human instinct to attribute blame. Today, many people are routinely blamed for this economic crisis—investment bankers for greed, central bankers for being behind the curve, regulators for being asleep at the wheel, credit-rating agencies for giving too many triple-A ratings, even the public themselves for foolishly borrowing too much. What made all these people reckless at the same time? The record seems to show that they were all just victims. Their mistake was to believe what they were told. They were lulled into a false sense of security by an idea—that if policy-makers could maintain low inflation and, more importantly, low inflation expectations, then all good things would follow: growth, employment, prosperity, stability. Unfortunately the idea turned out to be a myth—the largest public-policy failure of our generation.

The myth of inflation targeting created the illusion of the new Jerusalem, the new paradigm—the end of the economic cycle. But lack of clarity about the distinction between the necessity and sufficiency of inflation targets has been responsible for a misunderstanding of epic proportions. By first creating the false impression that low inflation meant financial stability, and then measuring the wrong kind of inflation, the inflation targeting policy encouraged the view that it was safe to borrow and safe to invest. The myth led bankers to lend more, traders to risk more, home owners to borrow more, regulators to relax more and politicians to boast more about the end of boom and bust. When the myth collapsed, it took all of us down with it—academics and auditors, bankers and bakers, economists and electricians; we all went into the dark. So this Bill has a definite purpose. For your Lordships’ easy reference, I offer this précis: never again.

I shall begin with the error in the Bank of England’s remit of obliging the Bank to focus only on inflation. I shall then address how that error was compounded by obliging the Bank to focus on only one kind of inflation—as it happens, the wrong kind. Finally, I shall try to deal with the consequences: how everyone was duped by this policy failure into an inappropriate sense of self-confidence which worked its way through the entire international banking system.

These proposals will not abolish the economic cycle, as was claimed by the myth of inflation-targeting. However, if this change is enacted in UK law, Britain will never again have an economic crisis caused by a banking crisis caused by debts that went unseen by auditors, regulators and central banks. That was the reasoning behind my introduction of the Bill into your Lordships’ House in October 2008.

The Bill does not seek to apportion blame for the crisis—failure of free markets; failure of regulation; failure of the FSA; failure of the Bank of England, the Treasury or the whole tripartite system; failure of the UK, the US or the whole world—the Bill is neutral on all counts. It has only one modest aim: to help whichever party is in government to be wary of the idea that an economic disaster cannot occur during a period of low inflation.

As your Lordships are well aware, the Bank of England Act 1998 was the iconic Act of Parliament that gave the Bank its independence. Clause 11, in Part 2 of the Act, defined the role of the Bank. It states:

“In relation to monetary policy, the objectives of the Bank of England shall be—

(a) to maintain price stability, and

(b) subject to that, to support the economic policy of Her Majesty’s Government, including its

objectives for growth and employment”.

The Bank of England was ordered to concentrate only on inflation, so that when the crunch came, its top officials were looking the other way.

During the passage of the Act in your Lordships’ House, there was much discussion about those three words “subject to that”. Why not, it was asked, “having regard to” or “taking account of”? Why were all other considerations to be subordinate to controlling inflation?

The economic orthodoxy which underpinned the Act was based on the seminal work of Professors Paish and Phillips at the London School of Economics. The Phillips curve showed that high inflation was incompatible with high employment and high growth. The mechanism of the causal relationship between them was “wage push”. According to the theory, unions, noting higher prices, would press for higher wages and employers would lay off workers to compensate. This was the dreaded wage/price spiral of the 1970s. Policy-makers concluded, and legislators concurred, that inflation must be curbed at all costs.

The winning argument at the time of the Act was that the relegation of the Government’s growth and employment objectives would prevent the manipulation of economic activity by unscrupulous politicians in search of votes, and it was said that control of inflation was, in any case, the best guarantor of growth and employment.

It is important to remember that the British psyche had been scarred by this stop-go cycle of the 1970s—a boom, followed by inflation, followed by severe measures to control inflation, then a bust. The lesson seemed obvious: if the monster of inflation could be tamed, that would be the end of the economic cycle as we know it.

So it was that when I introduced this Bill into your Lordships' House in October 2008, the UK Government were still clinging to the wreckage of that theory. On 12 November, speaking for the Government, the noble Lord, Lord Myners, said that the Government were quite satisfied with the remit of the Bank of England—it was impeccable. In fact, it was so perfect that it had been responsible for the fine performance of the economy under his Government. He said flat out that the remit,

“should not in any way be amended”,

and he gave his reasons. The remit had delivered,

“unparalleled … economic growth and low inflation”.

He explained how it had achieved this. He said that stable prices and economic growth are,

“not in conflict; one is a precondition of the other”.

He also said that low inflation was,

“an essential precondition for … growth, prosperity”.—[Official Report, 12/11/08; cols. 654-55.]

In other words, in November 2008 the UK Government were certain that low inflation would deliver economic growth and financial stability. As we all now know, it has not worked out quite like that. That fine theory, to which the Government were still attached in November, had already met its Waterloo in October, when we discovered, according to the deputy governor of the Bank of England, that,

“the largest financial crisis … in human history”

had arisen during a period of low inflation.

A month later, the Government had changed their mind. They had found a flaw in the Bank of England’s remit. On 4 December 2008, they published their Banking (No. 2) Bill to amend the remit. New Section 2A(1) in Section 238 of what is now the Banking Act 2009 would give the Bank of England a second objective:

“to contribute to protecting and enhancing the stability of the financial systems of the United Kingdom”.

So in this little-noticed revolution in economic management, the tectonic plates of the Bank of England were shifted from the sufficiency of a single remit to the necessity for a dual mandate.

What could have led the UK Government to such a change of mind about the remit of the Bank of England? Is it not because the Government belatedly agreed with the central proposition behind this Bill—that while low inflation may be a necessary condition for financial stability, it is certainly not a sufficient condition? By focusing only on inflation, as three words in Section 11 of the Bank of England Act 1998 directed it to do, the Bank of England was blindfolded to the disaster for economic growth and financial stability that could occur in a low-inflation environment. Never again.

I hope that that explains the error in the Bank of England’s remit of making the Bank focus only on inflation and the importance of removing the three words “subject to that” from the Bank of England Act, as this Bill proposes.

I shall now deal with how that error was compounded by obliging the Bank to focus on only one kind of inflation—as it happens, the wrong kind. Whereas the Bank’s consumer prices index, the CPI, keeps a close eye on inflation in the price of a packet of peas and a bar of chocolate, it overlooks the very aspects of inflation that caused this crisis—all the debt, housing and mortgage ingredients of our present misfortune. While asset prices rose and fell by 50 per cent, the Bank of England was directed by those three words in the Act of Parliament which created it to look the other way—to painstakingly examine a rate of inflation which barely moved at all.

While “inflation” as defined by the Bank of England stayed within a narrow range, other rates of inflation changed dramatically. For the past five years, “debt inflation” was on average 9.5 per cent a year—nearly five times the Bank of England’s CPI inflation target. But where is “debt inflation” in the CPI? It is not included. During the same period, the inflation rate of one particular asset class, property, was 13 per cent a year—six times the Bank’s CPI target. Where is that in the CPI? It is not included. What about the cost of acquiring and holding these property assets—that is, mortgage interest? Where is that in the CPI? It is not included.

CPI inflation barely moved. It was irrelevant. It registered neither the huge increase in asset-price inflation nor its huge collapse. The people were duped. Why? It was because the Bank’s measure of inflation was stuck in the past. The Bank’s CPI measure of inflation is out of touch, because the world has changed. Millions of people had become investors in a new asset class: they were home owners. This was the joy of debt as practised by the masters of private equity. It works like this: I borrow money, I buy an asset, the price goes up, I exit the asset, I repay the loan, I keep the profit. Remember that the great British public had been given specific assurances that central banks had achieved predictably low inflation, which meant prosperity and stability, so there was nothing to worry about.

But the great luminaries did not consider how a change in the inflation rate of a certain asset class could bring about a dramatic collapse in the economy, notwithstanding low inflation as they define it. As the chairman of the US Federal Reserve, Ben Bernanke, put it, there is no one correct method for valuing an asset class; there are two. First, there is the price that a normal seller would receive from a normal buyer who considers the value of the asset at maturity. Secondly, there is the price that a distressed seller would accept now from a reluctant, risk-averse buyer. That change in valuation methodology, completely unforeseen in the Bank’s definition of inflation, created this crisis. The IMF confirms my point in its report of 12 March 2009, which states that, by focusing on consumer prices, central banks ignored,

“risks associated with high asset prices and increased leverage”.

The Bill reveals to your Lordships' House that the true culprit for this crisis is not regulation or an accounting standard, not an institution or an industry but an idea: the myth of inflation targeting. It blinded us to how an economic catastrophe could occur during a period of low inflation. It lulled us into a false sense of security. Its confusion between the necessity and sufficiency of inflation targets led to a misunderstanding of epic proportions. When the myth was exposed, it took us all down with it. As we all now know, none of us can rely on inflation targeting for our safety and security. It has been the largest policy failure of our generation. It is not the guarantor of growth and stability, and never was. Why? Because it is a myth. Never again. I beg to move.

My Lords, I intervene briefly in the gap, which gives me the chance to thank the noble Lord, Lord Saatchi, for introducing his Bill. We will have a very interesting Second Reading debate. I rise to put two questions in the context of the Bill to the Minister in the hope that he will have the chance to deal with them later. I will be very brief. Today, 8 May, is Europe Day, the day when the European flag and member states’ flags are flying outside in Parliament Square. It would be nice if the European flag could stay up permanently, as it does in most other capitals of the member states of the European Union. I know that the Government are a bit nervous about that, but it would be appropriate.

My second point refers to the European Central Bank and its announcement of a rate reduction yesterday as well as its reference to its future techniques of policy formation to deal with the current global and European financial and economic crisis. It referred to quantitative easing as one technique and instrument of control in future—the first time that that has been said; the ECB has not referred to that before. The Minister is not directly responsible for ECB policy in that sense, but the British Government closely co-ordinate with the ECB. There is also the relationship between those not in the eurozone and those who are members of it. Perhaps the Minister can give the House an account of how the Government feel that quantitative easing is going so far—the Bank of England has made recent reference to that—and what their reaction would be if the ECB started to proceed with the same kind of policy. That depends on the fascinating question of what kind of issuance of bonds that might involve and how long-term gilt yields and long-term ECB yields are to be perceived in this country. I hope that it is not unfair to ask the Minister about that because he does not have direct responsibility for it, but it is of crucial relevance to this country in considering this kind of legislation.

My Lords, it is a great pleasure to speak in this debate and have the noble Lord, Lord Saatchi, back with us taking a leading part in debates on economic affairs. It is also a great pleasure to see the noble Lord, Lord McIntosh, in his place, because the Bill takes us back to the heady days of the Bank of England Act, when we were establishing the Monetary Policy Committee. That now seems a very long time ago.

I fear that the noble Lord, Lord Saatchi, claims too much for the role of inflation targeting in the current crisis. He contends that economic actors across the whole piece have been duped by the myth that low inflation meant that all restraint could be done away with. That is a very convenient myth, because it means that bankers, commentators, analysts and government can slough off any responsibility for what has happened because they were mere passive imbibers of the myth. There are many claims to be made for and against the way that the Monetary Policy Committee has worked and inflation targeting, but I do not believe that our current crisis can be laid entirely at that door. There are many other component parts of the crisis, lax regulation being one of them. To use Keynes’s phrase, there are “animal spirits”, the part that greed always plays when people think that they can get away with something. To claim that if only the inflation rate had been somewhat different, things would be completely different now is an overstatement.

I do not think that the Bill would achieve what the noble Lord wants, for two reasons. First, it introduces a degree of ambiguity into the role of the Monetary Policy Committee. What are its members trying to do when they sit every month? The great advantage of having a single target and a single aim is that there is a clear focus to decision-making. If we say that when they sit, they should be thinking about growth and employment, we could justify a much wider range of interest rate decisions than is the case when they have a single target. It will be very difficult to get it right if they are aiming at a number of targets with a single club.

I take the noble Lord, Lord Saatchi, back to the heady early days of the Thatcher Government. At that point, inflation was very high. The noble and learned Lord, Lord Howe of Aberavon, introduced a series of Budgets the consequence of which was to increase unemployment in the short term by reducing public expenditure. His justification for that—we can argue about whether it was good or bad—was to reduce inflation and to squeeze excessive expenditure out of the system. Let us go back to 1979, 1980 or 1981 and imagine that you are on the Monetary Policy Committee with the Bill of the noble Lord, Lord Saatchi, in force. Inflation is raging. What would you do that is different from what the noble and learned Lord, Lord Howe of Aberavon, did? Do you say, “If we put interest rates up, unemployment will go up, therefore we will not do it”, or do you say, “Inflation is so important that we will focus on that and accept that in the short or even the medium term, unemployment will rise”?

That takes me to my second criticism of the Bill, which is that having caused a muddle it would then, in many cases, have no effect. If you are in the situation that we were in the early days of the Thatcher Government and you want to drive inflation down, you will do that almost irrespective of the short-term consequences for growth and unemployment. So I disagree with that element of the noble Lord’s argument. The element that I agree with, but which is not actually influenced one way or another by the Bill, relates to how you define inflation. When reading the FT on Wednesday, I thought for a moment that the noble Lord, Lord Saatchi, had been able to persuade Martin Wolf of the value of his Bill, because the headline on his piece reads:

“Central banks must target more than just inflation”.

I thought, “Oh dear, he is going to completely shoot down my arguments and support the noble Lord, Lord Saatchi”. Actually, he does not. He argues, and I agree, that you need a definition of inflation that deals adequately with asset bubbles.

When I was a member of the Economic Affairs Committee in your Lordships’ House, the Governor of the Bank of England repeatedly came before us and explained why it would be completely irresponsible to take any account of asset bubbles in judging inflation and in setting interest rates. He has now done a 180-degree U-turn and agrees that it is now vital that we do so. I am very pleased that he has. I agree that that element of what the noble Lord is talking about is absolutely crucial for the future, and I hope, given that the contagion with which we are now dealing has spread across the EU, that the EU will move more quickly to redefine the CPI to take account of asset bubbles. If that had been done, interest rates would undoubtedly have been higher over recent years, and that, to a certain extent, would have reduced the bubble. If the noble Lord is to deal successfully with future bubbles and future irrational exuberance, as we all seek to do, he must realise that interest rate policy is one part of the picture and different forms of regulation are another.

As is often the case, I very much agreed with Martin Wolf in his article on Wednesday when he described a number of things that are “out”. He says:

“the choice, in the short term, is certainly going to be ‘inflation targeting plus’ … ‘In’ is likely to be ‘leaning against the wind’ whenever asset prices rise rapidly and to exceptionally high levels, along with a counter-cyclical ‘macro-prudential’ approach to capital requirements in systemically significant financial institutions”.

Those two things together—taking account of asset bubbles in inflation targeting and having a better macro-prudential approach to the banks—will be a much more effective constraint on irrational exuberance and animal spirits than the system that we have had to date, but I fear that the noble Lord’s Bill deals with neither of those issues.

My Lords, I pay tribute to my noble friend Lord Saatchi for yet again challenging the House. I wish that he would spend more time in your Lordships’ House enlivening our debates.

As my noble friend reminded us, the issue that is addressed by his Bill was debated at length when the Bank of England Bill 1998 was considered in your Lordships' House and in another place. Some wished the price stability objective to be subordinate to the Government’s general economic policy and others wanted to link them together more firmly. The Government did not budge then and, indeed, have batted away the intermittent questioning of the monetary policy objective ever since. I think it fair to say that the Government have had more trouble with those on their own Benches than they have with us on these Benches over the years. The noble Lord, Lord Barnett, who unfortunately cannot be in his place today, has raised this issue frequently.

In preparing for this debate, I sought to answer the hypothetical question: if the Act had been phrased in the way in which my noble friend's Bill suggests, would the Bank of England have acted any differently? Would we have avoided at least some of the economic mess in which this country is now mired? I am not convinced that the policy outcome would have been better.

There were calls throughout the period when interest rates were around 5 per cent for them to be cut in order to support one or other sector of the economy. It was always alleged that growth in the business sector was being held back because of the impact of interest rates—the CBI and other business groups were vociferous about this—but if interest rates had been cut at that point, monetary policy would have been looser, which would have added further fuel to an already overheated economy and to asset prices. We would therefore not have avoided the bust that we are now in.

I do not believe that the Bank’s monetary policy objective has been handled perfectly. For example, the decision by the then Chancellor to switch the inflation target from the RPIX to the CPI undoubtedly loosened monetary conditions at the wrong time. Moreover, as my noble friend and the noble Lord, Lord Newby, reminded us, asset prices are not captured at all in the target, which means that asset price bubbles can grow unhindered by a policy response. Even if these asset bubbles are noticed, asset prices are not a focus of policy. Neither of these issues—the change to the CPI and the absence of asset prices—would have been cured by the change in wording that my noble friend's Bill proposes. If there is a weakness, it is the way in which the Government specified inflation to the Bank, rather than the Act itself.

There are also questions about the Bank’s ability to forecast inflation two years out, which is how the Monetary Policy Committee has generally interpreted its price stability remit. The Bank made forecasts of inflation and of other economic variables, such as growth, and its record cannot be regarded as outstanding. The Bank will doubtless say that the global credit crunch invalidates a comparison between what has been forecast in the past and what has actually turned out, but there remains an uncomfortable fact that the Bank did not see the economic downturn or its severity. It is not alone in that, but it cannot claim any forecasting high ground. As two-year forecasts are a prime driver of interest rate policy, this is a serious issue.

My noble friend Lord Higgins, who also cannot be in his place today, has often reminded us that monetary policy is much more than interest rates, which control the price of money, and he has urged the importance of a focus on the money supply. The Bank of England has statistics on the money supply, but the question in the absence of a target or a benchmark is whether it got the prominence that it needed. Certainly it seemed not to until the money supply growth ground virtually to a standstill.

We have a longish list of other things that we need to look at again in relation to the Bank of England. Some of these were debated during the passage of the Banking Act earlier this year when I moved some amendments which the Government rejected. We do not believe, for example, that the tenure and reappointment provisions for the Governor are optimal in the context of supporting the independence of the Bank of England. We believe that the Bank should be given a more prominent role in financial stability, and in particular should have a formal ability to call time on debt, and we are not convinced that the tripartite arrangements, even after the Banking Act, are robust enough to prevent future banking crises. We are also far from convinced that the new arrangements for the Financial Stability Committee are well designed. I am not saying that the idea behind my noble friend’s Bill is not worth examining further. I think it would be a good idea to review very carefully all the issues that surround the Bank of England and the tripartite authorities and to consult widely on whether changes and further legislation are necessary.

On the basis that the next general election turns out in the way in which my noble friend and I fervently desire, I cannot promise him that our party will have this as one of our priorities. He will well understand that there are many other pressing issues surrounding the economy, as we debated at length yesterday. However, I am quite confident that he will continue to remind us of the inadequacies of the Bank of England’s remit, and I hope that he will get a more sympathetic hearing from the Treasury team that will be in place in a little over a year’s time than I anticipate he will get from the Minister today.

In the mean time, I have a suggestion for my noble friend. Last year, he authored a Centre for Policy Studies pamphlet, entitled Enemy of the People, which contained a devastating critique in the form of a charge sheet based on the Prime Minister’s tax and benefit policies. There were seven counts on the charge sheet. I do not suppose that the Minister has read it but, to give him a flavour, the first count was:

“Conspiracy to enslave United Kingdom citizens by making them unnecessarily dependent on the State”.

I do not think that the Bank of England’s remit will of itself provide such a dramatic charge sheet, but it would be interesting, if my noble friend had the time available, to create a similar charge sheet to capture the Prime Minister's role in the creation of asset bubbles, overindebtedness and boom and bust generally. The Bank of England is part of that. My noble friend is much more inventive than I am, but I suggest something along the lines of: “Conspiracy to impoverish UK citizens and to burden them with debts for a generation”.

My Lords, I congratulate the noble Lord, Lord Saatchi, on introducing this Bill, which gives us a chance to consider an important aspect of the British economy. He will have noted that we had five hours of general debate yesterday, in which he was unfortunately unable to participate. We would have welcomed that. He would also have heard the excellent response to that debate by my noble friend Lord Myners. He therefore will not expect me to comment much further about general economic policy when the House had the benefit of the Government’s perspective delivered only yesterday in such a clear and effective way. I also have no doubt that he will be just a little concerned that neither from the Liberal Front Bench nor, more importantly, his own Front Bench did he get total endorsement for his Bill.

One aspect of the noble Lord’s Bill and his proposed solution seems fully consistent with the attitude of his Front Bench here and in the other place; that is, an analysis which is purely directed towards the economic and financial crisis in terms of the United Kingdom only, as if the deficiencies, if they were proven to be the case, of the Bank of England had produced the worldwide credit crunch, and UK policy and institutions were alone responsible for the difficulties we are in. That is of course the economics of narrowness taken to the point of economic ignorance.

The Front Bench opposite and its colleagues in the other place persist in their arguments that they have a solution to the issue defined solely in terms of UK policy. They do not take into account all the significant perspectives of the great economies of the world, particularly the United States, which take a different view on how to emerge from this crisis. That view is much more consistent with that of Her Majesty’s Government. Therefore, once again, this Bill is an opportunity to narrow the debate on the crisis facing the world when we need breadth.

I am grateful to the noble Lord, Lord Dykes, for introducing that dimension in his short intervention about the European Central Bank. I agree with him that it plays a significant role with regard to the identification of the European Community’s response to the crisis. He will appreciate that I cannot go into a great deal of detail on the effects of that position at this stage, but it is clear that we are able to build on a perspective across Europe which is consistent with that which the British Government are taking, and which the Bank of England are taking in terms of its approach to quantitative easing. I am grateful to the noble Lord, Lord Dykes, for having identified that point.

The noble Lord, Lord Newby, introduced asset pricing, which he will know is easier said than done. Of course, there is a straightforward argument that inflation based on the CPI, which leaves out housing costs—particularly when we all recognise that with regard to the financial problem, housing, mortgages and finance for housing here and, even more significantly, in the United States is a significant contributing factor in terms of the collapse of the financial system—is an important issue. But the noble Lord, Lord Newby, is all too well aware that what has so far defied the statisticians’ analysis is a measure which can be used to get an accurate definition of housing costs across Europe, which would be our first dimension with regard to an index for inflation.

I have some words of comfort for the noble Lord, Lord Newby. Considerable work is being done by the Office for National Statistics with Eurostat and our counterparts in Europe to see whether we can make progress on this important point of asset pricing. The noble Lord will appreciate the difficulties attendant on that and will know that the search for rigour with regard to a price index, which led to the adoption of the CPI, has been important in combating inflation. It has meant that over the past decade we have had an exceptionally good record in controlling inflation. He will know that departing from that with a new measure requires the most careful evaluation.

However, we are not here to discuss the Government’s economic policy, although I did not think for one moment that we could debate the Bill without substantial reference to it. We are here to debate the Bill introduced by the noble Lord, Lord Saatchi, and to respond to his attempts to seek support across the House for the Bill. I share the reservations that have been expressed by the noble Lord and the noble Baroness who have spoken on behalf of their respective Front Benches on changing the Bank of England Act so that it adds to its primary objective in its monetary policy decisions; namely, to deal with price stability.

The Government remain strongly committed to the existing objectives for the Monetary Policy Committee. The noble Lord made reference to my noble friend Lord Myners, who is a very significant authority of the House in these matters, and he will know that the Chancellor of the Exchequer was at pains in the Mais Lecture on 29 October last year to emphasise our commitment. He said:

“The global challenges we face today are no reason for changing the remit of the Bank of England. The objective, price stability, is the right one”.

The 2009 Budget also reaffirmed the target of 2 per cent for the 12-month increase in the CPI, which applies at all times. The Government stay committed to that position. We are all too well aware of the additional measures which are necessary, in which the Prime Minister has taken such a significant international lead, to deal with the global crisis, but we see no reason to depart from the position that has stood us in good stead with regard to control of prices in terms of the Bank of England’s position.

Price stability is a precondition for growth and full employment. It must be achieved first and foremost if economic stability is to be assured. To give the MPC a dual mandate—the noble Lord, Lord Newby, expressed this point—with equal priority for price stability and economic growth objectives would risk the markets and the general public doubting that inflation will be tackled if there could be negative short-term consequences for growth. This would introduce an element of instability into inflation expectations and would do harm to the economy. It is also important to note that it is unnecessary to amend the objectives of monetary policy. The remit for the MPC already allows it to respond flexibly in difficult circumstances, such as “shocks and disturbances”.

Since the introduction of the existing monetary policy framework, and aside from the current challenging economic circumstances, interest rates have been lower and more stable, growth has been higher and more stable and inflation has been lower and more stable than they were between 1979 and 1997, when this framework was not in place. The proof is that in the past decade low inflation has supported growth and UK inflation has averaged less than half the rate of the preceding decade while growth has been higher. Moreover, the existing monetary policy framework has received praise from the International Monetary Fund, which reported as recently as August 2008 as follows:

“For over a decade, the United Kingdom has sustained low inflation and rapid growth—an exceptional achievement. This is the fruit of strong policies and policy frameworks”.

The IMF recommends that:

“The inflation targeting regime faces its most difficult test to date, but should remain unaltered. Adjusting the inflation target, its definition or the remit of the Bank of England to include output objectives, as suggested by some … would be a serious mistake”.

That is not a British analysis, but the judgment of the International Monetary Fund, and I am sure the noble Lord, Lord Saatchi, gives full weight to it.

Economic growth influencing inflation is an important factor underpinning the MPC’s interest rate decisions, which is evidenced in the minutes of the committee. We are able to appreciate its deliberations as they take place. The wider economic climate is already taken into account, but the primacy of the single objective must be retained. I say to the noble Lord, Lord Saatchi, that while he may not have expected the Government to give his Bill a fair wind, he must be a little concerned that neither his own Front Bench nor the Liberal Front Bench sees total merit in it. However, I congratulate him on introducing an element to the economic debate that we did not focus on in detail during our debate yesterday, so this is an added dimension from which we all can benefit. I am grateful to him for creating this opportunity, but I have to say that the Government do not support the intent of the Bill.

My Lords, I am most grateful to your Lordships’ House for the time it has taken over this Bill and I am very appreciative of the three Front Benches and the noble Lord, Lord Dykes. I do not want to detain noble Lords for more than a minute in my response, save to deal with the Minister and the noble Lord, Lord Newby. Your Lordships will want to consider carefully the fact that both of them said that there is tremendous merit in a single objective. I think the noble Lord, Lord Newby, used the words, “a single target and a single aim gives a clear focus on decision making”. The Minister used similar words when he referred to, “the primacy of a single objective”.

The point to remember is that the Government themselves have abandoned the concept of a single remit for the Bank of England. It went in the Banking Act, which was the Government’s legislative response to this crisis. They have abandoned the idea of a single remit for the Bank of England, however attractive it may have seemed years ago to have that single focus. They have introduced a new remit for the Bank of England. We should note carefully the exact words the Minister used in his response, because he said repeatedly that the remit of the Monetary Policy Committee should be a “single remit”. But the Government have changed the remit of the Bank of England because the Banking Act requires the Bank to consider how it will,

“protect and enhance the stability of the financial systems of the United Kingdom”.

That is proof of the central premise of this Bill, which is that an inflation target may be a necessary condition but not a sufficient condition. In recognising that, the Government introduced a second mandate for the Bank of England, which is to protect financial stability. The only possible reason for doing that is that they recognise the premise of this Bill, which is that an inflation target on its own is not sufficient to protect and enhance financial stability.

I am grateful to my noble friend Lady Noakes. We always agree about everything, and I agree with her that, as I said at the outset, this Bill is not a guarantee of the prevention of further crises—I do not claim that for it—and it is not the end of the economic cycle. That was the claim made for the myth of inflation targeting, which we know is wrong. I do not claim that for this Bill, only that whichever Government are in power, I urge them to remember that an economic catastrophe can occur during a period of low inflation. I thank all noble Lords who have taken part in the debate.

Bill read a second time and committed to a Committee of the Whole House.

Community Amateur Sports Clubs (Support) Bill [HL]

Second Reading

Moved by

My Lords, community amateur sports clubs, known as CASCs, and their predecessors are about as close as we get in political debate in our society to motherhood and apple pie. The reason for that is that they can achieve all you would ever want from a voluntary body. They provide exercise, a sense of community as defined in the Title of the Bill, and most of all they bring people together with a common purpose. They make sure that volunteering activities can be expressed. They offer those who might not otherwise have them the chance of good adult role models. They encourage self-discipline and show you the cost of not having good self-discipline in the form of contempt among your peers. All these come together in community amateur sports clubs.

CASCs can also act as informal job markets. I have to make a small admission rather than a declaration of interest. I have forgotten to pay my subs to a small rugby club of which I am almost a lifetime member and vice-president; I will rectify that. A lot of casual recruitment of labour would take place in the club. There was a support structure in place to which people could go for advice. All these things happen around amateur sports clubs to a greater or lesser extent.

It has to be said that after a fair degree of nudging, but not the worst I have ever known, the Government created a tax relief in the Finance Act 2002 which offered some advantages. It was not a bad first step, which is supposedly the most difficult part of any journey, but equally you cannot say that the first step marks the end of the journey and come to a stop. We have to make sure that the journey continues, and that is what this Bill is all about. It seeks to build on the Government’s acceptance that amateur sports clubs are good things and that they need help. This Bill looks at problems that were not dealt with in the first step and shows what can be done to enhance the status of these clubs, which are generally seen as a public good.

All the major clauses of the Bill propose amendments to other Acts, which shows how difficult it is to encapsulate in one piece of legislation something like adequate support of amateur sport. It also has to be said that the Government—I refer to all parties and so also to my own party, although we have not been in government quite as recently—need a vehicle that can focus the attention of Ministers, who have their heads in other briefs, on the value of amateur sports clubs. That it is needed is shown by the fact that this Bill has to cross a wide range of legislation over many years.

Probably the most topical issue is set out in Clause 1, which addresses the utility bills that amateur sports clubs have to pay. I suspect that I am not the only person who has had a number of messages about water charging of late. A classic example of the problem is this: Carlisle Rugby Club is facing a drastic increase in water and drainage charges, rising from £700 to £4,000. An amateur sports club is being asked to find an extra £3,000-plus. I do not know anything about Carlisle Rugby Club, but that is a heck of a lot of money to find. How do you do it? What is your membership? Do you up the subs? Do you exclude people? Do you lose the benefits of it from doing this? How do you help? The clause also asks for something that I very seldom ask for—that the Government take on a regulation-making power. This may not be the finished item, but we deserve an answer here.

The same applies to other utility bills. Surely there is an argument for making special arrangements for people who are doing a public good that otherwise would not be done or the Government would have to do themselves. Perhaps the Minister can give a conclusive argument for why some form of control should not be placed on these excessive charges. I accept that United Utilities has put a one-year stop to the increase, but that is a one-year sticking plaster. I am sure that club secretaries, managers and trustees will thank it tremendously for having yet another year to worry about this. I hope that the Government can give us some idea of what progress they think can be made and that we can receive some positive assurances from across the political spectrum represented here.

Now we come to a difficult issue in Clause 2, relating to the Copyright, Designs and Patents Act. I freely admit that, when we are talking about copyright money collection, if you tell anybody in the music industry that you are going to restrict what they are getting, you might just get a degree of wailing in the wind from an industry that is suffering from tremendous piracy. Why do we have something that is very difficult for amateur sports clubs to collect? They have voluntary secretaries. I have a minor consideration here, in that I am secretary of the Commons and Lords rugby club, though not in a venue that hosts much live music. But we should look at the type and complexity of regulation and the fact that we are not quite sure which bits we have exemptions from. Can the Government tell me why they are not going to do something to help the volunteers who run these organisations, who often take on the most tedious, complex and least fun part of the process? We are not talking about people taking on an activity that directly enables them to take part in a sport, but people who take on something that enables others to have a framework in which to take on a sport. Why cannot we have a simpler form of collection? I would be open to any suggestions at later stages of the Bill if a better way can be found of doing this. Of course I wish this Bill every success, as it is my Bill, but if we can use it as an example of getting somebody in to say how this could be done better, I would be very receptive to that in Committee.

Clause 3 deals with the Environmental Protection Act 1990. This is a slightly more straightforward swipe at nimbyism, primarily inspired by the long-running battle over floodlights. Modern floodlights do not cause a great disturbance or nuisance to people. They can be concentrated downwards. Let us face it, who wants to pay extra electricity charges, even if we get some government support on utility bills as I mentioned on Clause 1? I refer once again to my initial comments about what CASCs do. If people have objections, we must ensure that they are about something more substantial than just mild inconvenience. There is a public good to be had here. There will always be people who object to things. To take an extreme example, there is the Daily Mail version of the person who objects to a pub, having moved next door to it. We must make sure that it has to be on firmer grounds and that there is less hassle for those who run amateur sports clubs, as well as less expense on legal fees. These people are working as volunteers and supporting society.

Clause 4, the last substantive clause, deals with something that I have a bit of guilt about because I have not made enough noise about it either when the Act was brought forward or subsequently—but we all know that we will miss something. If we start getting everything right, either we are going delusional or we have reached a deifatic state—that is not even a word; I mean that we have reached the status of a deity. We will always miss things. The Learning and Skills Act 2000 put the emphasis, when giving funding for skills, on to those who do not have skills at the moment, post-16. Unfortunately, a by-product of this was that many people who are involved in coaching and who already have some form of qualification towards a job found out that they had to pay for their coaching qualification. We should accept that they are doing something good and of public benefit. Being taught how to coach well and safely is important. Remember the safety aspect. In my sport of rugby union I have seen many an injury caused by somebody who could not quite grasp the theory that getting your head in the way of somebody’s knee is a bad thing in a tackle. People need to learn how to make contact in that situation and how to move correctly so that you do not twist and injure. That type of thing is covered in the basis of coaching, as is how to restrict the amount of pressure you put on people so that you do not put them off.

There are also legal requirements and duties of care when you take on these things in various places. The Government should seize the opportunity to change this. This particular bump in the economic cycle may not be very friendly to a request to give extra resources to something that is not directly related to the job market, but as we have proved and as was pointed out in the last debate, the cycle is a cycle and we will come out of it. We should also take on board the fact that running clubs helps certain people in employment hunting. Surely we could say that this is something we missed. I am sure it was the law of unintended consequences. Surely we can turn round and change this. Making sure that we get people properly trained and properly helped to develop others in their sporting aspirations might even create a long-term economic gain by encouraging people to stay in sport and exercise for longer because they are well taught initially. A number of injuries may be avoided. I do not have to go on much further. I would have thought that the Government really should act on this. If anybody thinks there may be a good case for expanding it, I wonder whether I have caught dance properly in this. It probably comes under the same heading. Will the Government give a clear idea of their thinking about this?

Those are the substantive parts of the Bill. I hope that everybody who is listening takes on board the fact that I am not going into revolutionary territory. I am not asking the Government to address something that they have not already said is of benefit. I am merely saying that we should back it up. We have heard about the Olympic legacy; indeed, I have probably bored this House about it on several occasions. Surely this could be seen as part of that overall thrust and strategy of making sure that we encourage people to take part in sport at amateur level and making sure that it is easier to do. I hope that the House will look sympathetically on the Bill, and at least on its aims. I beg to move.

My Lords, I congratulate the noble Lord on initiating this debate and bringing forward this Bill. By so doing, he has clearly demonstrated the need to support sports clubs up and down the country. I know from other debates on sport in this House how much the noble Lord cares about sports clubs. I share his belief in them and in their contribution to every community in the land—they certainly make a contribution in my area. That is why I readily give up my time to be president of the Football Foundation and an adviser to Tameside Sports Trust. These roles have afforded me the privilege of understanding the problems and pressures facing clubs, their volunteers, committees and coaches.

I shall focus on subsection (1) of the new section introduced in Clause 1, relating to utilities, and on Clause 2(2), relating to music usage. The two clauses hinge on the same issue: the failure of some government departments to recognise the very existence of 151,000 sports clubs, 6 million volunteers and their contribution to community life in this country. Otherwise, why would departments such as the Department for Environment, Food and Rural Affairs and the Department for Innovation, Universities and Skills press regulations which tie up the boot strings and purse strings of those clubs?

Earlier this week, I went to the conference of the Central Council of Physical Recreation and heard two powerful speeches on sport, one from its president, Brigid Simmonds, and the other from the Secretary of State for Department for Culture, Media and Sport, Andy Burnham. Brigid, while recognising that a great deal more money has gone into sport from the centre nevertheless pointed to a very worrying scenario following a survey of sports clubs conducted by the CCPR during the past few weeks. She said that half of the clubs have already been negatively affected by the recession and predicted that many more would follow as the year goes on. Almost 40 per cent of clubs have seen a reduction in renewals; some 59 per cent believe that membership fee income will fall next year; and almost 60 per cent are considering cutting their costs or have already done so—23 per cent have made cuts in coaching and 23 per cent in community initiatives. Perhaps most worrying of all in the longer term is that 4 per cent of clubs believe that they will have to close altogether.

The Secretary of State was rather more upbeat, pointing out that school sport has seen investment of £1.5 billion in the five years up to 2008 and will receive another £780 million during the current three-year cycle. Nine per cent of children are now doing between two to five hours a week of high-quality sport.

I went from the CCPR conference to host a luncheon for the Big Lottery Fund here in Westminster, attended by many parliamentarians and speakers from universities such as Loughborough and Stafford Sports College, who have first-hand experience of the problems facing sport. A brighter picture was painted at that gathering. We heard that the Big Lottery Fund had contributed £77.5 million and Sport England £31 million to sport. That was the sunny side all right, but I do not know whether it can be sustained if the Government do not recognise the damage that they are doing unless they scrap the unnecessary regulations to which I referred earlier. The CCPR suggests a moratorium on new regulations, arguing that Ministers can desist from charging hundreds of pounds for licences to play music in sports clubs, recognise that it is unfair to increase drainage costs for clubs, which amount to hundreds of thousands of pounds—the noble Lord, Lord Addington, mentioned Carlisle Rugby Club, but there are many others as well—reject the notion of imposing extra charges on rates and ensure that planning regulations do not make it virtually impossible for some clubs to develop facilities such as floodlights. All this could be done until the UK economy picks up.

Finally, I must express my admiration for the tenacity of the noble Lord, Lord Addington, in hunting down the individual regulations which have led to this situation. However, it seems to me that his approach will tackle the disease only once it has set in. Once we have resolved the problems noted in the Bill, how can we be sure that other government departments will not immediately create more? Perhaps the noble Lord will consider another clause that requires government departments, perhaps via the Cabinet Office, to consider the impact of the new regulations on amateur sport, with a presumption that they will not apply to it. In this way, sports club secretaries would be able to get on with their unpaid jobs, safe in the knowledge that they would not suddenly be hit by some new legal requirement and financial cost which were never aimed at them in the first place. I would like to hear the thoughts of the Minister on that point. I again congratulate the noble Lord, Lord Addington, on introducing the Bill.

My Lords, I, too, am grateful to the noble Lord, Lord Addington, for his timely Bill, which we on these Benches are very glad to support. Like all those amateur, non-profit-making, community-building organisations for which he speaks, the churches, too, wish to be associated with the thrust of his Bill. These are non-profit-making organisations which are supported by those who give their services voluntarily and are at the forefront of building that secure, engaged and well motivated community that we all desire for our country.

Let us be specific about what Clause 1 seeks. The utilities tax is estimated to cost the Church of England more than £15 million per annum as it stands, which is the cost of resourcing some 375 clergy. In the past, community groups were largely exempt from drainage bills because of charitable status; now the proposal is that we are charged by the surface area of our roofs. In some medieval churches, the roof surface is extremely large. To take the cathedral at Salisbury for an example, the total surface area is 7,100 square metres, and that does not include the spire, the tallest in medieval Europe, whose octagonal surfaces are very largely vertical but quite substantially increase that amount. It is estimated that the cathedral’s bill might rise by some 4,000 per cent to around £70,000 per annum.

Her Majesty's Government have still not acted to enforce the guidance that they issued in 2000 which recommended that churches should be exempt from surface water drainage charges. As the noble Lord, Lord Addington, said, this is a matter of enormous concern to a very large number of charitable organisations—not just the churches but the amateur sports clubs and the Scout Association, which I know has registered its objections publicly. These groups are not commercial organisations; they are not in it for the money. Any tax will merely mean fewer resources available for doing what they do: trying to help build up the life of the local community which, as we all know, is vital to the well-being of this country.

Will the Minister say what Her Majesty’s Government are planning to do about this? Will he act to ensure that there is, at least, a third band for charitable users alongside that for commercial and private users, particularly since our churches are charged not only with serving our communities but also with caring for a high proportion of the nation’s most distinguished, largest and oldest historic buildings? The matter is causing grave concern and could seriously derail what we and the Government are seeking to achieve—that is, the well-being of our communities and the building up of the proper relationship between those who try to serve those communities and the communities’ own future.

I suspect that it may be just a matter of oversight that the Government have not followed up what they suggested. As the noble Lord, Lord Addington, said, we would all be very grateful for the Minister’s assurance on what the Government propose. Otherwise, this may not be the only Bill that we will need to introduce into your Lordship’s House. As the noble Lord said, there are a number of small and typed regulations that might extinguish many of our more valuable voluntary organisations and the work they do for the country if we cannot have an overall, catch-all attempt by the Government to regulate more widely on our behalf.

I hope that in bringing forward the Bill, the noble Lord, Lord Addington, will not need to introduce a number of consequential Bills and clauses at later stages. That might waste a considerable amount of time. We could all go home much more content if we had the Government’s assurance that action will be forthcoming and not merely suggested or promised.

My Lords, I, too, thank my colleague and noble friend Lord Addington for bringing forward the Bill. Sport matters for many people. It is not just an optional extra to their lives; it is the most important thing in their lives. That is particularly true for many children and young people. For many such people who do not find life easy and who are not necessarily good at school, sport gives a guiding purpose to their lives. I speak as a father with two sons. I remember very well when my younger son, aged about 10, was first picked to play in a cricket team in a match starting at 2 pm. Habitually, he did not necessarily get up desperately early but at 10 am he was down in the kitchen in his cricket whites, desperate to play cricket because it mattered to him more than how he did in his maths test or in any of his academic subjects.

Therefore, for many children and young people sport is crucial. How they are able to play sport matters very much to them. Sport teaches many of the disciplines which as parents and teachers we try to instil in our children, and which are much more easily instilled very often on a sports field than in a classroom—things such as teamwork, communication skills and leadership. These happen naturally within a sporting context much more easily than in many others.

It is not just as a child or young person that sport matters. A very interesting recent survey by the Isle of Man Government about motivation and business leadership found that, among our top business leaders, more were successful at sport at school than were academically. Clearly, sport at a crucial time in those people’s young lives played an important role in channelling their energies and giving them disciplines that they were able to use as adults to make a success of their lives. I declare an interest as chair of sport at the Prince’s Trust, where we use sport and the relationship with sporting clubs as a way to help motivate children and young people who are failing at school or are unemployed.

Arguably, sport is more important now than ever. We face an obesity crisis in the country, which the Government have failed to stem; I do not blame them, but they have not succeeded. The situation is getting significantly worse. Clearly sport—not least local sport run by amateur sports clubs—is going to play a major part in addressing that issue, arguably when many school leavers are not going to get jobs immediately and unemployment is rising very quickly. The ability of those people, who may not have anything else much to do, to spend some of their time in local sports clubs doing something positive, which helps motivate them and helps retain a sense of self-esteem, is extremely important.

To deliver sport to most people most of the time, community amateur sports clubs are going to be the delivery mechanism. We all have dealings in various ways with such bodies, I suspect. I have two little anecdotes. First, I recently visited my mother in Yorkshire. On getting a cab from Wakefield station to Rothwell, where she lives, the cab driver, who was of Pakistani origin, started telling me about his role as secretary of a local cricket club. He was immensely proud of this role and, indeed, of his club, which was doing quite well. His only concern was that if it was promoted it would have to follow further regulations in terms of the quality of the pitch and various other issues, which he was beginning to worry about. The problem was that when I got to my mother’s house he would not let me out of the cab because he insisted on showing me, with huge pride, his club in a thick directory of cricket clubs in one of the West Yorkshire leagues. For him, as a useful member of society, that amateur sports club was playing an inordinately important role; more importantly, he was engaging with many people in his community in doing positive things around, in that case, cricket.

I give my second example. I suppose I declare an interest: my wife is a vicar just across the river—not at a cathedral, and the roof of her church is extremely modest compared with that of the right reverend Prelate. She has established an after-school club. The bit of the club, into which huge effort has been put, which has really flourished is the football. Other elements have been tried and, if they have not failed, they have been hard going. However, football has worked. In terms of the church playing a role in inner cities, perhaps slightly surprisingly, sport plays a major part.

As the noble Lord, Lord Pendry, set out, amateur sports clubs are facing threats, partly due to the recession and partly due to some of the issues covered by the Bill. He referred to the fact that the recent CCPR report said that up to 4 per cent of sports clubs might fail during the recession, which does not necessarily sound a huge number. However, 4 per cent equates to 6,000 sports clubs, which amounts to several hundred thousand people playing sport. Therefore, this is a big threat when we should be looking to increase the number of sports clubs rather than reduce it.

The Bill deals with a number of real practical issues which have caused problems for sports clubs largely by mistake. I cannot believe that policy-makers intended that sports clubs would be faced with these huge additional water rates or electricity bills, or that they intended that they would be excluded from the apprenticeship scheme, but they are. These measures seek to deal with these intensely practical and sensible points.

I do not intend to go through the Bill. From my own experience I would just like to give one example, which would be remedied at least in part by the Bill as it deals with the situation related to nuisance caused by lights and floodlights. I know an amateur sports club in south London with tennis courts, which was seeking to enhance itself by having floodlights. These were not floodlights like those in a huge ground or that were going to be on every hour of the day and night, but local residents objected to very modest suggestions that these floodlights should be erected. The councillors took fright and they were not erected, which meant that the tennis courts have virtually no community use during the winter except at weekends; they could not be used during the week. The Bill would help deal with that kind of nonsense. It would also deal with many other kinds of nonsense. Therefore, I am very happy to support my noble friend.

My Lords, I congratulate the noble Lord, Lord Addington, on the care he has taken and the detail he has put in to bringing this useful Bill before your Lordships’ House. The special nature of voluntary sports clubs and the contribution that they make to society have long been recognised in the United Kingdom. Sports clubs provide opportunities for healthy activity for people of all ages. They increase community cohesion and encourage citizenship through volunteering.

The Charity Commission has for a number of years referred to community amateur sports clubs as distinct from charities. The Finance Act 2002 created the community amateur sports club scheme, which enables clubs that are open to all communities and which operate on a not-for-profit basis to register with Her Majesty’s Revenue and Customs and receive a range of financial and fiscal benefits. The benefits enjoyed by registered community amateur sports clubs do not currently extend as far as those enjoyed by charities. The Bill recognises the role of sports clubs in improving health and social cohesion within their communities, and acknowledges that these clubs face significant regulatory costs and burdens that severely restrict their growth and development, both in terms of finance and voluntary time, as has been referred to this afternoon.

The Bill therefore provides registered CASCs with fiscal and financial benefits equal to those enjoyed by charities, and makes further provision to remove regulatory costs and burdens, thus enabling clubs to focus on their primary purpose of providing high-quality sporting opportunities for the benefit of the community. Sports clubs have been the bedrock of British sport and British communities for hundreds of years. We have heard what the noble Lord, Lord Pendry, said, referring to the CCPR’s report. This is serious. Sports clubs are in trouble, and the data that Brigid Simmonds produced proves it. The survey that the CCPR carried out shows that, unless we act, thousands of local sports clubs could go under. The CCPR says:

“That would be a tragic shame for their members and their communities”.

I say that it would be disaster for this nation and its sport.

The Government need sports clubs to introduce the “five hour offer” for sport in schools. They simply do not have the staff or commitment from schools without involving local sports clubs. We now need a moratorium on any new regulations, laws and charges affecting the clubs. That has already been said, and we on these Benches support it.

The DCMS annual report for 2008 found that there was slippage in reaching the government target of increasing the take-up of sporting opportunities by adults and young people aged 16 and above from priority groups by 2008. Will the Minister tell us what steps are being taken to catch up and meet this target? The Minister for Sport has said that over 40,000 amateur sports clubs are missing out on a collective £100 million a year of tax savings. Will the Minister outline what measures have been put in place to encourage more clubs to register with the community amateur sports clubs scheme? Given that the Government want 2 million more people from low-participation groups to be active by 2012, why was a decision made against implementing the proposals to allow community amateur sports clubs to claim gift aid on junior subscriptions with Her Majesty’s Treasury?

Conservatives believe that sport is a powerful driver of health, social, economic and educational benefit, and recognise that all the evidence suggests that people who play sport are happier, healthier and more socially cohesive; and, if we listen to the noble Lord, Lord Newby, ultimately more intelligent, reaching higher up the ladder. With the UK’s current rates of obesity, diabetes and heart disease, and problems in the community, Conservatives believe that it is essential that sport is placed at the heart of a number of policy areas. Conservatives believe in the principles of individual enterprise and endeavour that lie behind the CASC scheme. Conservatives wholeheartedly support the scheme, and look to build on it as soon as economic conditions allow. Conservatives aspire to incentivise clubs by introducing gift aid relief on junior sports club subscriptions.

As noble Lords will gather from the Conservative viewpoint that I have just given, we support the noble Lord’s Bill. Personally, I believe that a great deal could be achieved if the Government could accept an Act on the recommendations in the Bill. As the noble Lord himself has said, it is not a finite Bill, but it certainly raises some important points. By working, and continuing the work that the noble Lord, Lord Addington, and his team have done to produce the Bill, a great deal of good could be done, without too much bureaucracy.

My Lords, I congratulate the noble Lord, Lord Addington, on his Bill, which raises a number of significant issues affecting amateur sports clubs. First, I am at one with all noble Lords who have spoken in the debate on the significance of our amateur sports clubs to the welfare of the nation and the community sport system we seek to support. Of course, when we are building up to the Olympic Games, which are on the horizon, the House will recognise the importance with which the Government treat sporting activity at present. We know that sports clubs are the nurseries for a great deal of sporting endeavour, encouraging young people when they leave education to continue in sport.

We know that one great challenge in tackling social problems like obesity and issues of sufficient exercise is the drop-out rate that occurs when people leave education. Sports clubs are increasingly being asked to pick up that mantle in a more constructive way than they have in the past, which is why the Government have been concerned to support those schemes that link sports clubs to schools and ensure that we tackle the issue of drop-out from sport.

We are sympathetic to the aims of the Bill, which sets out to identify financial and regulatory burdens in respect of community sports clubs. We know of the clubs’ importance to the future of sport in the nation. I appreciate the point of the noble Lord, Lord Glentoran, that not everybody is signed up to the scheme. We introduced it in 2002, and it brought significant benefits. Our survey currently indicates that about 6,000 clubs have signed up. We are concerned about the analysis of the dangers to clubs. A survey, based on 160 clubs, looked at the difficulties they had and grossed up into many thousands those that might face real difficulty. We are not sure about those figures.

We are concerned to protect the investment that has gone into sports clubs and sport. Noble Lords will appreciate how much emphasis the Government have laid on school sport and on aiding sports clubs and schemes developing their links with education. As the noble Lord, Lord Addington, said, clubs are experiencing difficulties in this difficult economic climate. However, we are not at all sure that the figure of 6,000 clubs closing during the recession suggested in the CCPR survey stands up to full analysis. However, it is a measure of the difficulties that we face.

Not all clubs wish to join the CASC scheme. The noble Lord, Lord Glentoran, asked for a perspective on how things are going. We are pleased with the numbers that have signed up. Some sports clubs may have good reasons for not wanting to be part of the scheme. Their finances may be sufficiently robust to lead them to conclude that they will not benefit from it. However, as the noble Lord acknowledged, the scheme is beneficial for clubs and we should encourage as many as possible to sign up to it. After all, registered CASCs receive 80 per cent mandatory relief on their non-domestic “business” rates, which is not an insignificant figure. This is topped up to 100 per cent by some local authorities. CASCs enjoy exemptions from corporation tax on bank and building society interest, trading income up to £30,000 and income from property up to £20,000. They are also exempt from capital gains tax on disposals of assets. A registered CASC can reclaim up to £25 in tax for every £100 donated from individuals. These are all significant advantages arising from participation in the scheme. Therefore, the Government wish to spread understanding of these benefits as far afield as we can to get as many clubs as possible to join the scheme. As I indicated, more than 5,000 clubs are in the scheme and Deloitte estimates that, since its inception, the scheme has injected more than £48,000 into grassroots sports. This has enabled clubs to spend the reinvested money on everything from improved facilities to kit.

However, the Bill of the noble Lord, Lord Addington, identifies where the shoe pinches and the difficulties that obtain in discrete areas and has received substantial support for it. Parliamentary Questions have recently been tabled on community sport. My noble friend Lady Billingham, who is in her place, asked a parliamentary Question on this issue very recently. I appreciate the difficulties arising from utility bills. The noble Lord, Lord Addington, referred to Carlisle football club, and a utility company in the north-west of England and mentioned the public concern about this. This concern, echoed by the Government, has caused the company to put a year’s stoppage on its proposed significant bill increases. The noble Lord is anxious about what will happen next. We shall all need to address that. Certainly, United Utilities realises that it has departed significantly from the practice of all other utilities in the country and has paused for thought. We hope that is a constructive pause for thought.

As the right reverend Prelate said, sports clubs are not alone in facing such problems. Many institutions are having difficulty meeting their utility bills. As he said, majestic buildings such as Salisbury Cathedral are particularly hard hit by the way in which water charges are calculated with regard to the removal of surface water. Of course, we understand these difficulties and wish to address them. However, the Bill is limited to sports clubs, while these issues also affect other institutions. The Government have to address the issue in the round. It would not do for us to support a Bill that solves the problem for one set of institutions while not considering the plight of others.

I appreciate the very real difficulty with regard to utility prices, particularly water charges. I entirely accept that certain institutions have real difficulties in this area. Sports clubs are the obvious example but churches are also affected. Indeed, churches’ difficulties in that regard were discussed in a recent debate initiated by a right reverend Prelate. Therefore, we must take a general approach to these issues. Utility companies must bear responsibility for their actions in this regard, particularly when one steps so far out of line and creates the difficulties for the sports club in Carlisle and in the north-west which have been mentioned. We want to see these companies adopt a much more reasonable approach to customers’ ability to pay. There is no doubt that substantial and sudden increases in costs adversely affect voluntary organisations that have no capacity greatly to increase their income in the short term. I accept the point that the noble Lord, Lord Addington, made. His Bill emphasises this important issue and I assure him that the Government are very concerned about it. However, we believe that the issue needs to be considered in the round and that other institutions are as deserving as sports clubs and also need to be protected in this regard.

My noble friend Lord Pendry with his sporting credentials and the contribution that he makes to sport in this country referred to entertainment that sports clubs provide. This is a very complex area. It is not unreasonable for the Bill to spell out that something needs to be done. The Government are sympathetic to the thrust of the matter and we appreciate the difficulties that sports clubs face with regard to music licensing. We are aware of the issues involved, having received written responses from them in relation to the consultation exercise that we are carrying out. However, we cannot pre-empt the process by accepting the Bill’s proposal to repeal sections of existing legislation. We are involved in a widespread consultation exercise on this and treat the matter very seriously. We agree that the problems need to be addressed and we look forward to the outcome of the consultation exercise as being one where we can draft legislation covering areas greater than just sports clubs, but which deals with these issues.

On the issue that the noble Lord raised on artificial light nuisance, he is right that modern floodlighting has made a great difference. There was a time when almost any floodlighting was regarded with horror by anyone who neighboured sports facilities, because it was intrusive on the neighbourhood. I recall an occasion not that long ago when I was a Member of Parliament, when the strongest representations were made against what I fondly thought of as one of the most popular development in the area—the enhancement of sports facilities to enable community sport to be enjoyed in the evening by the installation of floodlights—until all those who lived immediately adjacent to the facility took a very different view.

The noble Lord, Lord Addington, is right that technology has moved on and floodlights do not need to be as intrusive as they once were and they create much less of a problem. Nevertheless, we have some concern. We want to ensure that sports facilities can be available to the community for as long as possible and into the evening. This often means the use of floodlights, but we are concerned about neighbourhoods, too. He will recognise that we have to tread with care in this area. The 1990 Act states that floodlights that spill light and adversely affect people in significant ways have to be addressed and mitigated. This is when the nuisance significantly impacts on someone’s reasonable use of their property or adversely affects their health. Sometimes there is just bad lighting, but the Government have to tread with care in these areas. It would be difficult to see how we could exempt all floodlights from the provisions of the 1990 Act. There are sufficient problems with floodlights that require some protection for neighbourhoods. The noble Lord’s Bill asks for something that requires a balance for communities and that is why we are not prepared for there to be a complete change to existing legislation on floodlights.

The noble Lord, Lord Pendry, mentioned other aspects of sports clubs. He and the noble Lord, Lord Glentoran, were right to emphasise that sports clubs depend overwhelmingly on voluntary contributions. There is a very limited number of paid professionals in all but the largest clubs. The problem with voluntary activity is that it may often lack the expertise necessary to advance the best interests of the club. This is certainly the case with regard to planning applications. One of the main reasons why applications are turned down is because applicants are often uninformed about the types of issues they need to address, such as light or noise pollution and disruption to traffic. We are concerned to try and give sports clubs and the volunteers who work for clubs a degree of support and the necessary expertise to handle planning applications in the most effective way. We are conscious that this is an important part of our support for clubs and we are concerned to offer guidance. This summer we will publish guidance that will be of assistance to all volunteers and, indeed, professionals in sports clubs, on how to handle planning applications that seek to increase their facilities.

I have considerable sympathy for the point that the noble Lord, Lord Addington, made in the Bill on funding for volunteer coaches, because they need to develop their expertise and we need more of them. It is a skill. He is also right to emphasise that often the people who are prepared to train for these sport qualifications are the very people who avoid education and training for more traditional activities, and sport offers an opportunity for the enhancement of their abilities.

However, in the allocation of government resources, legislation is bound to prioritise first qualifications, particularly those that bring the greatest economic benefits to the individual and society. That is a very important part of the Government’s skills agenda. It is difficult for us to think in terms of changing the principle of our commitment to the first qualification to help those who have no skills whatever. The moment we change legislation to provide for a second qualification, as the noble Lord suggests, we would open the door to very substantial expenditure. The Government have to prioritise tackling the basic lack of skills in individuals who need them. That is why our skills legislation is defined in those terms. Nevertheless, anyone who receives a means-tested benefit will not have to pay fees for the qualification included in the Bill, and the Learning and Skills Council provides subsidies for course fees in appropriate areas.

The noble Lord, Lord Newby, graphically illustrated the significance of sport, and this debate has shown the enthusiasm of noble Lords on all sides of the House for the basic premise behind this Bill: a concern that community sports clubs are the heartbeat of grassroots sports in this country. They are so important to the Government’s targets of getting more people to play sport, tackling obesity, and improving the skills of the nation through increased exercise. We all share those objectives and, therefore, I am very grateful to the noble Lord, Lord Addington, for promoting the Bill, which has given us a chance to air these crucial issues.

Although he recognised that the Government cannot wholeheartedly support the Bill, I hope that he appreciates that, obviously, the Government are already working on concepts in the Bill. We need to take into account broader issues beyond sports clubs, and some aspects of the Bill involve difficult priorities with regard to government expenditure. However, the noble Lord, Lord Addington, is always a very strong advocate in this House for sport. He is addressing a Government who are concerned to enhance sporting opportunities, and there is no doubt that community sports clubs are essential in relation to those objectives.

My Lords, I thank everybody who took part in the debate. I am particularly glad that my noble friend did, as I was worried that I would be the only person on these Benches. I hope that the noble Lord, Lord Pendry, will not mind my picking out his final comment about trying to make sure that people think about these things in the first place. I think that what he said might add to the Bill, which at the moment, to be perfectly honest, is purely reactive. It is about what has gone wrong. It is especially about what has gone wrong with one good idea from the Government. It tries to bring things together. I fully appreciate the noble Lord’s point that, if we looked at this as a whole, perhaps half these problems would not exist and the other half would have been mitigated to an extent.

As I said, amateur sports clubs are motherhood and apple pie. The Minister talked about priorities, but we all know that this is about how you do your accountancy exercise on where the benefit will come from. The noble Lord also mentioned coaching. If you decided that you would drive this as part of the public health agenda, you would probably say that it was justifiable. In some of his responses, I heard in ringing tones words from the song by Tracy Chapman, “If not now then when?”. We should be aiming towards these things and encouraging them to happen, so that we get there eventually. In the failure to respond, I just heard the tone of government; more particularly, I heard the Treasury Bench rather than the rosette that sits on it.

The noble Baroness, Lady Billingham, joined us slightly late, but I would have mentioned her when I talked about Clause 3, as it deals with something that she brought very clearly to the world’s attention. I thank her for taking part. The right reverend Prelate asked us to stop looking too much in our own backyards and pointed out that the world interconnects. That is surely what a lot of the Bill is about. I thank the noble Lord, Lord Glentoran, for his support, at least for the principle of the Bill.

I feel that the Bill needs a little more thought and that we should bring our minds together to polish it. I would certainly welcome an amendment along the lines suggested by the noble Lord, Lord Pendry, if only to see what the Government would say to it. I will give myself that little indulgence. All I can say is that I hope that the Bill will be given a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.

Online Purchasing of Goods and Services (Age Verification) Bill [HL]

Second Reading

Moved by

My Lords, this Bill would make it a requirement,

“for the providers of goods and services and the providers of specified facilities enabling the purchase of such goods and services to take reasonable steps, in certain circumstances, to establish the age of customers making such purchases”,

online. In simple terms, this short but significant Bill would require online retailers and those who facilitate the sale of goods and services to abide by existing laws in respect of age-restricted goods and services. It would require every retailer who sells age-restricted goods and services over the internet to establish a system that would allow them to determine whether or not a person buying such goods or services met the legal minimum age.

This Bill cuts across government departments. It is about child protection, the law, business, communications and the media. I hope that my noble friend will agree with this and share her concerns with appropriate colleagues across those departments.

The Bill was introduced in another place in 2008, but it ran out of time. It was led by Margaret Moran MP, who has tirelessly campaigned on child protection issues; I salute her efforts. She was supported by colleagues on all sides of the House and I believe that this Bill has support from all sides in both Houses. I also salute the efforts of John Carr and the Children’s Charities’ Coalition on Internet Safety, which has worked with stakeholders to reach some agreement on a way forward. The Bill is a result of these combined efforts. I also wish to acknowledge the efforts of business services for clarifying and promoting the need for age restriction.

The law on the sale of age-restricted goods is clear. What are missing are mechanisms for ensuring that the law is being observed. The provisions of my Bill follow the relevant provisions of the Gambling Act 2005. Prior to this Act, most of the gambling companies simply asked everyone who came to their website to tick a box to confirm that they were over 18. Many young people under 18 of course ticked the box and used online payments for betting. In the Gambling Act, Parliament made it compulsory for all online gambling sites to devise methods of determining the age of everyone who came to the site. Such provisions came into force in 2007 and seem to be working well. Gambling companies have given contracts to specialist companies to carry out verifications for them. Neither the Gambling Act nor my Bill prescribes any particular method of verifying age; we simply call for it.

Trading standards officers have put effort into testing compliance with age-restriction laws, but they are very busy. My Bill would change the situation by putting an obligation on online retailers of age-restricted goods and services to have effective systems to prevent underage sales.

Some may ask whether there is a real problem. Let me go into some detail of why I think that there is a problem. In the second quarter of 1999, only 9 per cent of the UK population—2.2 million people—could access the internet from home. Between 2000 and 2004, internet usage in the UK increased by a massive 126.5 per cent. Today, over 35 million UK residents— 58 per cent—now access the internet. Close to 90 per cent of teenagers have a personal TV, as do 60 per cent of five and six year-olds. We are simply in a new electronic age, with more opportunities and more hazards for children.

Before the internet, the purchase of goods was relatively simple. If there was a question over the age of someone wishing to gamble or buy alcohol, tobacco, solvents, knives, guns and so on, this could be checked by means of identification, and the sale could, one hoped, be refused. Now, these goods and services are available online, as are pornography and drugs. Children can bypass regulations by using a computer.

Self-regulation is not working. Very few online retailers have procedures in place to prevent underage young people buying almost anything over the internet. Members of your Lordships’ House are not, perhaps, very familiar with this computer-driven scenario but, in the recent book Consumer Kids, Ed Mayo and Agnes Nairn explore this world. They point out that,

“a visit to the bedroom of a British child of 11, just starting secondary school, might yield a music system, TV, phone, text messaging, mobile phone, computer, instant messaging, voice over internet protocol, email, games console, DVD, VCR or MP3 player”.

How many of your Lordships have such access to electronic devices? They also point out that, while parents have a responsibility for monitoring their children, companies also have a responsibility for child protection. Currently, the law in respect of age verification says that there must be a testable and effective system to verify age. As long as a business makes a reasonable attempt to verify age, it is acting within the law. In the case of online child pornography, the self-regulation approach has been successful, even without legislation. But legislation is complex.

Public education is necessary, too. For instance, there is little to prevent a parent giving their child access to their credit card. There is also the issue of international sites and there are many payment systems other than by credit card. None of the proof-of-age card schemes has online components at the moment. There is no business case for retailers to lead the way in building a foolproof system. Retailers need a level playing field so that potential customers do not simply move from a compliant business to a non-compliant rival. A code of conduct is needed and DCSF and DCMS need to be involved in investigating possibilities.

Banks can and do provide children, some as young as 11, with Solo or Visa Electron cards, which can be used to make payments on the internet and are accepted on websites. There are also pre-paid or store value cards which can be bought as gifts and given to people of any age or bought over the counter. Such cards allow children to buy goods and services online, which they would not be able to do in normal circumstances.

A newspaper recently worked with a 14 year-old boy to test the system. I know of some parents who have also tested the system and found it wanting. The boy bought a pre-paid card with cash at a local store. Card retailers say that their cards can be sold only to people over the age of 18 but this boy was not questioned about his age. He was able to order porn videos from Amazon, and knives from Tesco that were delivered to him personally and signed for. Oddbins delivered some vodka to his home, and he was able to bet on a football match online.

Only today, Greenwich Council has highlighted in a report how easy it is for young people under 18 to obtain goods and services on the internet. In its example, a 16 year-old volunteer bought knives, age-restricted games and DVDs and alcohol from well known retailers. He used a pre-paid Splash Maestro card and a MasterCard gift card from local retailers. Both were registered with his real date of birth and address. Thirteen out of 16 online retailers sold to him with no further checks; only three asked for age confirmation. He got round the system simply by giving false information and his age was not confirmed. That example is from just one council report—that of Greenwich. How many other councils would find the same results, or worse?

Companies choose to sell online and, in this age of credit difficulties, they may intensify their efforts to target people, including children. Unless companies can be sure that they are selling goods or services legally, they should stop selling online. Many online retailers simply ask customers to tick a box to confirm their age, yet one online company survey found that, of 300 18 to 30 year-olds, 57 per cent lied about their age to gain access to age-restricted goods or services.

There are technological solutions to age verification, and companies must provide online and ID checks in order to screen minors. The law is being got round in the online provision of goods and services to underage people. The Bill would cut out this loophole, protect children and provide reassurance to concerned parents. I beg to move.

My Lords, I am in complete agreement with the objectives of the noble Baroness, Lady Massey, in introducing this Bill. There are very good reasons why age restrictions are applied by law to the sale of various products, and I strongly support all efforts by trading standards, parents, local authorities, the police and the relevant industries to make sure that the law is properly understood, observed and enforced. Growth of online sales in all sectors means that we urgently need to update the regime of good practice and regulation in this respect.

However, I should like to flag up one or two questions about whether the Bill as it stands is the best way of achieving those objectives. It is partly to do with timing and partly to do with the practicalities of good regulation. It may be that all this can be resolved in Committee, or perhaps a different mechanism altogether could be identified for achieving what we all want to see.

Before setting out my concerns in more detail, I should like to give some examples of how the drinks industry has dealt with this issue, because I believe that there are some examples of best practice here that may be helpful when setting standards across the board. Alcohol is one of the best-known products to which a legal minimum purchase age applies. I declare an interest as a former chief executive of the Portman Group, which introduced the very first national proof of age card in 1990. I also currently advise two drinks producers on social responsibility issues.

As I said, as far back as 1990, the leading drinks producers who supported the Portman Group decided that they needed to support the retailers who sold their products in avoiding illegal underage sales, and the proof of age card was launched. Over the years, it was developed to make it more secure and reliable—for example, by acquiring a virtually forge-proof hologram on the face of the card to help retailers to weed out the fake cards. Whenever we became aware of websites offering fake cards based on our design, we took legal action and, in all cases as far as I remember, the relevant internet service provider agreed to take down the offending website.

However good proof of age cards are, they can only ever be as effective as the retailers make them by consistently demanding to see them, but we all know that there have been too many occasions when underage customers have managed to buy alcohol for themselves. This problem is arguably magnified when it comes to online sales. It is not that I think that the alcohol sector is anything like the most problematic when it comes to online sales to underage customers; most children intent on buying alcohol will want it immediately and will not go to the trouble of ordering it over the internet. Nevertheless, the industry has taken this issue very seriously. That is why the Wine and Spirit Trade Association, for example, has initiated a comprehensive system to deter underage sales for all distance-selling operations, which includes sales by phone and mail order as well as over the internet. Most alcohol retailers already have systems in place to ensure that their delivery companies sign over alcoholic drinks products only to adults over 18 at the point of delivery. As we heard from the noble Baroness, Lady Massey, this is not 100 per cent foolproof, although I wonder whether any checking system would be, given young people’s ingenious agility with technology. Some alcohol retailers have a requirement to set up an account before ordering online, or they accept payment only by credit card. Many fine wine businesses conduct transactions only via bank transfers, a mechanism which I understand is not available to under-18s.

In June last year, the WSTA announced a new deal with Business Services, the leading age and identity verification specialists, which will help all its member companies to check online customer age even more efficiently. In case your Lordships should think that this is just a small drop in the ocean and confined to the niche markets of fine wines, which are unlikely to attract underage custom, I should say that the WSTA has more than 300 members, including all the major high-street supermarkets such as Tesco, Sainsbury’s, Asda, Morrisons, Waitrose and the Co-op, as well as the specialist chains such as Threshers and First Quench Retailing.

Therefore, if we were looking only at online underage sales of alcohol, I might be tempted to say that we do not need legislation at all, because enlightened self-interest is already producing the level of self-regulation required to do the job, but I can see that standards of compliance vary considerably from sector to sector and that the culture of social responsibility also varies.

However, I am worried that one of the Bill’s apparent strengths—its flexibility—may also be one of its weaknesses. It creates a duty on retailers to take all reasonable steps to establish the age of the customer, but what those reasonable steps are may well vary from sector to sector, and the Secretary of State will issue advice and guidance. I should like to know whether that is intended to acknowledge and accommodate differences between sectors and products, and therefore allow flexible interpretation of the duty so long as the desired outcome is achieved. For example, online age verification software might be suitable and effective for some businesses but not for others. One of the principles of better regulation, which have long been accepted by the Government, is that regulation should be properly targeted, and I hope that undue burdens will not end up being imposed on some sectors which are already looking after themselves in order to draw others into line.

I am also concerned about consistency and proportionality, two of the other better regulation principles. Again, I believe that this is all resolvable. It is about timing. The Policing and Crime Bill, which is currently awaiting its Report stage in another place before coming to your Lordships’ House, provides for a mandatory code for alcohol retailers which itself includes, in draft, a clause proposing that it be a mandatory condition of all licences that online retailers utilise age verification software. The formal consultation on the code is expected to be published shortly. I do not know whether the Minister can say something about that; but in relation to the Bill, we would obviously need to make sure that we are not creating impractical and unnecessary duplication, or worse still, conflicting duties for retailers.

The other timing issue that I want to mention, which might even contain the seeds for an alternative approach to this problem, is the current consultation on the review of the advertising codes, which ends on 19 June. I am very familiar with these codes and the Advertising Standards Authority which administers them, as I was a member of the ASA council until very recently. The rules currently do not cover e-commerce, but the advertising and media industries are actively looking at whether they could or should extend the remit of the ASA to cover advertising on a company website. If this were to happen, it might well be logical for the ASA to produce guidance on online purchase, which of course would cover all sectors and products, and not just the one on which I have focused in my examples.

I have no idea how likely this is to unfold, but it is a live discussion which should be taken into account when considering the progress of this Bill. If the remit of the advertising code did extend in the way that I have tentatively described, the ASA rather than the Secretary of State might well be the most sensible source of the advice and guidance referred to in Clause 1(3), and it would be a natural extension to the system of co-regulation that is working so well in the advertising field.

This idea is perhaps worth exploring further to see whether it will do the trick or whether it would still leave gaps that would be better filled by legislation. I hope that my comments and suggestions will be taken as constructively as they are intended, and I look forward to hearing the comments both of the Minister and of the noble Baroness, Lady Massey.

My Lords, I have one or two points to make, although many have already been made. As an aside, I think that the spelling of “organisation” should be consistent, as it makes electronic searching easier. Hansard standardises on an “s”, and I think the Bill should as well.

First, I sympathise with the intentions of the people behind the Bill and I am not in favour of allowing anyone to break the law, but the practicalities worry me. Will it work? The great cry is “something must be done”, and I very much associate myself with the comments of my noble friend Lady Coussins about the regulatory burden. We have to be careful about what we inadvertently introduce. I want to say something about the unintended consequences of something like this measure.

We must allow young people to buy things online. Many things are only obtainable that way nowadays—certainly the better bargains. We must not outlaw methods of payment that will completely stop them buying anything. There is the loss of privacy every time one has to give personal details to yet another database. We have to be careful how that information is retained and that we do not have a plethora of databases that could be attacked or used for other purposes at some other point in their lives.

Another unintended consequence is that children will learn how to even better spoof their identity. One suggestion may be the national identity card, but the current design of that scheme will not help small organisations reliably to verify online or over the telephone that the person holding the card is the one to whom it belongs. It does not have that capability.

The second major problem refers to unconstrained powers. Clause 1(2) provides that the Secretary of State can make regulations that could extend to things that are not covered by legal ages or goods and services covered under current laws. The legal duty to comply with these laws already exists, and I do not think that Parliament should micromanage people in how they do these things. We should not be passing laws just to send a message. That is not a good idea. One of the challenges is enforcement. The Home Office currently argues that e-crime is no different from other crime. It has taken a long time to fund a police central e-crime unit, for instance. It would be better to fund people who can do something about the problem rather than passing more laws and regulations and making great statements. We need to have a body to do something about these issues.

My Lords, I thank the noble Baroness, Lady Massey, for and congratulate her on introducing this Private Member’s Bill, and I offer her my support. She talked about the missing mechanisms and ticking boxes. Her Bill ticks a very important box that is currently unticked.

When considering an issue such as this, I ask myself four questions: is the law right; is it reasonable; is it working; and could it be improved? On the first question, the law says that young people should not be able to buy certain products by any route. Is that right? Yes, I believe that it is right, because we must protect young people from making bad decisions until they are old enough to make their own adult decisions. Knives, guns, certain games and DVDs, alcohol, solvents and gambling are all very harmful and can destroy young minds and young lives. While the illegal sale of all these products concerns me—including alcohol, covered by the noble Baroness, Lady Coussins—I believe that the sale of weapons is the most dangerous.

Last December, the Evening Standard conducted a survey that showed that 25 teenagers had been murdered by guns and knives on the streets of London last year and that their average age was only 17. Children as young as 13 were being charged with offences in connection with those murders, and of course we must bear in mind that their lives are being destroyed, too. Among others, the spokesman for the police’s Operation Trident revealed that children are routinely carrying knives and guns for their own protection—they think. However, they do not realise that doing so puts them even more at risk, as fatal events inevitably happen in situations where years ago children would just have had a street fight and gone home with nothing worse than bruises or a cut lip.

Where are children obtaining these weapons? We must tighten up on their availability, as well as tackling the individual and community problems from which these feelings of insecurity and disengagement arise. This Bill would help to do that. It would be just one step. Retailers have quite enough of a large adult market and there is no need to allow a free-for-all with children.

Secondly, is the law reasonable? Yes—there should be a level playing field between high-street and online retailers, otherwise there would be an enormous gaping hole in the system of control that Parliament has put in place. If high-street retailers can be controlled, we must find a way of ensuring that online retailers stay in line without imposing an unwarranted burden. I take the point that the noble Earl, Lord Erroll, made about that.

Thirdly, is it working? Clearly not. As the noble Baroness, Lady Massey, told us, a 16 year-old volunteer at Greenwich Council went online and managed to buy knives, age-restricted games and DVDs, and alcohol from 12 reputable retailers using legitimate forms of payment. Only three of the retailers asked him to confirm his age and he just gave false information that was not checked.

Finally, can the law be improved? That is what this Bill is all about. Is there a model that can show us the way? Yes—the online gambling industry has developed simple systems whereby it takes the reasonable steps that the law requires it to take to ensure that the purchaser is old enough to buy. The framework imposed on it by the Gambling Act 2005 has resulted in a range of suppliers, including, mentioned by the noble Baroness, Lady Massey, offering the industry a service that does not restrict or unduly delay legitimate sales, but is effective in stopping young people taking part in online gambling. The Children’s Charities’ Coalition on Internet Safety, which has briefed your Lordships on this issue, has not heard of any young person breaching the rules since 2007. So it sounds to me as though it is a model that is working and one that we could follow in relation to all the other age-restricted goods. These services can very easily be used by those selling other age-restricted goods, and they should be similarly compelled to use them. A small profit margin for a retailer is not worth the risk of destroying the life and potential of a young person.

It occurs to me also that the banks could play their part. Your Lordships will recall that, following money-laundering legislation, it has become very irksome to open a new bank account. One has to prove in great detail who one is and, in so doing, one has to prove one’s age. When young people open legitimate bank accounts and obtain legitimate cards, by which they are able to pay for online goods, they will have to prove their age. Could not the banks use some sort of code in the long number across the card to indicate that that person is underage, until such time as they become of age, when they would obviously get the same code as everyone else? Some simple mechanism, such as a special code, would reveal that that young person is under 18 when they had to put the long number into the computer to buy the product. That idea occurred to me only yesterday when I was buying something online just after having considered my remarks today on the Bill.

I hope that the Minister will look sympathetically on the Bill proposed by the noble Baroness, Lady Massey, and either allow it safe passage through the House or take up its measures herself and incorporate them into government legislation as soon as possible, before more teenagers die or have their minds warped or their lives destroyed. The internet is a valuable tool for good. It can be used for an enormous amount of learning. It is convenient, and all of us use it all the time, but we must protect children from its dangers. As I have said many times in your Lordships' House, child safeguarding is the responsibility of every one of us, every retailer and every organisation in this country.

My Lords, I join other noble Lords in thanking the noble Baroness, Lady Massey of Darwen, for her efforts in bringing forward the Bill for debate today in your Lordships' House. She spoke with evident passion and conviction on this topic. We agree with her that the problem of children and young people buying items online that ought to be prohibited to them is real. In that the Bill is concerned with purchases online, I should perhaps declare an interest as a substantial shareholder in an IT support company of which the business in that sector, which I had jointly founded, was sold a few years ago. As it happens, my wife is also in the early stages of establishing a business to conduct online retailing—although, I am glad to say, not in the goods contemplated by the Bill. I take a close interest in this area.

It is long established that there are items that should not be available to young persons. No one can possibly find that controversial. I understand that there are about 20 categories of item that are restricted, among them alcohol, tobacco, knives, solvents, and certain DVDs and video games, all of which are restricted for very good reasons to protect children from their various harmful effects. The noble Baroness explained that her Bill is intended to extend the restrictions that are already applied in shops—they require the vendor to ascertain whether a purchaser is old enough legitimately to complete the transaction—to vendors who sell goods and services online. She set out why she feels that that is a necessary step. As she explained, it is in essence because the age verification process online is often little more than clicking on a box, which amounts to a self-declaration of age that no one can really check.

The Bill aims to close that loophole by placing a duty on the online vendor to verify the age of the purchaser of certain categories of goods and services. The vendor would be required to take all reasonable steps to verify the purchaser’s age or would under Clause 2 be subject to prosecution and, on conviction, to a fine of up to the statutory maximum.

We on these Benches absolutely agree that certain goods and services definitely should not be bought by children. We might differ on whether or not a particular film should have an 18 certificate, but that is not the issue here. What matters is that the film has an 18 certificate. It is against the law for children to be sold restricted items, and the law should be enforced; the noble Earl, Lord Erroll, spoke with some strength on this. We should expect the law to apply to online vendors as it does to supermarkets. It is worrying that it should be possible to circumnavigate the age verification requirement simply by dealing online.

As the noble Baroness, Lady Coussins, said, we must consider how proposed laws will work in practice and whether they are enforceable. As I have said, we already have laws in place to prevent minors buying prohibited items. That does not, unfortunately, appear to have resulted in the Government enforcing those laws. My honourable friend in another place James Brokenshire tabled a Question to the Government in June last year on how many times the maximum fine was levied against a licensee for persistently selling alcohol to underage people in each of the last two years. At that stage, unfortunately, the Government did not have the requisite data available, so perhaps the Minister might us help today with up-to-date information. We know that in 2005 and 2006 just eight retailers received the maximum fine of £1,000 for selling alcohol to underage people.

The Opposition also asked, just a few days ago in another place, how many people had received a custodial sentence, on conviction, for selling a knife to a person under the legal age in each of the past 10 years. The answer was one custodial sentence in 1997, and one community sentence in 2006. The total number of convictions in that decade ranged from 32 in 2007 and 51 in 2006 to a very firm zero in 2000. To say that these numbers are not large would be an understatement. They suggest one of two things: either that there is not much of a problem with young people purchasing prohibited goods, or that there is truly abysmal enforcement of the law. I suggest, unfortunately, that the answer is the latter. I raise this to highlight the fact that perhaps we should think deeply about how to sort out the enforcement of our existing laws before we enact too many more. While we on these Benches may have reservations about the detail—we would need to think further whether the Bill really would solve the problem which we all wish to see stopped—we agree with the principle behind the Bill.

The Bill does two things; it requires the Secretary of State to come up with a proscribed list, and it requires retailers to take steps to enforce it. I am puzzled by Clause 1(2), which seems to allow the Secretary of State to include on the proscribed list items that are not age-restricted by law. I am not quite sure that I understand why the rules should be more onerous for online trading than for offline trading. I share the concerns of the noble Baroness, Lady Coussins, about the “reasonable steps” requirements on vendors. There is, as yet, no suggestion about what those steps might be or how they will be judged to be reasonable, except by placing a duty on the Secretary of State to publish advice annually. That provision is certainly sensible, but unless we have a better idea of what such advice might be, I am cautious lest we put unbearable burdens on retailers. Various age verification programmes are, of course, already in use on the internet. One of the recommendations of the Byron review, which was published by the Department for Children, Schools and Families last year, was to ensure that the online industry continues to explore good practice in age verification mechanisms. I will be interested to hear from the Minister what progress the Government have made on this front. We must, however, balance the need to protect children with the common-sense position that if the expectations on retailers are so demanding that they are unachievable, there must be a risk that they will simply give up trying.

Clause 1(1) also requires retailers to take steps to prevent minors purchasing “or otherwise obtaining” goods. We need to understand how that might be achieved. It seems quite a broad requirement. The noble Baroness, Lady Massey, mentioned the Gambling Act 2005 as a template to be followed under which online users must provide certain pieces of information before engaging in gambling online. I am interested in the possibilities that this might offer in the area of goods and services, although it may be that gambling is relatively easily defined. Therefore, it may be more straightforward to apply the provisions there than in the much broader area of goods and services. Would it be practical or desirable for someone to have to provide various personal data—perhaps a credit record—simply to buy a set of kitchen knives for someone from an online wedding list? I do not know the answer, but there should be further consideration.

The noble Baroness, Lady Coussins, referred to developments of guidance by the ASA, which is very encouraging and very relevant. We wait with interest to hear from the Minister what the Government are doing in this area. Of course, it should be possible to achieve considerably more even without further legislation. No system that we devise for online retailing will be foolproof, just as it is not foolproof on the high street. However, I emphasise that my reservations do not mean that we disagree with the principle behind the Bill. The noble Baroness has raised an important issue, which needs to be addressed.

My Lords, I join other noble Lords in thanking my noble friend Lady Massey for her commitment and her care, and for the opportunity to discuss this important subject. I assure her that this Government completely share her objectives and that her concerns will be brought to the attention of all relevant departments. She made the point well that this is a cross-departmental issue.

I agree with the noble Baroness, Lady Walmsley, who made one of the few statements today about the importance of the internet and e-commerce to the economy, the way we live and the way we operate our lives in terms of offering choice, convenience and greater participation for everyone in society. Since 2002, for example, internet sales have grown from 19 billion to nearly 163 billion a year. Of course, we want these innovative industries to flourish, but the primary importance given by this Government is to the protection of children. We agree—it has always been the Government’s position—with the statement made by the noble Lord, Lord De Mauley, that activities deemed to be illegal offline are also illegal online, which includes the selling of restricted goods and services to underage customers.

Existing law requires all retailers and providers of goods to verify the age of customers buying restricted items, such as alcohol or other goods which have been mentioned today, or using restricted services, such as gambling. As noble Lords have pointed out, because the law does not stipulate how retailers and service providers must verify the age of their customers, they are free to adopt a variety of methods.

Many noble Lords referred to gambling, and it is interesting to note that this approach has been shown to work. The Gambling Act 2005 obliged all gambling companies to ensure that under-18s could not access their services. This brought them in line with other retailers offering age-restricted goods and services. The Act did not draw any distinction between online and offline gambling, nor did it stipulate any particular method for verifying ages. But it has succeeded due to the industry’s own efforts, which the Children’s Charities’ Coalition on Internet Safety acknowledges. Its briefing paper states:

“We are unaware of any cases where a young person has breached the rules since September 2007”.

Just as the gambling industry has accepted its responsibilities, so should, and I believe do, the majority of retailers. The focus therefore has to be on the enforcement in practice of existing law. Some face-to-face retailers ask for proof of age such as a birth certificate or passport, while others will assess it through a simple visual check. But these methods are not failsafe and will not prevent underage consumers from accessing restricted goods and services in every case. That is just as true for online sales as it is for those made offline.

However, responsible online retailers are already making real efforts to ensure they are not selling goods and services to underage consumers and we are working closely with them to prevent underage knife sales of all kinds. As a result, a number of major retailers do not sell knives online and we are encouraging other retailers to adopt this approach. We are currently working with 21 retailers who have signed up to a six-point agreement. The majority of them have removed knives for sale from their websites, and we are looking at several options, including more robust systems for age verification, for those retailers who do sell knives. Of course, retailers who continue to sell knives to children can expect to receive the strongest penalties, including up to six months in prison.

The British Retail Consortium, meanwhile, recommends that deliveries of age-restricted goods are made directly into the hands of the customer so that their age can be checked at that point. Online service providers are also employing a number of methods to deny access to children who are underage or who have misrepresented their age to get into a restricted website. For example, some will send a cookie to the computer to prevent the user from attempting to re-register with false age details. The noble Baroness, Lady Walmsley, mentioned a potential code for credit cards. Some providers currently charge a nominal fee to the credit card used when registering for their service. The fee is subsequently refunded, but it shows up on the credit card statement and thereby alerts the parent to their child’s activities. That might not be foolproof if the child can get an alternative code, but it may be a better method to pursue. In addition, an increasing number of providers are offering free downloadable software enabling parents to monitor and, where appropriate, restrict the services their children can access.

I fully understand the concerns that my noble friend Lady Massey seeks to address. We share her objectives and this Bill reinforces our determination to protect children using the internet. But I hope I have been able to illustrate that the majority of online retailers and service providers take their responsibilities seriously. Indeed, the noble Baroness, Lady Coussins, intimated that she has relevant evidence in certain sectors, but as she also said, there is no perfect solution. However, I shall write to the noble Baroness and the noble Lord, Lord De Mauley, in response to the specific questions they put to me.

Reference was made in the debate to Tanya Byron’s review of child internet safety which reported last year, and as a result we have set up the UK Council for Child Internet Safety. This forum, which reports directly to the Prime Minister, has brought together Government, industry and other stakeholders to draw up an online safety strategy for children and families. In June, my noble friend Lord Carter will bring forward proposals to improve consumer safety online when we publish the Digital Britain report.

For the reasons that I have outlined, I must express reservations about the new regulations being called for in the Bill. We do not think that they would address the difficult issues in practical terms and would not lead to a foolproof means of age verification. We believe that the answer lies not in introducing new legislation but in more strictly enforcing the existing provisions. Trading standards officers are well aware of the issue and are making concerted efforts to tackle it. Indeed, there is a risk that having separate rules for online transactions could create confusion for retailers, consumers and the authorities, thus making enforcement more difficult. Here I agree with the noble Earl, Lord Erroll, and the noble Lord, Lord De Mauley, about the imposition of regulatory burdens and the risk of potential unintended consequences and a lot of practical difficulties. While we are sympathetic to the aims of my noble friend’s Bill, the law outlawing the sale of restricted goods and services to underage consumers is in place for good reason, and we believe that the focus should be placed on rigorous enforcement of the clear and comprehensive rules that are already in place.

My Lords, as usual for your Lordships’ House, this has been an excellent debate about children and many interesting suggestions have been made. For me, the bottom line is that we must protect children and society from consequences that they may not be able to respond to themselves.

I thank all noble Lords who have taken part. The noble Baroness, Lady Coussins, raised many interesting issues. Alcohol is a huge problem. Children are buying it online and I do not think that we have enough safeguards established to deter youngsters, who must be protected. That is what parents and society want. She asked what are responsible steps and what are the ways forward. There is room for discussion on that. The law is clearly not working and we should think again.

The noble Earl, Lord Erroll, raised the issue of practicalities and the regulatory burden—the Minister also raised that—and the unintended consequences. Of course people should be allowed to buy online and of course laws exist, but the current laws are simply too easy to break. The noble Baroness, Lady Walmsley, and I have stood shoulder to shoulder many times talking about children’s protection and children’s rights. She showed her concern about knives. I agree with her. She also said that the Bill is just one step forward on protecting children. As she said, there is a gaping hole in the system of control. We need action. Local councils such as Greenwich, which I and several others cited, are very concerned about this. I think that more of them will express their concerns.

I am so glad that the noble Lord, Lord De Mauley, spoke, because I did not know that he had all this expertise. Having now found that out, I think he could be very useful, as could his wife, in delivering some clarity on the online situation. As he pointed out, young people are buying goods and services. He agrees with the Bill in principle, but he would like more detail and discussion on certain aspects.

I thank the Minister for her detailed reply. I am glad that she will share the concerns across the relevant government departments. It is a cross-government issue, as I said earlier. I repeat that the law is not working here. It is being got round. The bottom line is the protection of children, who are not being protected by existing measures. I now ask the House to give the Bill a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.

House adjourned at 12.53 pm.