Monday, 29 June 2009.
Arrangement of Business
Before the Minister moves that the first statutory instrument be considered, could I remind noble Lords that in the case of the statutory instrument the Motion before the Committee will be that the Committee do consider the statutory instrument in question? I should perhaps make clear that the Motion to approve the statutory instrument will be moved in the Chamber in the usual way. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2009
Considered in Grand Committee
The purpose of this order is to extend the scope of FSA regulation to cover reclaim funds as part of the framework for a UK dormant accounts scheme. I will begin by setting out the purpose and operation of the scheme, before turning to the draft order before us. The primary legislative framework for this scheme was established by the Dormant Bank and Building Society Accounts Act, which received Royal Assent on 26 November 2008. The Act was widely supported during its passage through both Houses. The scheme was strengthened greatly by the contributions made by other noble Lords during debates on the Act.
The UK dormant accounts scheme allows banks and building societies to make funds in dormant accounts available for distribution to the benefit of the community, while ensuring that the right of account holders to reclaim their money is protected. Banks and building societies are committed to reuniting account holders with their dormant accounts. Where reuniting is unsuccessful and an account meets the statutory definition of dormancy, a bank or building society may transfer the balance of that account to a reclaim fund. Following a transfer, the bank or building society’s liability to repay the account holder is extinguished. Instead, the customer gains a legally enforceable right to repayment from the reclaim fund. Money that the reclaim fund does not require to meet reclaims or cover its own reasonable costs will then be passed on for reinvestment in society. The Big Lottery Fund will distribute the money for social or environmental purposes. Finally, there is an optional scheme for small and locally based institutions, allowing them to focus on the needs of their communities, in which they often play such an important role.
Since the purpose of this draft order is to extend the scope of FSA regulation to cover reclaim funds, I turn now to explain how we envisage the reclaim fund will operate, according to requirements set out in legislation. The Act itself sets out what a reclaim fund is. A reclaim fund must be a company incorporated under the Companies Act 2006. The industry is committed to leading on selecting or setting up a reclaim fund. The reclaim fund, once established, will be entirely independent of government, the banking industry and the distribution mechanism. The Act also requires the activities of a reclaim fund to be restricted by its articles of association to: the meeting of repayment claims; the management of dormant account funds to meet whatever repayment claims it is prudent to anticipate; and the transfer of money to the Big Lottery Fund or to any other bodies charged with distribution of the unclaimed funds for social or for environmental purposes.
The Government’s approach to developing the scheme has focused on three key principles: first, consumer protection, by ensuring an ongoing legal right for account holders to reclaim their money at any time; secondly, reuniting, by encouraging account holders to be reunited with the assets that are rightfully theirs; and thirdly, better regulation, by adopting a proportionate regulatory approach. Although the draft order before us is largely technical in nature, it contributes significantly to these objectives by extending the scope of FSA regulation to include reclaim funds. FSA regulation will help to ensure that the reclaim fund manages dormant account funds prudently and can meet repayment risk, and that consumers continue to receive the same protections should their dormant funds be transferred into the scheme.
The FSA has already consulted separately on its proposals for regulating reclaim funds. In order for the FSA to bring forward its final rules and regulations, the Government must legislate to enable the FSA to regulate reclaim funds, and that is the purpose of the order. In preparation for this secondary legislation, the Act itself amended the Financial Services and Markets Act 2000 to enable the activities of a reclaim fund to be specified in secondary legislation as regulated activities, and thus for a reclaim fund to be regulated by the FSA.
Following the passage of the Bill, the Government consulted on consequential secondary legislation. All respondents to that consultation firmly supported the Government’s proposals for secondary legislation, including the order. The Government now wish to pass the order to allow the FSA to oversee the activities of a reclaim fund by amending the regulated activities order of the Financial Services and Markets Act 2000 to specify as regulated activities the meeting of repayment claims by a reclaim fund and the management of dormant account funds by a reclaim fund.
In addition to the benefits I have already mentioned, FSA regulation will ensure that consumers have access to the Financial Services Compensation Scheme in the unlikely event that the reclaim fund becomes insolvent. In the event of any disputes, consumers would, subject to the usual qualifying conditions, have recourse to the Financial Ombudsman Service and could resort ultimately to the courts to enforce their legal rights.
In conclusion, I emphasise that the order was entirely anticipated during the passage of the Dormant Bank and Building Society Accounts Bill. It is a technical but necessary part of the scheme to ensure that the reclaim fund is properly regulated. The principle of consumer protection that motivates this instrument is common to us all and has been agreed in previous debates on the scheme. Should concerns about any aspect of its operation remain, the Government have committed to undertake a post-implementation review of the UK dormant accounts scheme within three years of the date when a reclaim fund is first authorised.
I hope that noble Lords will agree with this order and I beg to move.
I thank the Minister for introducing the order, which was of course anticipated when we passed the dormant accounts Bill, and we have no problem with it. However, the order provides him with an opportunity to update us on the progress of the dormant accounts scheme.
The order is drafted, as the Act is, in terms of reclaim funds in the plural, but it was the intention of the Bill at the time that there would be one reclaim fund. The Minister’s opening remarks effectively repeated that. Will there be one reclaim fund? If so, what progress has been made on forming it—that is to say, when will we see one in existence?
More importantly, when will the reclaim fund start to gather in money from the banks and building societies? The whole purpose of the Act was to liberate money from the dormant accounts held in the banks’ balance sheets and put it to good use. When can we expect money to start to flow through the system? Do the Government have any up-to-date information on the size of the flows of money to be expected? A number of estimates were provided during the Bill’s passage through both Houses of Parliament, with some wide variations between those put forward by the BBA, the Building Societies Association and some other parties.
Of course, some of us suspected that the Government engineered the timing of the dormant accounts scheme to align with the timing of the next general election. The Minister might like to say whether the Prime Minister is on track to achieve his aim.
I am grateful to the Minister for setting out the provisions of the order and, like the noble Baroness, we are content with it. I, too, have one or two questions about how it will work in practice. Picking up the point made by the noble Baroness, it is now six months since the Bill received Royal Assent and, as far as I can tell from the documentation, which is silent on the point, no real progress has been made in establishing a reclaim fund. Some had doubts about how enthusiastic the banks really were about that initiative. One can imagine that, especially at the moment, they would prefer to hang on to as much money as they can for as long as possible. Anything that the Minister can say about the timetable for the establishment of the reclaim fund will be extremely welcome.
One provision of the regulation is that the Financial Services Compensation Scheme will come into play in the unlikely event of the reclaim fund becoming insolvent. When we discussed that as the Bill was passing, we raised that possibility. The Government's response at that point was that the fund could borrow to make up any short-term shortfall—because, of course, there will be a constant flow of funds into the reclaim fund. Even if the reclaim fund had been overgenerous in passing money across to the lottery, it would be naturally replenishing its resources over a period, as more funding came in. I wonder why we need that belt-and-braces approach. I have a sense that if we reached the situation where the Financial Services Compensation Scheme was called into play, the whole basis of the scheme would be so fatally undermined that we would have almost to start again. I thought that the way that the reclaim fund had been established meant that that just was not a possibility and that it could borrow to deal with any short-term shortfall.
I greatly enjoyed reading the assessment of the effect of the fund, because on virtually every piece of information that could have been given, the answer is either “no” or “not applicable”. However, there was some information about costs, and I would be grateful if the Minister could explain a couple of things. It states that,
“the FSA proposes to meet its set up costs through an increase of 0.4% in the annual fees paid by banks and building societies eligible to participate in the scheme”.
How much is that? It seems to me that the cost to the FSA of setting up its regulatory function under the order should be extremely small. I do not know what 0.4 per cent amounts to be, but it could be quite a significant sum. The FSA then plans to charge a £25,000 authorisation fee on top of that. I wonder why that is necessary if it is meeting the costs through the levy. It then estimates incremental compliance costs as being up to 5 per cent of the total cost of running the scheme. That seems to me to be quite a lot, because this is a simple scheme. Anything that the Minister could say to explain those costs would be gratefully received.
However, subject to those comments we support the order.
On the timetable, the scheme is conditional on this secondary legislation taking effect. If that is achieved, the FSA needs to bring forward details of its proportional, prudential framework for the scheme. The reclaim fund will need to apply to the FSA for authorisation once the necessary legislation and FSA rules are in place. We are looking for the scheme to be operational as soon as possible following authorisation of a reclaim fund. The Government hope that the scheme will be launched as soon as possible this year. From that, the noble Baroness should draw no conclusions as to the timing of a general election; the two matters are clearly totally unrelated.
When will the fund get money? The industry is publicly committed to the scheme. As soon as the reclaim fund is set up and authorised by the FSA, we expect dormant accounts to run through the scheme. Great preparation has been carried out by the industry in that respect. The noble Baroness also asked whether there could be more than one reclaim fund. In theory there could be more than one, but we do not envisage it.
The industry’s willingness throughout—I include here the building societies and the banks—to support this initiative has been very clear. I have engaged frequently with leaders of the industry at chief executive and chief operations officer level to discuss their support for the scheme. There is still important work to be done in establishing the reclaim fund and I shall be emphasising tomorrow at the British Bankers’ Association annual conference the importance that society will place on banks being seen to play an effective role in supporting community programmes and initiatives, if not least of all in response to and recognition of the significant support that the banking industry has received from the state over the past 12 months.
The amount of money that will flow into the scheme is still a matter for considerable conjecture and I am not sure that a great deal can be added to earlier estimates given when the House discussed the matter. The figure given at that time was somewhere north of £400 million but, quite frankly, it could be a great deal more. We shall simply have to wait and see. However, whatever happens, it is money that will no longer remain dormant in the deposits of banks but will be used for good purposes as Parliament intends.
The noble Lord, Lord Newby, inquired about regulation costs. The FSA levies are a matter for the FSA, but I shall pass on the noble Lord’s comments to the FSA and add my own emphasis by saying that this is a simple scheme which should therefore be reflected in a low cost of regulation and supervision, and that the FSA can make its own contribution to ensuring that the purpose of the Act is recognised by the way that it supports and supervises the fund.
The FSA has already consulted on the draft rules for its prudential regulatory framework for the reclaim fund. Publication of its final rules and regulations, as well as setting up a reclaim fund, is contingent on passing this secondary legislation. The Government believe that the FSA will publish its final rules and regulations shortly. It is already available to engage with candidate reclaim funds on a pre-application basis in order to expedite the process of setting up a UK dormant accounts scheme once the legislative process is completed.
The BBA and BSA are committed to leading on selecting a reclaim fund. Overall, the Government intend that a UK dormant accounts scheme should be operational as soon as possible. I believe that we all eagerly anticipate the launch of a UK dormant accounts scheme and I commend the order to the Committee.
Banking Act 2009 (Restriction of Partial Property Transfers) (Amendment) Order 2009
Considered in Grand Committee
Partial property transfers are an essential part of the authorities’ toolkit for resolving failing institutions under the Banking Act 2009. The Government recognise that unless effective safeguards are in place, partial property transfers have the potential to affect the contractual interests of counterparties and creditors of UK banks, with the possibility of negative consequences for the market generally. To this end, when the Banking Act was passed in February 2009, the Government put in place safeguards to protect contracts relevant for regulatory capital purposes from disruption that might arise as a result of the possibility of partial property transfers.
Noble Lords may recall that during the debate on the safeguard orders I committed that the Government would continue to review the need for amendments to the safeguards order to further enhance legal certainty, given the comments of market stakeholders. Following the constructive input of the Banking Liaison Panel and in particular its subgroup on safeguards, the amendments that we are debating build on the protections already in place and in the Government’s opinion help to ensure legal certainty for the parties involved in a partial transfer.
In its advice to the Treasury, the BLP’s safeguard subgroup made five recommendations which the Government have studied carefully. On four of these we have been able to respond positively, and the results are reflected in the amendments in front of the Committee. I should like to explain why we have not taken on board the fifth recommendation.
Noble Lords may recall that the Government have exempted FSCS-protected deposits from the protection of set-off and netting arrangements. This particular carve-out from the set-off and netting safeguard allows the authorities to transfer, for example, the retail deposit book of a failing institution to a solvent new institution in a short timeframe, which is important to allow the authorities to provide continuity of service and protect public confidence. Small companies are included in the definition of FSCS-protected deposits and therefore are not afforded the protection for their set-off and netting arrangements.
The fifth recommendation was to extend set-off and netting protection to small companies that are part of larger groups. The BLP subgroup on safeguards discussed and proposed a way for this to be done, through providing for protection where banks had placed an identifier on set-off and netting arrangements with small companies that are part of larger groups. If such identifiers existed, the authorities would have to protect these arrangements. However, the authorities were not confident that an amendment to the safeguard order along these lines would be workable and, further, market participants themselves were not completely confident that such identifiers could be delivered.
Sitting suspended for a Division in the House.
The Government have therefore proposed that the BLP should continue to work on this matter over the next year, with the aim of treating small companies that are part of large groups in the safeguards order in a manner that will address industry concerns while ensuring that the authorities can resolve a failing bank or building society effectively. The Government will continue to discuss with the panel how we can progress this issue.
I turn to the substantive provisions of the order. The amendments ensure that, in establishing which transactions fall under the protection of the safeguards order, the order covers to the full the range of transaction types that can be or are typically included in set-off or netting arrangements. This was a concern following the laying of the safeguards order, and I told the House on 16 March that the BLP would be looking at the definition of relevant financial instruments in the order. This amendment is the result of that consultation.
As we are all aware, this is a complex and evolving field. We are confident, though, that the definition of “relevant financial instrument” proposed in these amendments is comprehensive and future-proofed as far as possible. Our feedback from industry is that it is content with the new drafting.
The amendments also clarify the legal intention that the inclusion of any excluded right or liability under a set-off and netting arrangement does not exclude the entire arrangement from protection under the safeguards order. This is the so-called “bad apple” problem arising from the presence of the word “solely” in the original order. Ministers have given assurances that the term “relates solely to” is intended to prevent market participants wrapping up service contracts with financial contracts, thereby gaining the protection of the order for their service contracts. However, there is a difference in legal interpretation over the effect of this drafting, and some industry participants took quite a different view of the effect: that the inclusion of any excluded right or liability under a set-off and netting arrangement excludes the entire arrangement from the order’s protection.
It was never the Government’s policy intention that the presence of excluded rights or liabilities under a wider set-off and netting arrangement should render that entire arrangement unprotected by the order. I make it clear that, in the Government’s view, the drafting of the safeguards order did not have this legal effect. However, as there are differing legal views on this, the Government have responded to the concerns and removed “solely”. Our feedback from industry is that it is happy with the result.
There is also an amendment in respect of Section 34(7) of the Banking Act 2009, which deals with trusts. That section provides that where a property transfer instrument makes provision about property held on trust, it may also make provision about the terms on which the property is to be held and how any powers, provisions or liabilities are to be exercised after the transfer. The purpose of the section is to ensure that a transfer of property is able to provide certainty of outcome and speed of execution in relation to property held on trust by or for a banking institution, in spite of any restrictions that might otherwise exist.
The panel was concerned that trust arrangements for any bond held by a failing bank or building society could, on the face of the legislation, be modified or terminated irrespective of the consequences for the transaction, bond holders or any other interested parties. The amendment makes clear that a partial property transfer can remove or alter the terms of a trust only to the extent necessary or expedient to transfer the legal or beneficial interest or any powers, rights or obligations of the banking institution in the trust property to the transferee. It cannot remove or alter the terms of the trust for any other purpose.
The authorities can, of course, make different provision for different cases and circumstances. The new drafting does not prevent the authorities making different provision for different trusts. However, the authorities cannot remove or alter the terms of a trust to cherry-pick parts of the banking institution’s legal or beneficial interest or powers, rights or obligations, and the new drafting does not give rise to doubt about this point.
Finally, the order excludes from set-off and netting protection all publicly tradable securities that are not referred to or described in a netting or set-off arrangement, while retaining the protection for securities that parties expressly rely on for netting purposes or are referred to or described in such an arrangement. This benefits all parties involved in a partial transfer. The authorities will be able to transfer the securities all parties believe should be transferred without the risk of inadvertently breaching the safeguards in so doing.
These amendments meet the vast majority of the market’s concerns, and demonstrate that the Government are committed to working with the industry to ensure that the regime is as effective as possible. I would like to put on record the Government’s thanks to the Banking Liaison Panel, and in particular the panel’s subgroup on safeguards, for their very hard work and thorough advice. I hope that noble Lords will agree with this order, and I beg to move.
I thank the Minister for introducing the order, which we are happy to support. In large measure it responds to the points that I made during the debate on the initial partial property transfer order back in March, following briefing from the BBA, LIBA and ISDA. In March, the Minister committed to bringing forward an amending order, if that proved desirable, before the Summer Recess on the basis of the work to be carried out by the Banking Liaison Panel. I congratulate the Minister on achieving that.
When we debated the Banking Act 2009 orders in March, I raised the point that the consultation, while greatly enhanced by the effective working of the Banking Liaison Panel, had effectively disappeared behind closed doors. The Explanatory Memorandum to the order states at paragraph 8.1:
“The Treasury has sought formal advice from the BLP subgroup. The advice will be published on the Treasury’s website in due course”.
That made me think that the terms of that advice would not be available to your Lordships’ House in considering this order. I was pleasantly surprised to find that the advice was on the website when I researched it at the weekend, but that raised further issues. I am not sure exactly on which day the draft order was laid before the House, but it appears in the House of Lords Minute on 11 June. The advice from the liaison panel subgroup, however, is dated 17 June. This suggests that the Treasury had no intention of taking formal advice from the subgroup. Will the Minister say how we can be confident that the processes are robust and not simply window dressing to allow the Treasury to carry on doing what it wants to do?
The Explanatory Notes also give the impression that the only issue between the subgroup and the Treasury is that of the small companies that are a part of larger groups that have set-off or netting arrangements. The Minister addressed that, but in fact the formal advice shows that the subgroup offered drafts of alterations to the original partial property safeguards order that were not adopted by the Treasury. This applies in particular to the widening of the definitions of transactions included in netting and set-off arrangements.
Neither the Treasury in the Explanatory Memorandum nor the Minister today has explained how the Treasury’s own drafting, which is very much less extensive than the drafting proposed by the subgroup, meets all the issues which the subgroup identified as giving rise to concerns. Will the Minister put on record why the Treasury rejected the subgroup’s advice so that we can be clear about what happened?
The biggest difference—the Minister has referred to this—between the subgroup and the Treasury is the issue of small companies, as I have mentioned. The Minister said that it was the subgroup’s fifth recommendation. In fact, it is its first recommendation. Indeed, the subgroup devotes nearly half its formal advice to the issue of small companies. Paragraph 17 of the advice states:
“The BLP subgroup believes that the case for excluding from the carve-out small companies that are part of a larger group is compelling. Extending protection to the small companies in question would reflect the commercial decisions taken by the companies themselves in the best interests of their company. We do not think that extending the protection to these small companies would weaken the attainment of any SRR objective”.
That view is diametrically opposed to that of the Treasury, which has simply given its version of the practical difficulties that were rejected by the subgroup in its formal advice. Furthermore, the subgroup raised several other issues around small companies, such as the position of special purpose vehicles, which the Treasury, and indeed the Minister, seems to have ignored completely.
I note that the Treasury will ask the BLP to continue to consider this point but, given that the subgroup’s view in its formal advice is unequivocal, how does the Minister see this proceeding? Is there a timetable for this, or is the long grass about to sprout up around it?
I also note that the Treasury’s website still has no documentation in the form of minutes or anything else about the work of the Banking Liaison Panel itself. Those of us of a cynical disposition are well aware that bringing critics within the tent is a sure way of neutralising them. The Government refused to impose a requirement on the panel to publish its minutes, but we were given various assurances that something would be available. Either the panel is doing nothing, which I doubt, or it is conspiring with the Treasury to keep Parliament and the public unaware of its deliberations. Can the Minister say whether there is any genuine desire to achieve transparency in the work of the Banking Liaison Panel?
The issues that are covered by this extremely arcane statutory instrument were among the most vigorously debated and contested when the Banking Bill was going through Parliament. The question of set-off and netting at one point was of huge concern to the banking industry but, during the passage of the Bill and subsequently, the work of the Banking Liaison Panel has largely resolved those differences.
As the Minister has said, this instrument takes forward the work that was covered by the earlier instrument in March and deals with many of the outstanding points. To the extent that there is a remaining issue around small companies, I, at least, am reassured by what the Minister said about the ongoing work of the panel in trying to resolve that issue.
Although I have some sympathy with the noble Baroness, and naturally share some of her cynicism about the attitude of the Treasury towards openness, the Banking Liaison Panel process has been remarkably effective in dealing with intricate issues which I suspect very few officials—and certainly very few politicians, whether in government or opposition—understood at the start of the process. We therefore support the order and hope that the panel will continue its work to resolve the one outstanding issue that has been raised today.
Perhaps I may make a brief intervention as a Member of the Merits Committee. I reinforce what my noble friend Lady Noakes said on the matter of the advice being published on the Treasury’s website. On the morning of the meeting, if I remember right—it might have been the day before—we asked whether we would be able to see this advice on the website because it did not look as though we would. In fact, we were not, although it did come on the day that the Merits Committee met.
The Treasury assumes—one understands why—a level of understanding among the people who look at statutory instruments in the Merits Committee that they may not always have. You could argue that from time to time the Treasury takes advantage of the fact that the chances are that the members of the committee are not as sophisticated as it is itself and minimises the explanation it gives us, rather than thinking of how to make it clear to the average Member of the House of Lords.
I open by noting that the partial property transfers are an essential part of the authority’s toolkit for resolving failing institutions, and it is important for legal certainty and market confidence that the safeguard order provides adequate protection to the use of these powers.
The noble Baroness asked about timing, as did the noble Viscount, Lord Eccles. The Government have been consulting with the BLP on an ongoing basis since the first meeting shortly after the Act received Royal Assent. I agree with the noble Lord, Lord Newby, that the BLP has made significant progress in resolving what we all recognise to be technically complex and challenging issues. The panel’s advice to the Treasury is the formal output of that consultation.
The Government’s decisions were made on the basis of that advice and they have taken on the overwhelming majority of the panel’s recommendations in the amendments that have been tabled. The order was laid as soon as the substantive policy discussions with the BLP were completed. This was necessary to allow Parliament time to debate and agree the order before the Summer Recess in line with the BLP’s wishes and ministerial commitments. The advice itself was published shortly afterwards and is now of course available on the Treasury website.
I note the comments of the noble Viscount, Lord Eccles, about the explanations that are given in the papers that go to the Merits Committee. I shall communicate those comments to my colleagues in the Treasury who are responsible for these matters and ask them to bear in mind the need to recognise that, in preparing papers which of necessity deal with highly complex issues, we should make every effort to provide an enlightening context and explanation.
A question was raised by the noble Baroness about special purpose vehicles. The issue of whether SPVs should receive special protection is important. As the panel notes in its advice, it seems counterintuitive that SPVs should be treated as small companies for the purpose of the safeguards order. However, this is a practical question of whether it is possible to identify SPVs quickly enough in the timeframe of a resolution, which will usually of necessity take place over a very short period—frequently over a weekend. We are taking this work forward in the context of the small companies carve-out and we will no doubt hear more about that in due course.
The panel meets quarterly and the minutes will be approved at the next BLP meeting, at which point they will be published. There is a genuine desire on our part that there should be transparency about the process of the work of the BLP. Certainly there is no ground for suggesting that the BLP either is doing nothing, as it has evidently done a great deal, or is somehow conspiring with the Government, save that it is conspiring with the Government to ensure that we have the best possible arrangements in place to deal with the type of situation that this legislation is designed to handle.
The Treasury has not rejected the subgroup advice in respect of the small companies carve-out. It is completely appropriate for Treasury legal advisers to draft the order as necessary. BLP members include trade body representatives and commercial lawyers, who have brought a considerable expertise in a number of areas, but legislative drafting is not something that we look to the BLP to do. The key point is that the Treasury’s drafting has the desired effect and reflects the substance of the panel’s requested changes to the definition of “relevant financial instrument”.
Perhaps I may reply also to the noble Viscount. I am sorry that the BLP was only received on the day of the Merits Committee meeting. I can understand how frustrating that would have been for the committee. I will make every effort—inasmuch as it is within my power—to invite colleagues to arrange things in a better way in the future. I commend this order to the Committee.
Transfer of Functions of the Consumer Credit Appeals Tribunal Order 2009
Considered in Grand Committee
I shall speak also to the draft Transfer of Functions (Estate Agents Appeals and Additional Scheduled Tribunal) Order 2009, the draft Transfer of Functions (Transport Tribunal and Appeal Panel) Order 2009 and the draft Transfer of Functions of the Charity Tribunal Order 2009.
These orders transfer the entire jurisdictions of the consumer credit appeals tribunal, the estate agents appeal panel, the charity tribunal and most of the jurisdiction of the transport tribunal into the first-tier tribunal and upper tribunal created by the Tribunals, Courts and Enforcement Act 2007. This is a further phase in a series of transfers.
The need to re-examine the tribunals system was first set out in Sir Andrew Leggatt’s review Tribunals for Users—One System, One Service. Accepting his proposals, the Government created the Tribunals Service in 2006 and this was followed by the Tribunals, Courts and Enforcement Act 2007. It provided for the first-tier tribunal and upper tribunal, creating a unified appeal structure.
In November 2008, three first-tier chambers commenced work: the social entitlement chamber, the health, education and social care chamber and the war pensions and Armed Forces compensation chamber. The administrative appeals chamber of the upper tribunal was also established. In April 2009 the first-tier tribunal tax chamber and the upper tribunal finance and tax chamber were established, and this was followed by the creation of the upper tribunal lands chamber this month.
These transfer orders provide for the first transfers into the new general regulatory chamber of the first-tier tribunal, which will be established on 1 September 2009. Part of the jurisdiction of the transport tribunal will also transfer to the upper tribunal administrative appeals chamber. The jurisdiction of the charity tribunal will transfer in part to the finance and tax chamber of the upper tribunal, to be renamed the “tax and chancery chamber” to reflect its new remit.
A separate order, which is subject to the negative resolution procedure, will amend the existing chambers order to establish the general regulatory chamber and assign functions to the chambers as appropriate.
Each chamber under the Act is required to have a chamber president, whose role is the maintenance and improvement of the chamber’s expertise. The first-tier tribunal general regulatory chamber will have a chamber president selected by the Judicial Appointments Commission. An acting chamber president will be appointed by the senior president of tribunals under his powers in the Act until an appointment can be made.
Each of the transfer orders provides for the transfer of existing judges and members to the first-tier tribunal or upper tribunal as appropriate, which is essential for ensuring that a good service is maintained and existing specialist expertise is protected. The provisions of the Act mean that judges and members can be invited to sit in another jurisdiction within the tribunal to which they have been transferred, but that will happen only if the individual has the necessary qualification, is acceptable to the chamber president and has undertaken any necessary training, and if there is a business need.
Rules for the general regulatory chamber will be made by the tribunal procedure committee, which was created under the Act. The committee is chaired by a Lord Justice of Appeal, Lord Justice Elias, and includes representatives from a number of organisations, including the Administrative Justice and Tribunals Council, the Bar Pro Bono Unit and the Free Representation Unit. The rules are made with the agreement of the Lord Chancellor and laid before Parliament under the negative resolution procedure. Rules for the upper tribunal administrative appeals chamber are also made by the tribunal procedure committee and replace existing functions for the transport tribunal.
Transitional provisions in each of the orders ensure that cases currently being heard by the transferring tribunals will not be adversely affected by the transfer. A hearing that has commenced but not completed will be completed by a panel comprising the same members. Directions and orders made by a transferring tribunal prior to each of these orders coming into force will continue in force as if they were directions or orders of the first-tier tribunal or upper tribunal, as appropriate.
I turn to the detail of each order. I will take the consumer credit appeals tribunal and estate agents appeal panel together. Article 2 of the Consumer Credit Appeals Tribunal Order 2009 and the Transfer of Functions (Estate Agents Appeals and Additional Scheduled Tribunal) Order 2009 transfers the jurisdictions in their entirety to the first-tier tribunal and abolishes the consumer credit appeals tribunal and the estate agents appeal panel.
Article 3 of both orders provides for members of the tribunal and panel to be transferred to hold offices in the first-tier tribunal and, in the case of the president of the consumer credit appeals tribunal, in the upper tribunal.
Article 4 of the consumer credit appeals tribunal order 2009 and Article 5 of the Transfer of Functions (Estate Agents Appeals and Additional Scheduled Tribunal) Order 2009 provide for consequential amendments to and repeals and revocations of primary and secondary legislation, and transitional and saving provisions. These are set out in full in the schedules.
Article 4 of the estate agents appeal panel order adds the London service permits appeals panel to the table in Part 4 of Schedule 6 to the Tribunals, Courts and Enforcement Act 2007. That brings the London service permits appeals panel within the scope of the Lord Chancellor’s power to transfer tribunal functions to the first-tier tribunal or the upper tribunal. The functions of the panel are transferred to the first-tier tribunal in the transport tribunal order.
I move now to the draft Transfer of Functions (Transport Tribunal and Appeal Panel) Order 2009. Article 2 transfers part of the jurisdiction of the transport tribunal to the first-tier tribunal and part to the upper tribunal. That is in line with our proposals in our consultation Transforming Tribunals in 2007. The jurisdiction to hear appeals from decisions of traffic commissioners transfers to the upper tribunal administrative appeals chamber.
Traffic commissioners are in effect an appeal body when they make a decision in cases that can be appealed to the transport tribunal and, in that capacity, are subject to the oversight of the Administrative Justice and Tribunals Council. It is therefore more appropriate to transfer appeals against decisions of traffic commissioners to the upper tribunal, to preserve the current status of the transport tribunal as a superior court of record when dealing with these types of appeals. The remaining jurisdiction transfers to the first-tier tribunal and generally deals with appeals from the Driving Standards Agency. Such appeals are appropriate for the first-tier tribunal, given its first-instance jurisdiction. Appeals to the London service permits appeals panel are also transferred to the first-tier tribunal.
Unlike most other transfer orders, this order does not abolish the transport tribunal, as it is necessary to retain the tribunal to hear appeals under the Transport (Scotland) Act 2001. As a devolved matter, that function of the transport tribunal cannot be transferred in the order. An amendment by way of primary legislation is needed before that can be achieved. The Scottish Government will consider whether they wish to transfer the appeal route in the Transport (Scotland) Act 2001 to the upper tribunal when an appropriate legislative opportunity becomes available.
Additionally, the transport tribunal will retain jurisdiction to hear appeals in relation to quality contract schemes introduced by the Transport Act 2000, as amended, which have yet to be brought into force. We are unable to transfer those provisions at this time as no decision has been taken on where the appeal should lie. A decision will be made after a forthcoming consultation has considered responses to the question. We intend to make an order transferring the functions of the transport tribunal in relation to quality contract schemes as soon as we are able, following completion of the consultation. A separate order will provide for this jurisdiction to be dealt with in the general regulatory chamber of the first-tier tribunal or the administrative appeals chamber of the upper tribunal, as the case may be, and for onward appeals from the first-tier tribunal in this jurisdiction to be heard in the administrative appeals chamber of the upper tribunal.
Article 3 of this order provides for judges and members of the transport tribunal to be transferred to hold offices in the upper tribunal. Since all members of the London service permits appeals panel are also members of the transport tribunal, there is no need to transfer the members of that panel separately. Article 4 provides for consequential amendments to, and repeals and revocations of, primary and secondary legislation, and transitional and saving provisions. Those are set out in full in the schedules.
I turn to the transfer of the charity tribunal. The jurisdiction will be transferred in part to the general regulatory chamber and in part to the finance and tax chamber of the upper tribunal. Cases will be heard in the first-tier tribunal except where it is decided by or under tribunal procedure rules that the upper tribunal is better suited to hear a particular case—for example, where the case raises complex or unusual issues or its importance merits it being dealt with in the upper tribunal, which is a superior court of record and can set precedent.
Onward appeals from the charity tribunal are currently dealt with by the Chancery Division of the High Court. Onward appeals from the first-tier chamber will be dealt with in what is currently the finance and tax chamber of the upper tribunal. This chamber is headed by a judge from the Chancery Division, and other Chancery Division judiciary may sit in the chamber alongside upper tribunal judges. To reflect the extended remit of the chamber, it will be renamed as the “tax and chancery chamber” in the amendment to the chambers order that I referred to earlier. Onward appeals from the tax and chancery chamber, as with other chambers of the upper tribunal, are direct to the Court of Appeal.
I turn to the detail of the order. Article 3 provides for members of the tribunal and panel to be transferred to hold offices in the first-tier tribunal and, in the case of the president of the charity tribunal, in the upper tribunal. Article 4 of the order provides for consequential amendments to, and repeals and revocations of, primary and secondary legislation, and transitional and saving provisions. These are set out in full in the schedules.
The Government are committed to the ongoing transformation of our tribunals, placing the user at the very heart of the service. The unified system will have greater flexibility in absorbing new work and responding to fluctuations. The orders that I bring before the Committee today are another significant step towards achieving this. I commend these draft statutory instruments to the Committee. I beg to move.
I will be brief. I thank the Minister for introducing these four orders. We have had a number of transfer of functions orders over the past few months, some of which—for example, those dealing with war pensions—were somewhat more controversial than others. These come at the bottom end of the scale of controversy; in fact, there is very little controversy in them as they build on the original report by Sir Andrew Leggatt, Tribunals for Users, and the subsequent 2007 Act. I have two or three questions. First, will there be yet more orders in due course? He referred to legislation that has not yet been brought into force. When decisions are made on that under the Transport Act 2000, presumably that will mean more such orders. Is most of the new set-up in place, or in due course will yet more orders come in?
Secondly—I really ought to be able to remember this from whatever assurances the Government gave at the time of the 2007 Act, or when Sir Andrew Leggatt’s report originally came out—but presumably the department will make savings as a result of this streamlined system of tribunals. What estimate did the Government make of those savings at the time of the 2007 Act? Are they on target to meet those savings when all this comes into effect?
Finally, as the Minister made clear, and as is made clear by the Explanatory Memorandum, the transport tribunal will remain in place when dealing with two matters, the first of which concerns Scotland. It is for the devolved Parliament to decide whether to abolish it or whether we shall continue with different systems in different countries, as we have with war pensions. As paragraph 7.7 of the Explanatory Memorandum makes clear, it will remain in place until Sections 127A, 131E, 131F, 132, 132A and 132B of the Transport Act 2000 come into effect. When exactly were all those sections originally enacted, and when might they be brought into effect? Since they have letters behind them, I imagine that some were not part of the original 2000 Act. I am just interested in view of the amount of legislation that comes from the Government, particularly the Ministry of Justice, which is enacted but then not brought into effect. I hope that the Minister can answer those questions.
I do not rise to confuse the Minister. I have not been transferred from what I still refer to as the Department of Trade and Industry to be shadow spokesman for the Ministry of Justice; it is just that sometimes one does one’s duty. Generally, my party supports this order, as does the noble Lord, Lord Henley. We have supported the reform of the tribunal system through another place, if for no other reason than that it seemed to us, and indeed the Government, slightly strange to have a system under which there was a whole series of tribunals that were responsible for monitoring the decisions of government departments, but the government department was responsible for monitoring what the tribunal was doing. In any sensible world, that would not be sensible. For that reason, above others, we have supported these reforms. I have three points to raise with the Minister.
First, as the Minister will know from his time on trade and industry matters, I have asked this about endless statutory instruments that have been brought forward in this area. I find it very difficult to keep track of what the department is now called, so I continue to refer to it as trade and industry matters. The Government are very good at entering into consultation—much better than many other Governments have been before bringing in such instruments, or indeed legislation. We always get a document that tells us—as this one does at paragraph 8.1—that the Government have consulted and received 140 responses. As I think one of my honourable friends in another place said, it would be very interesting if the Government, in responding to the consultation, could indicate, first, what changes were made to the orders as a result of the consultation; and, secondly, what important points were made by those who were consulted but not taken on board by the Government? I know that this is quite a complicated issue but I always ask this about these orders in the hope that one day the Explanatory Memorandum will set out the arguments for and against, and why the Government rejected them.
Secondly, the transport tribunal stays in existence, notwithstanding these changes. I think the noble Lord, Lord Henley touched on this. I understand that the difficulties, which I gather have been referred to as the “floating in limbo” provisions of the Transport Act, still need to be resolved. The more important issue, which I think is unclear, is of how the Government envisage dealing with the Scottish issue. Does this mean that primary legislation must take place in Scotland? Must it take place in the UK? Wherever it takes place, when do the Government think that it will occur?
The third issue that I want to raise, which the noble Lord, Lord Henley, did not, was raised by his honourable friend the MP for North West Norfolk in another place, and I thought it was a very good point. Could some indication be given of the basis on which certain matters are referred to a first-tier tribunal and others to an upper tribunal? Is it to do with levels of judicial expertise? If so, yes; if not, why not?
I thank noble Lords for their support. The noble Lord, Lord Henley, asked what further transfers were planned. Subject to parliamentary approval, further transfers into the general regulatory chamber are planned for January 2010 when we will transfer the jurisdictions of the gambling appeals tribunal, the immigration services tribunal, the adjudication panel for England, the information tribunal and the claims management tribunal to the first-tier tribunal general regulatory chamber. Draft rules for the general regulatory chamber have been proposed by the Tribunal Procedure Committee and a public consultation has recently closed.
Also in 2010 we plan to transfer the Family Health Services Appeal Authority to the first-tier tribunal health, education and social care chamber and the pensions regulatory tribunal and financial services and markets tribunal into the finance and tax chamber of the upper tribunal. The Tribunal Procedure Committee will shortly be consulting users of these tribunals to assess whether amendments to procedure rules will be required when they transfer in.
In May we announced plans to transfer the work of the asylum and immigration tribunal in 2010 and set up the first-tier tribunal and upper tribunal chambers for immigration and asylum. The Tribunal Procedure Committee will be consulting on rules for the upper tribunal chamber and will modify the existing AIT procedural rules and fast-track rules so that they apply for proceedings in the first-tier chamber. After this set of transfers, we will consider how best to transfer the remaining tribunals, many of which have few or no cases.
The reason for setting up the unified tribunal system was to provide a better system for users and was not, therefore, primarily a cost-saving measure. Moreover, the regulatory impact assessment for the Tribunals, Courts and Enforcement Act 2000 did not identify any additional costs from setting up the first-tier tribunals and upper tribunals. However, it is expected that the new structure will facilitate improved use of resources as well as offering greater flexibility in absorbing new work and responding to fluctuations, which will lead to savings in the longer term.
As to when the provisions will be brought into effect, the transport tribunal retains jurisdiction for tribunals relating to the quality contract scheme under sections—and there are an awful lot of sections—of the Transport Act 2000, as amended, which have yet to be brought into force and, as yet, no decision has been taken on whether the appeal should lie to the first-tier tribunal or the upper tribunal. There will be further consultation on this by the Department for Transport and a further transfer order will be laid before Parliament following completion of that consultation. It will be brought into force after consultation is concluded. The consultation is planned to be published shortly.
As regards the Government’s consultation regarding tribunals and the response to it, 48 respondents thought that the proposed allocation of jurisdictions was correct. Of the 19 who disagreed, three respondents commented on the mental health review tribunal, one on the information tribunal and a few respondents disagreed on the proposals for the tax credit appeals tribunal. Seven respondents commented on the proposals for the pension appeals tribunal and these concerns were met during the debates on the transfer of this tribunal. Of relevance to today’s transfers were the comments provided by two respondents, who thought that the consumer credit appeals tribunal and estate agents tribunal should be in the upper tribunal on the basis that they dealt with issues similar to those of the financial services and markets tribunal. The Government rejected these arguments on the basis that the level of complexity and breadth of the issues dealt with by the financial services and markets tribunal was not replicated in either the consumer credit appeals tribunal or the estate agents appeals panel. The Government have considered and listened carefully to all respondents’ comments and have responded accordingly where concerns have been raised.
As to when the transport tribunal will be abolished—in other words, when are we going to solve the Scottish question?—we are unable to provide an exact timetable, given the legislative amendments needed, but we plan to do so as soon as we are able. In respect of the devolved matter, a suitable legislative vehicle will need to be found to amend the Transport (Scotland) Act 2001 or the Tribunals, Courts and Enforcement Act 2007. This could be done directly by the Scottish Government or in Westminster with their agreement.
On the question of what goes where, my relatively simple understanding—I will write if I get this wrong—is that most matters from first appeal will go to a first-tier tribunal. The big exception is the traffic commissioner, because the appeal was to the commissioner in the first place. In that case, it goes directly to the upper tribunal. Appeals from the first-tier tribunal—shall we start again on this bit, now that I have a script? The jurisdiction to hear appeals to decisions of the traffic commissioner transfers to the upper tribunal. Traffic commissioners are, in effect, an appeal body when they make a decision in cases that can be appealed to the transport tribunal. In this capacity, they are subject to the oversight of the Administrative Justice and Tribunal Council. It is therefore more appropriate to transfer appeals against decisions of the traffic commissioners to the upper tribunal, which preserves the current status of the transport tribunal as a superior court of record when dealing with these types of appeal.
The remaining jurisdiction transfers to the first-tier tribunal and generally deals with appeals from the Driving Standards Agency. Such appeals are appropriate for the first-tier tribunal, given its first-instance jurisdiction. In other words, the first tier will normally deal with first-instance jurisdiction and the upper level will hear appeals for the first level, but in some areas particularly complex or important cases will go directly to the upper tribunal. The issue is that, it being a superior court of record when dealing with these types of appeal, it can create precedent.
Transfer of Functions (Estate Agents Appeals and Additional Scheduled Tribunal) Order 2009
Considered in Grand Committee
Transfer of Functions (Transport Tribunal and Appeal Panel) Order 2009
Considered in Grand Committee
Transfer of Functions of the Charity Tribunal Order 2009
Considered in Grand Committee
Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2009
Considered in Grand Committee
The purpose of this order is to maintain the crucial balance between the need to rehabilitate reformed ex-offenders into employment and the need to ensure that the public, particularly vulnerable groups, are adequately protected from those who pose a serious risk.
As noble Lords will be aware, the Rehabilitation of Offenders Act 1974 serves to help those who have a previous criminal conviction or caution but who wish to move on with their lives and put that behind them. If an ex-offender can demonstrate that they are staying on the right side of the law by remaining free from further convictions for a specified period of time, their original conviction or caution will become spent. Once spent under the Act, it no longer needs to be declared for most purposes. For instance, an employer is no longer entitled to ask, and such convictions no longer need to be declared when applying for insurance. The Act thereby enables ex-offenders to avoid discrimination. This in turn helps to rehabilitate ex-offenders into the workforce and to reduce reoffending.
In some cases, however, a need to protect the public outweighs this principle. In certain positions, it is appropriate for the employer or licensing body to know about spent convictions. For instance, when it comes to the protection of children, the vulnerable and national security, the need to safeguard the public comes first. This is the purpose of the exceptions order, which the current amendment order updates.
The exceptions order specifies the positions of sensitivity where the need to support the ex-offender is deemed to be outweighed by the need to protect the public, so the Rehabilitation of Offenders Act no longer applies. This instrument is one of a series that have been put before noble Lords for consideration over recent years. It is part of an ongoing commitment and a corresponding series of legislative updates to ensure that this important balance is maintained. It updates the order to ensure that it keeps pace with changes both to legislation and to known risk.
The order before us today makes a number of separate but important amendments to the exceptions order, which I will run through in turn. The first purpose of this instrument is to create an exception to the Act for those working, or seeking to work, in regulated activity as defined by the Safeguarding Vulnerable Groups Act 2006—the SVGA. This legislation, which was part of the Government’s response to the Bichard report following the Soham murders, introduces a vetting and barring scheme that will fundamentally strengthen safeguarding practice.
For the first time, it will be necessary for all those working in regular direct contact with vulnerable groups to be vetted by an independent body: the Independent Safeguarding Authority—the ISA. There will be an obligation on employers to check that their employees are registered with the ISA. Those who are registered will be subject to monitoring, which means that the employer will be informed if, as a result of any new convictions, the ISA de-registers that person.
Amending the exceptions order to include regulated activity is essential for the next stage of the scheme to be implemented. This amendment will authorise the Criminal Records Bureau to disclose information to the ISA that would otherwise be protected by the Rehabilitation of Offenders Act. The ISA can then decide whether to bar people based on factors that include spent convictions, cautions, reprimands and final warnings. This amendment will also enable employers to obtain disclosures informing them about criminal convictions, thereby enabling them to make employment decisions based on all relevant safeguarding information.
The Police Act regulations are also being updated in tandem to enable the relevant information from police records to be disclosed. This will ensure consistency across the entire disclosure regime, and that such crucial safeguarding decisions can be taken on the basis of all available evidence. Unsurprisingly, many of the areas covered by regulated activity are already listed in the exceptions order. However, the new category and the new scheme bring new levels of consistency and enhanced vetting by an independent expert body, and help to ensure that any safeguarding gaps are bridged.
Provisions on the Channel Islands are included in the current order. These are linked to the Safeguarding Vulnerable Groups Act and are part of the process leading to the extension of that Act to the islands. The inclusion of those measures was requested by Channel Island Ministers, who are keen to ensure that the islands are covered by the same vetting and barring regime as is being introduced in England and Wales. That will avoid the possibility of those who are barred from working here moving to the islands to avoid detection. However, if those working in the islands are to be subject to vetting by the Independent Safeguarding Authority, and their employers are to be able to obtain CRB disclosures, it is necessary that they are covered by the exceptions order. Hence the provisions in the current order.
Of course it is imperative when introducing measures such as this that due consideration is given to ensuring that our order ties in appropriately with local legislation. For this reason, the exemption from the ROA applies only where the purpose is already subject to an exemption under both England and Wales and Channel Islands legislation. Hence eligibility to disclosures, and the information which can be disclosed, will never exceed that which exists either in England and Wales or in the Channel Islands.
I am sure that the Committee will agree that the extension of the Safeguarding Vulnerable Groups Act to the Channel Islands is a sensible step for all concerned, and that this measure is a necessary step in implementing this.
I now turn to the other provisions in the instrument, starting with the Master Locksmiths Association. The instrument entitles the MLA to ask exempted questions when assessing membership applications. There has recently been concern that locksmiths, particularly those who are licensed, should be appropriately vetted. That is especially true of those given training in the skills of gaining entry to property or in possession of a badge of quality assurance which is looked for by those in greatest need of someone trustworthy. Under the current system, it would be possible for an individual with many spent convictions or cautions for theft to apply for membership of and training with the Master Locksmiths Association, and it would be unlawful for the MLA to see or consider that crucial information before awarding MLA member locksmith status.
Crime prevention is always a priority for the Government, hence the frequent publicity campaigns encouraging the public to take issues of home security seriously, fit reliable locks and install security systems. The MLA, as the principal trade body representing locksmiths and promoting standards within the industry, runs a licensing scheme which enables the public to be reassured that their locksmith has been vetted. Indeed, the Home Office and many police forces recommend using an MLA-approved locksmith for crucial security purposes.
It is therefore only logical for the Government to take a joined-up approach and enable the MLA to ensure that those who are accredited with MLA member status can be verified as being of sound character and unlikely to abuse their skills. Indeed, before giving someone access to your house keys, or, even more crucially, the keys to a hospital, school or old people’s home, it is not unreasonable to expect that person to have been checked and to have been assessed as trustworthy and honest. Similarly, it is not unreasonable to expect that anyone signing up to an accredited course on how to circumvent locks and security systems without keys should be similarly checked. The MLA is keen to ensure that adequate vetting is conducted in both those circumstances, ensuring that those who are given the trusted MLA member status are reliable, and that those who sign up to their courses also meet their membership criteria.
Vetting decisions for locksmiths will be taken centrally by the MLA, ensuring that there is consistency of vetting and that information on spent convictions is used only for its intended purpose: to see if an applicant for MLA membership is suitable to work as a locksmith. The Government believe that it is entirely appropriate for the MLA to be supported in this, and that it should be given the necessary information to make an informed vetting decision. Hence the relevant provision in the current order which addresses an area where public protection could and should be improved.
On which note, I move to the provisions relating to Home Office licences to handle controlled drugs and precursor chemicals. The need to regulate access to such materials and closely regulate the sector needs no introduction. The industry involved in the legitimate production of controlled substances—for instance for pharmaceutical purposes—is hugely important. However, the consequences of criminality entering that sector would be dire. Although we need responsible people to produce controlled drugs for their intended purpose, and to destroy those controlled drugs which should not be in circulation, it is vital that those substances do not get into the wrong hands. For this reason, there are a number of drugs which it is illegal to handle without an appropriate licence from the Home Office.
The Government also have important international obligations, under a number of UN conventions, to ensure that narcotics and psychotropic substances are subject to adequate controls. The Home Office is responsible for fulfilling these obligations, and has recently become aware that this is an area where our safeguards need to be strengthened. This is what the current order seeks to support.
Specifically, the order enables the Home Office Drugs Licensing and Compliance Unit to assess all convictions of relevant persons when deciding whether to grant a licence to handle controlled drugs and precursor chemicals. A full enhanced disclosure will be issued, enabling an informed decision to be made.
The measure will be used responsibly; only specified people who are in a unique position to subvert or circumvent existing safeguards will be vetted. It will apply to those responsible for witnessing the destruction of controlled drugs, and the vetting will be conducted by the Home Office as part of the licence application. The measure, which is designed to prevent criminals obtaining and abusing a licence to obtain, make or distribute controlled drugs is an essential step in ensuring that access to controlled drugs and precursor chemicals is just that: controlled.
I will now speak to the provisions relating to regulated immigration advisers. The Office of the Immigration Services Commissioner—the body responsible for regulating immigration advisers—has proposed that this amendment be made to the exceptions order to help to tighten its current regulatory regime. It is illegal for anyone who is not a solicitor, barrister or regulated immigration adviser to work in the sector. The first two categories are already listed in the exceptions order, and there are several reasons why it is appropriate for the third to be brought into line.
Those who use the services of immigration advisers are often extremely vulnerable. They include recent victims of persecution, violence or torture; minors who may be unaccompanied; and those with no knowledge of the UK legal system and potentially little or no knowledge of English. For these people, immigration advisers are in a position of significant power and trust. They can represent their clients before tribunals, advise them on legal matters, and submit forms and applications about their immigration status to the UK Border Agency on their behalf. Furthermore, they may charge substantial fees for their services, and misleading their clients could result in an application being refused or detained or, at worst, the client being deported. In other words, there is therefore significant scope for wrongdoing, and it is essential to prevent those who would willingly abuse the system to provide false documentation, wrong legal advice or illegal services from being able to practise.
Since its creation, the OISC has taken enormous steps in regulating the profession and in ensuring that those who practise as immigration advisers do so for the correct reasons. However, it has now identified areas of weakness in its current vetting system that could lead to highly vulnerable individuals being abused, and as such it is only correct that we should help it to resolve them. The provisions in the draft order therefore enable the OISC to obtain criminal record disclosures for those whom it regulates. This means that it will be able to vet those who seek to work in this sensitive profession on the basis of all available evidence. In turn, it will be able to prevent those with a background of abusing immigration law from being able to gain a foothold in the sector of immigration advice.
Finally, I move to the provisions relating to the Criminal Records Bureau—the CRB. This body was set up in 2002 and is responsible for providing disclosures, including criminal record information, for all the purposes specified in the exceptions order. The nature of its work and the data to which it has access are obviously sensitive. A recent review of CRB staff security measures has recommended that, in order to meet government best practice, it should enhance its internal staff vetting from the current baseline standard checks. This need is made even more pressing by the fact that some of the CRB’s work is changing, with CRB employees playing an ever more active and involved role in ensuring an effective safeguarding system. As well as the CRB’s role in matching the individual named on an application form with a record on the police national computer, the CRB is increasingly conducting data-matching work that was previously conducted by the police. This will involve the CRB undertaking an initial search of police local intelligence systems. With both these searches, clicking “no match” may result in a clear disclosure being issued to a person with a criminal record or relevant local police intelligence.
The CRB will also be processing future applications for ISA registration on behalf of the Independent Safeguarding Authority. Failure to pass on details of a conviction to the ISA could result in a person who would otherwise be barred being allowed to work with children. For this reason it is vital that those working in this role need to be checked and cleared as not having any criminal history which would give cause for concern.
Those in the ISA who will be interpreting criminal record information to make barring decisions are already listed in the exceptions order. It is only logical that those who gather relevant information from the police national computer and are responsible for providing it to the ISA should be vetted to the same level. Put simply, as the CRB’s business develops, it is vital that those who have access to the police national computer and those who can influence the outcome of disclosure and barring decisions do not themselves have criminal records that they would rather keep hidden. I trust that the Committee will agree that this is not only sensible but essential.
In conclusion, the order is a clear illustration of the Government’s commitment to updating safeguarding legislation to ensure that it does not get left behind by changes in legislation and risk analysis. The rehabilitation of ex-offenders remains a priority, but the protection of the vulnerable in society is an absolute necessity, as is reducing the risk of abuse of trust in the immigration, drug licensing, locksmiths and criminal record-handling regimes. I beg to move.
I thank the Minister for that extensive explanation of this order. We obviously welcome the principle behind the rehabilitation of offenders and it is right that offenders should have a chance to wipe the slate clean, as it were, and make it easier for them to seek employment thereafter. However, there have to be exceptions to that which need regular updating, as the Minister said, to make sure that the appropriate ones are put in.
I was amused by his explanation as to why those seeking membership of the Master Locksmiths Association should be included. It occurred to me that a successful burglar probably would not need to be a member of the Master Locksmiths Association, but a successful burglar is probably much less likely to be caught anyway and, therefore, to have convictions; but the unsuccessful burglar might in later years want to seek membership of the association to improve his further career chances in that profession.
I am grateful for the Minister’s explanation as regards all five classes. I have only one question on which I hope he can help me. It relates to paragraph 3 of the Explanatory Memorandum on:
“Matters of special interest to the Joint Committee on Statutory Instruments”.
As I understood it, the Joint Committee referred to some problems which were explained in terms of a drafting error in the primary legislation when the original Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 was amended. There is an explanation of this in paragraph 3.2 which seems to relate only to what the department now,
“construe the delegated power as intended to refer to paragraph 3(3) of the Schedule”.
That is merely a statement by the department of its view. Can the noble Lord tell me if that is correct and, if so, when will the department find an opportunity to seek a proper amendment? Will that require primary or secondary legislation? In the mean time, does the department think that it will be safe to rely on the assertion it seems to make in paragraph 3.2 of the Explanatory Notes?
I also welcome the explanation offered by the Minister on the order. We welcome what he has said. Obviously, the order is sensible enough, and a good case is made out for the five various exemptions that the Minister has specified.
I raise this matter because I have shown considerable patience since the Home Office first produced its consultation paper on the Rehabilitation of Offenders Act. Having cleared it with the Public Bill Office, I am now in a position to promote a Bill on the Rehabilitation of Offenders Act. I am delighted that the noble Lord, Lord Henley, has offered the support of his party and that the Minister said that this matter remains a priority for the Government. I look forward to their co-operation in the matter.
The Minister mentioned that the Office of Immigration Service Commissioners regulate immigration advisers as defined in Section 82. I think that we are talking of the solicitors who offer people advice. Now the Government want to bring in other people who may not necessarily be qualified in legal matters and yet do valuable work advising on immigration, asylum and so on. I hope that I am right on that. If I am, can the Minister explain whether that is limited simply to immigration advisers operating in this country? What happens to people who come from abroad and are attracted to work with solicitors who are qualified in immigration matters? Is there any way to determine their status through the CRB and others before they work with vulnerable groups? Does a similar system exist in other parts of the world from which immigrants or asylum seekers come to this country?
I am also delighted that the order provides for sensitive occupations, such as work with children and vulnerable adults, to remain exempt from the proposals. That exemption will, to a great extent, reduce the scope of discrimination against former offenders and, because employing offenders reduces reoffending, it will also increase public safety. It will be very helpful if the Minister can take the lesson from this exercise that, while we support the order, it would be in the interests of the Justice Secretary, Jack Straw, rather than tinkering again and again with the Rehabilitation of Offenders Act by making exemptions now and then, to look at the whole provision and see whether parliamentary time permits to either introduce legislation or at least support my Private Member’s Bill, which I hope to introduce soon after the Summer Recess.
Turning first to the drafting error, it is in the primary legislative provision located in Schedule 2, which is inserted by the Criminal Justice and Immigration Act 2008. The reference in the second line of paragraph 4(a) to “paragraph 3(2)” should be to “paragraph 3(3)”. That erroneous cross-reference has arisen because paragraph 3(2) was inserted after the original clauses were drafted, and the cross-reference has not been updated to reflect that. The Joint Committee on Statutory Instruments was of the opinion, as are we, that this is a clear case of a simple error of drafting, and that the reference can be properly read as referring to paragraph 3(3), therefore providing the proper vires for this order. I am pleased to report that we have just received notification from the House authorities that they are proceeding to issue a correction slip—actually, I now have a copy of the correction slip with me.
I turn to the questions of the noble Lord, Lord Dholakia. Speaking personally, I am impressed that the noble Lord, Lord Henley, was able to detect the humour in my reference to locksmiths; it was in the middle of a very long speech.
On the issue of immigration advisers, in order to practise in this country as an adviser a person must be subject to regulation by the OISC. I will look at Hansard to see whether that answers the noble Lord’s question completely as he was going into some more difficult areas. I will write to him on it if I feel that it remains unanswered.
On the essential point that the noble Lord was making about his view that reform of the Rehabilitation of Offenders Act was long overdue, I am well aware of his commitment to this subject and I reassure him that the Government are also mindful of the importance of rehabilitation. That does not mean, though, that we can lose sight of the importance of public protection. Therefore, whether or not the reform of the Act is progressing as he desires, I am sure that he will acknowledge the importance of the current order.
I confirm that the commitment to reform the Act remains in place; however, no timeframe for such a reform has yet been set, and the task will not be a simple one when it arises. The noble Lord is aware of the pressures on parliamentary time and the ever competing priorities for it. I look forward to the noble Lord’s promised Private Member’s Bill, and we will give it careful consideration in due course.
Criminal Defence Service (Provisional Representation Orders) Regulations 2009
Considered in Grand Committee
This instrument is being made to provide for publicly funded legal representation in cases of investigations of serious or complex fraud governed by the guidelines on plea discussions in those cases that were issued by my noble and learned friend the Attorney-General on 18 March 2009.
The Criminal Justice and Immigration Act last year inserted paragraph 1A into Schedule 3 to the Access to Justice Act, headed “Individuals to whom right may be provisionally granted”, and these regulations are made under that paragraph and under paragraph 2A(1)(c). At the time of making that amendment to the Access to Justice Act, the Government envisaged making regulations to deal with plea discussions. That had been recommended in the final report of the fraud review, which was published in July 2006.
The report made a number of recommendations encompassing the prevention, reporting, measurement, investigation and prosecution of fraud. The underlying message in the report, which the Government fully accepted, was that it was essential to have an overarching fraud strategy linking all these areas and drawing in all interested parties throughout the public and private sectors.
On the subject of fraud prosecutions, the report recommended that a framework and new guidelines on the conduct and acceptance of pleas by prosecutors in fraud cases should be issued by the Attorney-General. Detailed proposals for the framework for plea discussions were the subject of a public consultation by the Attorney-General in 2008. With some caveats, which we have addressed, the majority of respondents supported the implementation of the framework.
Discussions about the plea and possible sentence already take place in criminal cases in England and Wales. They can be highly beneficial in saving time and costs, and in particular can reduce the stress experienced by victims and witnesses. The benefits can be particularly marked in fraud cases, where the investigation, case preparation and trial are often particularly lengthy and typically run for a number of years. The discussions are also likely to be more complex in these cases than in others. The Attorney-General’s aim in issuing guidelines was to put these discussions on to a clearer footing in fraud cases.
Enshrined in our criminal justice system are three key principles. First, it is the duty of the prosecutor to ensure that the case is put before the court in a way that reflects the true facts and the full gravity of the offending. Secondly, the defendant must not be put under any improper pressure to plead guilty, so the framework adds no new incentive or sentence discount that would reward the defendant for reaching a plea agreement. Thirdly, the court must have the unfettered discretion to pass the right sentence for all the circumstances of the case. It is important to emphasise that the court’s hands will not be tied in any way by this process.
The Attorney-General is confident that the proposed framework safeguards these principles. It has been designed to complement the legal system of England and Wales, rather than being copied from another jurisdiction where different considerations may arise.
I shall now speak to the detail of the draft instrument. Currently, a representation order for publicly funded legal representation in criminal cases can be granted only after an individual has been charged. This instrument allows the provisional grant of a representation order at an earlier point in a criminal investigative process in order that the prosecution and defence may discuss, and in appropriate cases agree, the basis of a guilty plea. If a plea agreement is reached, the case proceeds to the Crown Court in the usual way. Judicial discretion will not be fettered in any way, so judges may accept or reject the plea agreement.
The instrument also makes provision for circumstances in which provisional representation orders must be withdrawn. Broadly speaking, the Legal Services Commission must withdraw the provisional representation order where the plea discussions come to an end, where an individual is charged, or after three months have elapsed. The commission may also withdraw a provisional order where it believes that the plea discussions are unlikely to lead to a plea agreement.
The Attorney-General’s guidelines on plea discussions in cases of serious or complex fraud will encourage discussions about guilty pleas in fraud cases to be much earlier and more transparent. Avoiding costly and lengthy fraud trials would be beneficial for the criminal justice system as a whole, including legal aid, and would provide an earlier outcome for victims and witnesses as well as defendants.
The three-month lifespan of provisional orders may be extended once, on application to the commission, for a period of up to three months. This limited period is important to ensure that the process is not allowed to drift or, if unsuccessful, simply delay cases.
The instrument will cease to have effect on 31 December 2011. At that stage, we will review the effectiveness of the process. If the process is benefiting the criminal justice system, we envisage introducing a scheme based on graduated fees, in common with many other areas of legal aid.
In order to introduce provisional representation orders, the Lord Chancellor will need to amend two other statutory instruments by the negative procedure before provisional orders can be implemented on 1 August 2009. I must make noble Lords aware that a reference to Regulation 2A(1)(c) was inadvertently omitted from the preamble in the draft currently before the House. We have consulted the Joint Committee on Statutory Instruments on this omission, and as a result a correction slip has been published to correct this in the draft before the Committee. The omission does not affect the substance of the regulations. I beg to move.
I thank the Minister for his explanation of these orders which, in effect, bring in legal aid at a much earlier stage in complex fraud cases. He is right to stress that the regulations will cease to have effect on 31 December 2011—that is, in two-and-a-half-years’ time—and that the Government will then review how they have been acting and then, according to whether they have had a positive effect, decide whether to continue with them. Will the noble Lord expand a little on what he means by a “positive effect”? Does it mean that there will be savings in both time and cost in some of these complex cases—many of which, as the noble Lord put it, can last for months or years, be very expensive and a drain on the Courts Service—or are there other factors relating to justice and the administration of justice that the Government wish to take into account?
I add my thanks to the Minister for his explanation of the order. When Clause 56 of the Criminal Justice and Immigration Bill was going through the House we made no objection to it and we were very pleased that the Bar Council and the Law Society were supportive of the consultation. This was for two reasons: the first is that the instrument also makes provision for circumstances in which provisional representation orders may or must be withdrawn; and the second reason, which is quite attractive, is that the Attorney-General’s guidelines on plea discussions in cases of serious or complex fraud will encourage discussions about guilty pleas in fraud cases to happen much earlier and more transparently. That will avoid costly and lengthy fraud trials, which will be beneficial to the criminal justice process.
As this scheme is being set up as a pilot, it would be very helpful if the Minister could indicate how long he expects the pilot to run. When it has finished, will the Government publish the results and come back to the House to update us on how it has worked?
The noble Lord, Lord Henley, asked me, perfectly reasonably, what the positive effects will be. I cannot add to what I said in opening: essentially, there will be a saving in time and costs, which is a good thing.
However, the human dimensions are also valid. I was a witness in the infamous Jubilee Line case, where the events had taken place so far in the past that the idea of having to go in front of a jury and reveal the poverty of my memory was in itself stressful. I think that I answered two out of every three questions with, “I cannot recall”. I was a minor witness, but there were hundreds of witnesses. Many of my friends who were witnesses considered it an irritating event in their lives. Clearly the victims are in a similar situation.
These cases often delay justice, perfectly reasonably, because of their complexity. Securing a safe path for defendants, where they have a reasonable understanding of the range of sentencing against them after following a transparent and positive process, must be good for them. They can be sentenced, serve their punishment and then get on with their lives.
The scheme will run until its sunset date in the order, which is December 2011. We will publish the results of the pilot and consider what to do from 2012 onwards. My understanding is that that will be once we have published the results of the pilot and are able to consult on it. I shall write to noble Lords if we have more precise information on how the pilot will be judged and more on the timescale.
Data Protection (Processing of Sensitive Personal Data) Order 2009
Considered in Grand Committee
The Government have introduced a number of very important measures, which are designed to protect the public from known offenders and to improve the flow of information to the public about dangerous offenders in the community.
In 2001, the Government introduced the Multi-Agency Public Protection Arrangements—the MAPPA. By law, the police, probation and prison services are now required to work together as a responsible authority to assess and manage the risks posed by offenders convicted of the most serious sexual and violent offences. When such offenders are released from custody, either because they have completed the custodial part of the sentence imposed by the court, or because the Parole Board has directed their release from an indeterminate sentence, they will be supervised in the community under the MAPPA. The services will share information on the offender in order to identify the risks that the offender poses and then put in place a risk management plan to control those risks. While, tragically, there can be no such thing as zero risk when it comes to supervising known offenders in the community, of the 13,000 offenders managed at the highest levels of the MAPPA in 2007-08, fewer than 0.5 per cent were charged with committing a serious further offence.
By virtue of Section 327A of the Criminal Justice Act 2003, as inserted by Section 140 of the Criminal Justice and Immigration Act 2008, the MAPPA responsible authority must consider whether to disclose any information that it holds about the relevant previous convictions of any child sex offender whom it manages to a particular member of the public. Further, there is a presumption that the responsible authority will disclose such information where the offender is assessed as posing a risk of serious harm to any particular child or children, and where disclosure is necessary for the purpose of protecting a particular child or children. In addition, the guidance to the MAPPA responsible authorities, which the Lord Chancellor issues under Section 326 of the Criminal Justice Act 2003, has been amended to require responsible authorities to consider disclosure in the case of every offender managed under the MAPPA.
The Government have introduced changes to sentences that will make it less likely that prisoners known to pose a current high risk of harm to the public will be released from prison. From April 2005, the courts have been able to impose an indeterminate sentence of imprisonment for public protection. Where an IPP is imposed, the offender is not eligible for release until he has served the minimum period set by the court for punishment and deterrence, and will be released only if the independent Parole Board determines that it is no longer necessary for the protection of the public that the prisoner should be confined. We therefore hope that the number of prisoners who will fall within the ambit of this order will diminish with the passage of time.
Regrettably, and notwithstanding these changes, certain offenders are assessed as presenting a very high risk of harm to the public at the point at which they have to be released from custody. It is those offenders who are in view as we consider this Data Protection (Processing of Sensitive Personal Data) Order 2009.
The purpose of the instrument is to enable the Secretary of State for Justice to provide information to a Member of Parliament about certain high-risk prisoners and the arrangements for the prisoners’ release. The National Offender Management Service, NOMS, in the Ministry of Justice operates a scheme known as the critical public protection case scheme. It applies to certain high-risk prisoners. The purpose of the scheme is to assure Ministers that robust risk management plans are in place to manage this category of offenders, to allow probation areas to bid for additional funding to strengthen local risk management plans, and to enable Ministers to notify Members of Parliament of the arrangements that have been put in place to manage the risk which these offenders present in order to protect the public.
This order will allow Ministers to provide Members of Parliament with additional information about the offenders. We think it right that Members of Parliament should have assurance that there are systems and measures in place to protect the public from known offenders when they are released from custody. That is why we are seeking the approval of the House to make the order. It will allow information relating to the release arrangements of certain high-risk prisoners from prison to be passed to a Member of Parliament. The prisoners would include those released from young offender institutions, remand centres and secure training centres. On receipt of such information, the Member will be able to make inquiries for further details of the local chief constable of police or chief probation officer. In this way he will be able to assure himself that there are effective measures in place to protect his constituents from the risk of harm posed by certain offenders.
We do not intend that the processing of sensitive information should apply to all released offenders but only to the critical public protection cases. These are offenders who are assessed as presenting a very high risk of serious harm and who consequently need to be managed at the highest level of the MAPPA, together with offenders who have been convicted of offences under the Terrorism Act 2006, who are linked to extremist organisations or who, because of the high-profile nature of their offences, also require to be managed at the highest level of the MAPPA. Many of the high-risk prisoners who meet the criteria for CPPC were sentenced under previous legislation.
We consider that the processing of sensitive personal data of these kinds in these circumstances is necessary and proportionate. Members will be informed of the released prisoner’s name as well as of any standard and additional licence conditions to which he is subject, including the address at which he must reside as a condition of his supervision. Members will also be told whether victims of the offender’s previous offences have elected to receive information about the offender’s progress through his sentence. Finally, Members will be given the name and contact details of the local chief constable or chief probation officer in order to make further inquiries about the measures in place to protect their constituents.
In electing to receive information about a limited class of released prisoners, Members are required to sign an undertaking that they will not disclose the information except in specified circumstances. Members may discuss the offender and his supervision arrangements with the local chief constable or chief probation officer. They may disclose the information where it has become publicly available by some other means, or with the written consent of the offender, or to a government department, or in accordance with an obligation to provide information under or by virtue of any enactment in accordance with an order of the court. In no other circumstances should they disclose the sensitive information, the processing of which will be permitted by this order. They must agree to destroy the information when they have no further use for it.
The order is essential if Members of Parliament are to receive comprehensive information about certain very high risk-of-harm offenders in order that they may assure themselves that there are robust arrangements in place to protect members of the public. I beg to move.
Again I thank the Minister for his explanation. The order is timely, coming as it does barely a week after the Lord Chancellor was compelled to make a Statement about the case of Sonnex, a released prisoner who went on to murder two young Frenchmen in tragic circumstances. Will the Minister confirm that the individual in that case would not have been covered by this in that he was not assessed as being that high a risk on that occasion? The order deals with information about a very high-risk offender. Secondly, will the Minister say what exactly is meant by a Member of Parliament? On this occasion, do the Government mean a Member of another place? Do they mean any Member—in other words, a Member of this House or another place? If they mean only a Member of another place, do they mean that this should be restricted to the MP of the appropriate constituency—in other words, the constituency which the released prisoner came from originally, to which he is likely to go, or in which there is thought be a risk because of whatever he had done, whether it was a terrorism offence or whatever? I would be very grateful for a proper explanation of what is meant by a Member of Parliament.
I thank the Minister for the explanation that he has just given us. On the face of it, this seems to be perfectly reasonable in that it gives more channels of accountability. He cited some figures, but I was not quite clear whether he gave us an estimate of how many people would fall into this category per year. Obviously we would not know how many offenders each Member of Parliament would be likely to get on their books. As the noble Lord, Lord Henley, said, will this apply to where someone came from or where they will be released to? I think the Notes refer to where they will be released to, but where they came from is obviously of some interest too because their associates and their family may still be there.
I have a number of other queries. Obviously there is no attempt to include in the provisions the leader of the relevant local authority, although the leader has responsibility for the LEA, for certain types of housing provision and for various services that would probably make them as relevant a person as the MP. What if the MP is not happy with the arrangements that are in place? This information is there so that he can satisfy himself about them. Can he veto any proposals made to him? What happens at election time? Is there an automatic transfer of this information to the newly elected MP, or would the process start again so that an incoming MP would have a whole list to go through, having signed the appropriate paper mentioned by the order? What about MPs’ staff? Presumably his or her staff would have to be involved in the record-keeping and so on, and so presumably they would be covered by the arrangements that are mentioned here. Finally, how will the data be sent to the MP? Will they be sent by e-mail or by post?
I was very pleased that the noble Lord, Lord Henley, was generally supportive of the order. He asked whether Mr Sonnex would have been covered by it. The answer is “probably”, but, as the Statement made clear, errors were made in his case, particularly in the risk assessment, and I do not want to add to anything that has been said about the case.
The noble Lord, Lord Henley, is right to draw the conclusion that these are high-risk individuals. What do we mean by a Member of Parliament? We mean a Member of the other place only. The release would normally be to the constituency MP for the release address, but the order permits release to another MP. An example would be an MP for the victim’s constituency—the arrangements may be based, at least in part, around the victim—or maybe, in certain circumstances, an opposition spokesman.
Turning to the points raised by the noble Baroness, Lady Miller, I have one figure to give a sense of scale. There were only 96 registered CPPCs last year. The higher figures that I quoted were for people managed at other levels of the MAPPA process. This critical group is not made up of 96 CPPCs who were released last year but of 96 who were registered last year. The MP does not have any veto over the arrangements but can make representation. He is, in a sense, directed by this process to the chief constable or the chief probation officer. There will be quite a burden on them to explain very carefully what the plans look like.
What about the transition during elections? New MPs will have to sign an undertaking once elected. Notification will continue during elections. MPs have to agree to sign an undertaking to store information securely. Their staff will have to see letters to support MPs. Staff will have access; they will, presumably, be under an appropriate duty of confidentiality. Letters will be sent by post and not restricted. I beg to move.
That completes the business before the Grand Committee this afternoon and the Committee stands adjourned.
Committee adjourned at 5.52 pm.