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Grand Committee

Volume 714: debated on Monday 9 November 2009

Grand Committee

Monday, 9 November 2009.

Arrangement of Business


My Lords, before the Minister moves that the first statutory instrument be considered, perhaps I may remind noble Lords that in the case of each statutory instrument, the Motion before the Committee will be that the Committee do consider the statutory instrument. I should perhaps make it 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.

Scottish and Northern Ireland Banknote Regulations 2009

Considered in Grand Committee

Moved by

That the Grand Committee do report to the House that it has considered the Scottish and Northern Ireland Banknote Regulations 2009.

Relevant Document: 22nd Report from the Joint Committee on Statutory Instruments.

My Lords, as the Committee may be aware, the Banking Act 2009 contains a range of measures to enhance the resilience of the UK financial system now and in the future. The regulations are made under Parts 6 and 8 of the Act. The provisions update, strengthen and modernise legislation that dates from 1845.

Currently, seven banks are authorised to issue banknotes in Scotland and Northern Ireland, and the Government acknowledge the cultural importance of this. The fundamental objective of the legislation is simply to ensure that holders of Scottish and Northern Ireland banknotes have similar protection to holders of Bank of England banknotes and, in the event of an issuing bank failing, can obtain full face value for their notes. This is important for consumer protection and financial stability.

Part 6 of the Banking Act 2009 contains the overarching principles of the new regulatory regime, the details of which are contained in these regulations. The Treasury and the Bank of England have been working closely together, and with the issuing banks, to develop the regulations and ensure that the underlying policy objectives are met. We have also been working closely on the operational details of the new regime that are to be contained in the banknote rules, which are made under the regulations by the Bank of England and must be approved by the Treasury.

At the core of the regulations are the provisions relating to the holding of ring-fenced backing assets to ensure the protection of noteholders. In the event of a note-issuing bank becoming insolvent, the Bank of England is required to make arrangements to ensure that the insolvent bank’s ring-fenced backing assets are applied for the purpose of satisfying noteholders’ claims, and that noteholders may obtain full value for their notes by exchanging them for an equal value of banknotes, coins or funds of another bank.

Clearly, for the regime to operate effectively the Bank of England needs to be able to require banks to provide such information as it may reasonably require for the purpose of exercising its functions, or for verifying or monitoring a bank’s compliance with the new regime. The regulations therefore enable the Bank of England to make the relevant rules. Similarly, enforcement provisions ensure compliance with the new regime. The Bank of England may impose a financial penalty on an authorised bank that has failed to comply with any provision of the banknote regulations or rules, subject to a maximum annual cap as set out in the regulations.

I would like to bring to the attention of the Committee one point in regard to the operation of the enforcement provisions that came up via the consultation that the Treasury conducted on the draft regulations.

Respondents to the consultation asked that an independent appeals or arbitration panel be established, in the event that an authorised bank wanted to dispute a penalty imposed by the Bank of England. The Bank of England has confirmed that the penalty policy will set out an appeals process to which authorised banks may have recourse if they are dissatisfied with the Bank’s decision on such a penalty.

As I have said, the fundamental principle underpinning these regulations is to offer holders of Scottish and Northern Ireland banknotes a similar level of protection to holders of Bank of England banknotes.

The powers conferred by these regulations on the Bank of England equip it to carry out its role as regulator effectively, and ensure that the objectives of these provisions are being met.

These regulations will therefore enable the current long-standing tradition of commercial banknote issuance in Scotland and Northern Ireland to continue, and I commend them to the Committee.

My Lords, I thank the Minister for introducing the regulations, which are largely uncontroversial, although I would like to raise just a couple of areas, one of which is penalties, which he has partly touched on, and the other is costs.

Under paragraph 4 of Schedule 3, penalties can amount to 10 per cent of the relevant bank’s notes in circulation annually. There are nearly £5 billion-worth of notes in circulation, so in the admittedly unlikely event of all the banks failing to fulfil their obligations and incurring a penalty, in theory the Bank could raise half a billion pounds a year. Even in today’s climate of a billion here and a billion there, that seems to be a large sum of money potentially accruing to the Bank of England.

How did the Government arrive at the figure of 10 per cent? What conversations did the Treasury have with the Bank about how penalties would be calibrated? If I can put it another way, what is the Government’s view of what would trigger the maximum penalty; 10 per cent of the notes in circulation?

When we debated penalties during the passage of the Banking Act 2009, the Minister noted that they would be dealt with in more detail in a statement of policy on penalties, which is required under these regulations in Schedule 3. We had very little time in the final stages of the Banking Act earlier this year, which I am sure the Minister recalls, so I cannot claim that we pursued this with the vigour that we might otherwise have done. The requirement for the Bank to issue a policy is clearly a move in the right direction, but it is a very modest one. Statements of policy, unlike the rules which are required under these regulations, do not require the Bank to consult on the policy, do not require Treasury consent and involve no parliamentary oversight whatever.

Can the Minister tell the Committee more about what the policy statement that is required under paragraph 5 of Schedule 3 will contain? Does a draft of the statement of policy exist, and is it available for public scrutiny? Is any consultation in practice being undertaken in respect of it, notwithstanding no formal requirement for there to be consultation?

Given the high level of potential penalty, it is no surprise that the consultation on the regulations revealed a desire for an independent appeals process or an arbitration panel, which the Minister has referred to. There is nothing in the regulations that sets out or requires an appeals process. The Minister has already repeated what the Government said in response to the consultation process, namely that an appeals process will be set out in the statement of policy on penalties, which is required by paragraph 5 of Schedule 3. I want to query that with the Minister. Paragraph 5 states:

“The Bank of England must publish a statement of policy … in respect of … the process it will follow when it imposes a penalty”.

It says nothing about the statement containing processes that might be available to an aggrieved note-issuing bank if that bank is handed a penalty. Is the Minister content that the Government’s drafting of paragraph 5 covers policies for the remedies available to others? It seems to me to be drafted only in terms of actions by the Bank.

I find it difficult to see how a process, which the Bank must follow, can cover the administration of an appeals process that is independent of the Bank. I think that I heard the Minister say in his introductory remarks that there would be some form of independent appeals process. That being the case, it is difficult to see how an independent appeals process could fit within the wording of a statement of policy that the Bank will follow. I should be interested to hear how the Minister sees that operating in practice.

As I said, the statement of policy is of an even lower level than the rules that have to be issued under these regulations. Perhaps the Minister will explain why a matter as important as appeals has been left by the Government to a statement of policy by the Bank, and not even to rules issued under regulations to which the Treasury would have some say as it would have to give consent. Will the Minister say whether the interests of natural justice are served by this approach, which appears to leave the matter of appeals solely to the whim of the Bank?

My honourable friend Mr Greg Hands raised the issue of costs with the Minister when these draft regulations were considered in another place last week. I do not think that all of the answers given at that stage fully dealt with the matters, so I am returning in part to those issues. The impact assessment shows costs falling on the issuing banks of £100,000 in terms of start-up costs and ongoing annual costs. That does not seem a large sum spread over the number of banks, and the consultation did not unearth a major issue. By far the biggest cost will be borne by the Bank of England, which is a factor of five times the cost of the private sector. It is estimated that the Bank will incur £500,000 of start-up costs and then a similar amount each year. What was unexplained in the Delegated Legislation Committee in another place was why such a disproportionate amount of the total cost is being borne by the Bank of England.

It is unusual to find that the total cost of regulation is split so unevenly between the regulator and the regulatees. It is normal that the cost of regulation falls predominantly on those who are the object of regulation and not the regulators. Are the Government satisfied that the Bank of England is planning to carry out cost-effectively the functions that are required of it by the Banking Act 2001? At the end of the day, the Bank’s costs affect the taxpayer if only by way of the dividend arrangements between the Bank of England and the Treasury, so the amount of costs incurred by the Bank is a matter for the Government. I hope that the Minister can shed more light than what was offered in another place on what the Bank will do and why.

I am grateful to the Minister for explaining the detail of the regulations. As he and the noble Baroness said, they are completely non-contentious. However, given that these regulations are bringing procedures up to date, I was slightly surprised that in the unlikely event of a penalty notice being issued, it will be sent by post. A letter sent by post to the registered office of the authorised bank,

“shall be deemed to have been received by the bank on the second business day after posting”.

In current circumstances, that seems not only a hazardous basis on which to communicate important information, but a rather outdated method. I wonder whether using electronic forms of communication in addition to the post might be a policy usefully adopted by the Bank of England.

My final point relates to a short discussion that we had some time ago about who signs the banknotes. It was pointed out that at one stage Sir Fred Goodwin signed the banknotes of the Royal Bank of Scotland. Given that the Government now own the Royal Bank of Scotland, will this be done by the noble Lord, Lord Myners?

My Lords, normally in the Chamber or in Committee I am seen by Members opposite as one of a band of loyal supporters of Her Majesty’s Government, here to defend at all costs, in all circumstances and in every way possible what the Government are doing. However, today I have one or two questions. I hope they are not too awkward for my noble friend, because I do not want to cause him undue problems on this special day that I look forward to celebrating with him later. I do not want to sour the occasion, but I have two or three questions that I hope he will answer.

The issue is not theoretical, as we in Scotland know. The Explanatory Memorandum includes the line,

“in the event of the insolvency of a note issuing bank”.

We were within 24 hours of that happening in the case of the Royal Bank of Scotland, so it is not a theoretical issue. Now we are being told that banks will be disaggregated in line with competition legislation and because of representations from, and the requirements of, the European Union. What happens to the note-issuing responsibilities if a bank is disaggregated? The Royal Bank of Scotland, Lloyds Banking Group and the Clydesdale Bank have responsibility for issuing RBS notes, Bank of Scotland notes and Clydesdale Bank notes. If the Lloyds Group is disaggregated, as some people have suggested will happen, and an independent Bank of Scotland is set up, does the responsibility for issuing banknotes automatically transfer to the Bank of Scotland and its new owners? Heaven forbid that someone like Sir Fred Goodwin or Sir George Mathewson would be part of that new ownership. Would that worry my noble friend? I hope that he would be concerned if those who were involved in the near-collapse of a bank were then to take over responsibility for running a bank that had responsibility for issuing banknotes.

My second question relates to the excellent speech by the Prime Minister—here I am reverting to type—at St Andrews at the weekend. He suggested a number of alternative ways in which funds might be raised to finance banks that get into difficulties. He suggested the so-called Tobin tax on transactions, and also insurance arrangements under which either the banks might put money into a fund to provide insurance or have an external insurer provide it. How does this relate to the proposal today? It seems to conflict with what is being suggested. The noble Baroness opposite referred to costs and other aspects of it. It would be interesting to know whether any suggestions made by the Prime Minister in St Andrews will be adopted.

Finally, as a former Member representing a Scottish constituency in the other place and now a Peer with a Scottish title—not all Peers from Scotland have Scottish titles, but I am one of them, although the title is not as distinguished as that of one Member opposite—I welcome the fact that the banks in Scotland will be allowed to continued to issue notes, subject to these provisions, and I hope that that will continue for many years to come. However, I hope that the Minister will be able to give me and others some assurance by answering my questions, as well as those raised by the noble Baroness and the noble Lord opposite.

My Lords, perhaps I may come in quickly, having experienced this amazing note of humility from an Ayrshire man. In backing up my noble friend’s concern about costs, I want to make a very simple point, which may have an explanation. The Explanatory Memorandum says that if a bank goes bust, its notes will be redeemed by the Bank of England at no cost. However, if a worthless piece of paper is replaced by a note issued by the Bank of England, how can that be said to be at no cost? It seems to me that the Bank of England will have to pick up the tab for reimbursing people who hold those other notes.

My Lords, this is a timely matter in the present circumstances of banks in both the United Kingdom and the Republic of Ireland because those in business and those who handle notes have increasing concerns about banking in both territories.

The regulations mention that we have four issuing banks’ notes in Northern Ireland: those of the Bank of Ireland, the Ulster Bank, the Northern Bank and the First Trust Bank. The Northern Bank and Ulster Bank are not matters of great concern in Northern Ireland because the Ulster Bank is, after all, a British bank owned in Scotland and the Northern Bank is owned by a Danish bank. Our problems in Northern Ireland relate increasingly to notes issued by the Bank of Ireland and the First Trust Bank, which is not really a separate bank as it is 100 per cent owned by the Allied Irish Bank.

Banking in the Republic of Ireland is pretty serious. Sometimes the press in Ireland refer to it as the next Iceland, and it is scary when you see language such as that. The Anglo Irish Bank in the Republic of Ireland has already collapsed, and the other two, the Bank of Ireland and Allied Irish Bank, which is the First Trust Bank, are often referred to in the press as being insolvent. Of course, the Republic of Ireland may have to seek support from the eurozone, but some economic journalists are saying that Germany may not come to its rescue and that it may have to go to the IMF in the first six months of 2010.

That is why I say that these regulations are timely. They are a means of further guaranteeing to people in Northern Ireland that the pound notes issued by the four banks, and in particular the two in the Republic of Ireland, will be guaranteed by the Bank of England. However, I want to comment on that.

First, I agree that the cost of this is amazing—£600,000 a year, and for what? For nothing. It would be much better to have a standard bank note in the whole United Kingdom, and here I disagree with the noble Lord from Scotland. Today, I have just three notes with me: from the Northern Bank, the First Trust Bank, which I stress is the Allied Irish Bank in the Republic, and the Bank of Ireland, which once again is a Republic of Ireland bank. Those notes are an embarrassment because when you go to Scotland, England, Wales, the eurozone or indeed the whole of the European Union, people do not recognise them. They are not even recognised in England, the reason being that they are not exchangeable with other currencies, be it the euro or any other foreign currency. Therefore, they are an embarrassment and cause difficulty.

One thing that would be much better would be to have the word “sterling” on the notes in larger print. It is the smallest word on each of the notes. When you try to explain to English people that the note has the same value as the Bank of England note, they look at you in horror. You look for the word “sterling” and find it. After some debate they might accept it, but you can be refused on many occasions. These notes are a hindrance and an embarrassment. They have one advantage; England still does not have £100 notes. We, however, need lots of money in Northern Ireland for our farmers, who deal in £100 notes. That is one advantage of having notes of our own in Northern Ireland, but the only one; there are disadvantages in the design.

Many banks in Northern Ireland, such as HSBC, Santander, Alliance & Leicester and Abbey, do not issue notes but work mainly with Bank of England notes. In this case, however, some consideration should be given in the future to the withdrawal of the right to issue local notes, which, as I say, are an embarrassment wherever you travel.

My Lords, I am grateful to all noble Lords who have participated in this short but interesting debate on what we all recognise is an important issue. One or two important questions were asked, as were some relatively complex ones. I am relieved that the noble Lord, Lord Newby, asked me one or two questions which I ought to be able to answer with one- or two-syllable words rather than in a long discussion of the issues.

The noble Baroness, Lady Noakes, began the discussion by making important points about this work in two areas, to which I shall refer first. Penalty notices are a small part of authorised banks’ overall operations, but ensuring that banks comply with the regulatory framework is of the greatest importance for consumer confidence and for ensuring that commercial banknotes continue to play an effective role in the economy. It is therefore important for a financial penalty to carry enough weight to act as a deterrent against non-compliance while balanced against the need for a proportionate and reasonable response to breaches.

The maximum penalty of 10 per cent of a bank’s notes in circulation is cumulative over the course of the year. However, I am sure the Committee does not have the slightest doubt about the importance of the strength of the penalty for a breach in this area, given the whole issue of confidence, as the noble Lord, Lord Kilclooney, indicated when he went on to discuss Irish banks at present.

The noble Baroness asked why we had arrived at 10 per cent and whether to incur any penalty could do more harm than good, such as tipping a bank into insolvency. The Bank must be able to impose a penalty that fits the nature of the breach and acts as an effective deterrent to prevent further such breaches. The penalty will be in line with the Bank of England’s published penalty policy. The maximum value of 10 per cent of an authorised bank’s notes in circulation is, as I have indicated, a small part of its overall operation. It is therefore considered an appropriate cumulative annual cap on the penalties that the Bank of England may impose.

What will the statement on the Bank of England’s policy on penalties look like? This is the Bank of England’s responsibility. The Bank is currently consulting the issuing banks on the banknote rules and the penalty policy. I am not in a position to describe those in greater detail at present, but the Committee will draw solace from the fact that the Bank is consulting on these issues, which are part of the rules for which it is responsible.

The impact assessment contains full details of the costs. None of the consultation responses queried the assumptions for costs, or the difference between the Bank of England’s and the issuing banks’ estimated costs. The noble Baroness referred to a disparity between the two.

My Lords, I suggest to the noble Lord that that is not surprising. Those who looked at the consultation, and at the impact assessment, would have been concerned about their own costs. These are quite modest for the banks concerned. I would not have expected anybody else reading the impact assessment to comment on the Bank’s costs unless they had an impact on their own costs. I understand that there is no charge from the Bank of England to the banks that may issue notes, so it signifies nothing that there were no comments on the Bank’s costs.

Nevertheless, my Lords, when one conducts consultations on these issues, one deals with informed individuals who have viewpoints. They do not occupy the same kind of role as the noble Baroness, but consultation among informed participants tends to throw up areas where there might be questions and difficulties. I am reflecting the fact that we have not met those issues in the way that the noble Baroness suggests.

My Lords, on the subject of consultation, the noble Lord said that the consultation was with people who understood these things. I was amazed that there were only eight responses. In what way was the public in Northern Ireland consulted about continuing to have separate notes?

My Lords, should we have consulted the general public about a position that was derived from a banking Act of 1845 concerning the question of continued circulation? I will reply to the noble Lord in a moment on the crucial question of security that has been identified with regard to banks. On the question of whether it was a good idea, it was reasonable for Her Majesty’s Government to make the presumption that in both Northern Ireland and Scotland—I am sure that my noble friend Lord Foulkes will be on his feet in a moment if I make the wrong presumption—there will be a continuing policy, and that there would have to be a jolly good reason why that policy should be abrogated and the power taken away from two parts of the United Kingdom. I do not think that there was consultation on that matter. The consultation was more about the details of the regulations that we are discussing.

The consultation involved putting the issues on a website, and a copy was sent to all previous respondents on the issue, so the level best job was done to try to involve those who might be defined as being interested. I say to the noble Baroness that consultation is still going on—that is the responsibility of the Bank of England as regards the penalty policy. It is consulting the authorised banks on the matter. There is no formal requirement for the Bank to consult: it is empowered to draw up policy on its own. That is what the Act says. However, it is wise that it should consult the general public, although perhaps not in the way suggested by the noble Lord, Lord Kilclooney. It should consult those who will be directly involved. Therefore I hope that it will be appreciated that the Bank is going about its business in a purposeful way, and seeking to get the best insights possible by the way in which it works to resolve issues of penalty policy.

I am not in a position to single out any specific behaviour that might trigger the maximum penalty. The noble Baroness asked me to envisage the worst case. That is always a hazardous thing when one is involved with banking behaviour, because when it comes to confidence the wish can be father to the thought if one is not careful. The Bank of England would have to consider all the relevant circumstances at the time with regard to the crucial issue of confidence. The noble Baroness cannot expect me to go into much detail on the issue, although I am always tempted by the questions that she asks and attempt to answer them as fully as I am able.

The noble Lord, Lord Newby, asked me two questions. On one I can reassure him: my noble friend Lord Myners has many responsibilities but he is not going to be signing the banknotes. His second question concerned the post. I emphasise that communication will take place through all modern media—not just the post but electronic media as well. The noble Lord knows only too well that in very serious circumstances such as this you have to have proof of notification, and one form of communication will be by post. If the bank can prove that after two days it did not receive the requisite document by post, then of course there will be an extension of time; otherwise, it will be assumed that the postal services will deliver, as they are accustomed to do. As has always been the case, the policy with regard to these issues will be that, if you are not able to substantiate that the document did not arrive by post, it will be your responsibility to respond on the assumption that you received it two days after it was posted. We will not be departing from that. I do not think that the noble Lord, Lord Newby, was really asking me to fashion a policy communication based on what we all regard as temporary difficulties with the Post Office, which we hope will return to normal fairly shortly.

My noble friend Lord Foulkes kindly said that he did not want to ruin my day. However, he started to do that the moment he stood up, as he was all too well aware. He could have made a much better job of looking after my interests by not asking me those questions. Nevertheless, I emphasise to him that they are important questions. He asked what would happen if a bank were broken up. The issuing rights are vested in the corporate entity that was authorised to issue notes by virtue of the 1845 legislation, and a change in the share ownership of that entity would not deprive the bank of its issuing rights. However, the right to issue notes cannot be transferred to another bank by contract; it stays with the original bank, as defined under the legislation. If his anxiety was that these rights could be readily transferred and be the responsibility of others, I can reassure him that that would not be the case. I give way to my noble friend, who I see is seeking to enhance my day again.

I am very grateful to my noble friend. I presume that within the Lloyds group there is currently an identifiable unit—the Bank of Scotland, as part of Lloyds. However, if it is disaggregated, as is being suggested by the European Union and domestically, is it guaranteed that there will be a new organisation or entity also called the Bank of Scotland? I do not know whether that will be the case but would it not create some problems? Therefore, arising from these obligations at the time of disaggregation should there not be an agreement that one of the units will be the Bank of Scotland, presumably with its headquarters in Edinburgh? If that were the case, I would be encouraged because it would mean that we would have some kind of guarantee during the aggregation that the Bank of Scotland would rise like a phoenix from the ashes.

That is a colourful perspective but I am not sure that I can follow my noble friend down that path. I reassure him that the rights conferred on the corporate entity cannot be transferred to anyone else—they cannot be sold to another bank by contract. Whether the existing bank will continue will depend on the circumstances of the restructuring and the security identified in terms of that restructuring. I am not in a position to give assurances on that now because none of us knows the structure that will emerge. I can only give my noble friend a negative assurance: the rights cannot be transferred to another corporate entity. Whether the corporate entity continues and enjoys the confidence to carry on its functions will depend on the Bank of England’s judgment on the arrangements of the corporate entity, but my noble friend will recognise how important that is to the bank. Therefore, it is inconceivable that this will not be part of the priorities of the restructuring position. I do not think that I can comment any more fully on that.

I appreciated the comments made by the noble Lord, Lord Kilclooney, about the timeliness of the measure. It is important that we establish confidence all round in the circumstances he identified where there are some anxieties, which I would not want to exaggerate. However, he is suggesting that the cost is somewhat high, but we do not think that it is. The confidence of the public in the banknotes that are issued is crucial. The noble Lord has identified a dimension of the problem of others accepting the banknotes at face value because of the way in which they are inscribed and so on. I am not in a position to comment on that, but that point will be taken on board. The general issue is that confidence in the notes is critical, which is why we regard this whole process as being one in which necessary costs may be incurred, but they are part of the crucial role of the Bank of England in relation to guaranteeing the essential security behind the banknotes, which, as the noble Lord emphasised, is so important.

The noble Lord, the Earl of Montrose, also asked me about this question.

I am sorry. I apologise to the noble Duke. This is not the first time that I have made such a calamitous mistake. I want to reassure him that, with regard to costs, the position being adopted is eminently defensible. We are involved in an exercise of great importance as far as the Bank of England and other banks are concerned and the calculations are based on reasonable assumptions.

I am all too well aware that aspects of this submission are difficult for the Committee, not least because we are talking about regulations which relate to rules that the Bank of England is to draft. The rules have to be supervised, vetted and authorised by the Treasury, but they are not part of these regulations. That is because these rules go down to such elements of detail as to make them not suitable for detailed parliamentary scrutiny. We are concerned with the regulations which govern the whole process.

I sense that the Minister is winding up his remarks, so I should like to put one point back to him.

Sitting suspended for a Division in the House.

Before I was so rudely interrupted by a Division, I was about to interrupt the Minister before he sat down and escaped dealing with these regulations. I want to take him back to my point about appeals, which he did not really deal with.

Let me track back. During the passage of the Banking Act earlier this Session, we created different regimes for Part 5, which dealt with inter-bank payment systems and Part 6, which is about banknotes and which we are currently debating. Part 5 had a very clear appeals mechanism linked to the provisions of the Financial Services and Markets Act. No such provisions were made in the Bill for banknotes. The issue of appeals comes up again in the consultation, and the Government replied that it would be done in a statement of policy. I am trying to tease out whether the Government have properly allowed for an appeals mechanism in the way in which they have approached both the legislation, including the regulations and subsequent rules, and the statement of policy. There is no requirement in the regulations for an appeals process. The Minister’s position is that the possibility of issuing a statement of policy on penalties allows but does not require the bank to make provision for an appeals process. The point that I put to the Minister was that paragraph 5 of Schedule 3 to the regulations says:

“The Bank of England must publish a statement of policy, with which it must comply, in respect of … the process it will follow when it imposes a penalty under these Regulations”.

I put the point in my earlier remarks, possibly not sufficiently clearly, that what the Government have provided for in paragraph 5 does not seem to encompass anything that could be regarded as an appeals process, because an appeals process involves organisations or appeals tribunals—it involves something other than the Bank of England. The Government have drafted paragraph 5 only in terms of things that the Bank of England must do in its policy and they have not even drafted it sufficiently comprehensively to encompass what one would need to see in terms of an appeals mechanism.

This may sound rather pernickety, and on reflection I am not clear why we did not insist on having an appeals mechanism in the Bill. It was probably because of lack of time rather late in the day in the proceedings at the end of the Bill, when we were operating an expedited process. To some extent, one takes the blame for that; but it is important now. Consultation has revealed the need for an appeals process, which I can fully see given the scale of the penalties that are potentially capable of being imposed by the Bank of England. I put to the Minister that the regulations do not adequately allow for that appeals process to be created within the legal framework of the Act and the regulations.

My Lords, the noble Baroness has made explicit her concerns, and earlier I attempted to identify how these concerns were being addressed, not perhaps in quite the way that she wished. She is absolutely right that the regulations do not make a formal requirement to consult on the penalty policy on the issue of appeal.

As I indicated earlier, the Bank of England has circulated to the issuing banks the appeals procedure that it envisages alongside the latest draft of the rules. The Treasury can only approve the rules. It does not have the power to approve the penalty policy. The Bank of England is working against the background that, on consultation, the issue with regard to the penalty policy and the right of appeal, which the noble Baroness has stressed, is important. The Bank of England is working closely with the Treasury while drafting both the rules and the penalty policy. The Bank of England remains answerable. If the policy is manifestly unreasonable, if what was created was a structure in which the right of appeal was not a significant right for anyone undergoing the penalty, the Bank could be subject to judicial review. As a public body, it is all too well aware of its responsibilities in those terms.

I am sorry that I am not able to take the issue much further than that. The noble Baroness has identified that these are the limits of the regulations regarding the appeal policy. I am stating that that is so, but insofar as the Bank of England wants to act fairly and justly and deal in its consultation with the issues that have arisen, the Committee can rest assured that the Bank is proceeding in a way that guarantees that it acts entirely properly in this regard.

The regulations are of the greatest importance. They ensure that holders of Scottish and Northern Ireland banknotes will be afforded the same level of protection as that afforded to the holders of Bank of England banknotes. The regulations are the first step in implementing Part 6 of the Banking Act 2009, which established the framework of the new regime after very considerable consultation. It will be recognised by the Committee that throughout the process the Treasury has worked closely with the Bank of England and with the issuing banks on the evolution of this policy, against a background where we all recognise why we needed a new banking Act and why the wider public needs every confidence to be restored with regard to a matter of such importance as banks that issue banknotes.

Motion agreed.

Ministry of Defence Police (Conduct) Regulations 2009

Considered in Grand Committee

Moved by

That the Grand Committee do report to the House that it has considered the Ministry of Defence Police (Conduct) Regulations 2009.

Relevant Document: 22nd Report from the Joint Committee on Statutory Instruments.

My Lords, in moving the Ministry of Defence Police (Conduct) Regulations 2009, I shall also speak to the Ministry of Defence Police Appeals Tribunals Regulations 2009. These are defence regulations, and it would be wrong of me to say anything about the Armed Forces, especially this week and after Remembrance Sunday, without paying tribute to those who have died in recent operations and to their families and friends. We will, of course, pay tribute in the Chamber to individuals at a suitable point.

The Ministry of Defence Police Act 1987, as amended by the Criminal Justice and Immigration Act 2008, contains powers for the Secretary of State for Defence to make regulations on disciplinary matters, including the conduct of members of the Ministry of Defence Police. There are currently some 3,500 Ministry of Defence Police officers throughout the United Kingdom. The Secretary of State for Defence has the option of deploying them to any location owned or run by the MoD to maintain the safety and security of Armed Forces civilian personnel and the public.

In recent years, the role of the Ministry of Defence Police has evolved significantly and continues to do so. The force is operating in increasingly challenging and sophisticated roles that go beyond the demands of day-to-day policing in the wider community. Examples include: marine policing; firearms duty, including specialist duties using special weapons and tactics; operating with CBRN protective equipment; dealing with public disorder; and officers working overseas in Afghanistan. MoD police officers possess the full range of constabulary powers and the skills to interact with personnel and the general public: with a view to protecting life and property, maintaining the peace, detecting and preventing crime, and prosecuting offenders. They can work both inside and outside defence establishments.

Today, in an effort to improve further the arrangements for dealing with the misconduct of MDP officers, we are seeking to introduce two statutory instruments that will bring the MoD Police into line with their colleagues in Home Department police forces in issues of conduct and appeals. The Home Office regulations have been in place for almost a year and continue to enjoy the full support of all major stakeholders, including the Police Advisory Board for England and Wales and the Independent Police Complaints Commission.

In response to the recommendations of the Taylor review, the two statutory instruments establish a new set of procedures that govern police disciplinary matters. The Ministry of Defence Police (Conduct) Regulations 2009 establish procedures for taking action against the misconduct of police officers. The Ministry of Defence Police Appeals Tribunals Regulations 2009 provide for appeals to a police appeals tribunal against the findings and specific outcomes of the MDP conduct regulations.

The Ministry of Defence Police is a national police force. It is therefore our policy that all members of the force—whether in England, Wales, Scotland or Northern Ireland—operate under the same conduct regulations, policies and procedures wherever they serve in the United Kingdom. We have therefore kept in close contact with the devolved authorities, the Police Complaints Commissioner for Scotland and the Police Ombudsman for Northern Ireland, and informed them all of our legislative proposals on the new MDP conduct procedures and of our intention to enter into agreements with the respective ombudsmen to extend their jurisdiction over MDP officers in Scotland and Northern Ireland, as outlined in the new regulations.

It may be helpful if I set out the background to the regulations. The Taylor Review of Police Disciplinary Arrangements was a review conducted by William Taylor, CBE, OBE, QPM, a former Commissioner of the City of London Police, a former HM Inspector of Constabulary for Scotland and also a former police adviser to the MoD Police Committee. The programme board that guided and informed the Taylor review consisted of the main police stakeholders and other invited organisations—the Association of Chief Police Officers, the Police Federation of England and Wales, the Police Superintendents’ Association of England and Wales, the Chief Police Officers Association, the National Black Police Association, representatives of the Special Constabulary, the Independent Police Complaints Commission, UNISON, Liberty and the Advisory, Conciliation and Arbitration Service. The MoD was also involved in the consultative process.

The Taylor report made 19 recommendations, some of which I shall highlight. They include: police officers disciplinary arrangements are most appropriately determined by Parliament after extensive consultation; a new single code should be produced to be a touchstone for individual behaviours and a clear indication of organisation and peer expectations; although regulated by Parliament, the new procedures should be based on the Advisory, Conciliation and Arbitration Service’s code of practice on disciplinary and grievance procedures; conduct issues should be separated into two distinct groups—misconduct and gross misconduct—to promote proportional handling, clarify the available outcomes and provide a better understanding of the policing environment; and the police service must manage the disciplinary arrangements dynamically to drive through the changes to the internal culture of the organisation and promote the acceptance of responsibility at all levels. The recommendations were accepted by the programme board and the Home Office Minister. That led to the Police Advisory Board for England and Wales being asked to take forward the process for implementation.

I have a few points to emphasise about the Ministry of Defence Police (Conduct) Regulations 2009. First, the Taylor review found that the current system of dealing with police misconduct can be slow and disproportionate. It gives little or no encouragement to managers to deal swiftly and proportionately with low-level misconduct matters. Discipline hearings were seen as being more akin to criminal court hearings and even low-level misconduct matters were decided by a three-person panel of senior officers.

The new system will ensure that police managers are given the responsibility and ability to deal with misconduct fairly and proportionately at local level. Timescales are also built into the process to ensure time limits on all misconduct and gross misconduct cases. An independent member appointed by the MoD Police Committee will also sit on misconduct hearing panels to bring a public perspective to holding MDP officers to account. The Taylor report recommended a new single code, which should be the touchstone for individual behaviour, and a clear indication of organisational and peer expectation. The Home Office together with other stakeholders produced the new standard of professional behaviour for Home Department police officers that form part of their conduct regulations. These standards set out clear expectations of the behaviour that the public and colleagues expect of all police officers. The same standards will therefore form part of the Ministry of Defence Police (Conduct) Regulations and replace the existing MDP code of conduct.

The Taylor review also proposed that the new misconduct procedures should be based on the Advisory, Conciliation and Arbitration Service principles which will modernise the system and make it easier for individual officers and the police service generally to learn lessons and improve their service to the public. One of the key points to emerge was the need to shift the emphasis and culture in police misconduct from blame and punishment towards a focus on development and improvement. The review also stressed the importance of carrying out a full assessment of the alleged misconduct at an early stage with a view to implementing a proportionate response. The new procedures have incorporated the requirement for this objective assessment to take place at an early stage.

A further recommendation by William Taylor was that the procedures for dealing with the unsatisfactory performance of a police officer should be reviewed. While new regulations on performance were therefore introduced for Home Department police forces on 1 December 2008, there are no equivalent regulations for the MDP. Instead, MoD Police officers will continue to fall under existing MoD restoring efficiency procedures in any case in which a police officer’s performance or attendance falls short of the required standard.

The Ministry of Defence Appeals Tribunals Regulations 2009 provide for appeals against findings or certain outcomes relating to cases considered under the new conduct regulations. Appeals should be dealt with in a timely and proportionate manner, so timescales are built into the new regulations to ensure that this is the case. The police appeals tribunal chair will have the power to dismiss appeals at an early stage where there is no real prospect of success and no other compelling reason for the appeal to proceed.

The tribunal will have the power to overturn the findings of the original panel that considered the conduct case and to amend the sanction imposed. The composition of police appeals tribunals differs according to whether the officer is senior or non-senior and whether the officer serves in England, Wales, Scotland or Northern Ireland. The police appeals tribunal is a three-person panel for senior officers and a four-person panel for non-senior officers. For senior and non-senior officers serving in England, Wales or Northern Ireland, the chair is selected through the Judicial Appointments Commission and must have five years’ legal standing. For officers serving in Scotland, the chair is selected from a list that is nominated by the Lord President of the Court of Session. The chair has the casting vote and there is no appeal against the decision of the tribunal or of the chair; the only challenge is through a judicial review.

Our proposals for the Ministry of Defence Police enable the force to follow in the footsteps of its Home Department police force colleagues in implementing the new conduct and appeals regulations. The new procedures provide a fair, open and proportionate method for dealing with alleged misconduct, and will hold MoD Police officers to account appropriately and in the same manner as their colleagues from other police forces throughout England and Wales. This will create a conduct environment for police officers that more closely reflects civilian employment practice. The regulations are intended to encourage a culture of personal responsibility among police officers and of learning and development for both individuals and the organisation.

It remains the case that, where circumstances require, there must be appropriate sanctions for misconduct. However, we must also ensure that improvement is an integral part of any outcome. Even when the individual is dismissed, there are learning opportunities for the force. I beg to move.

My Lords, I thank the Minister for explaining these statutory instruments in great detail. We on these Benches share his tribute to members of the Armed Forces who have been killed and to their families, and his view that the main tribute should be paid on the Floor of the House.

These new regulations are uncontroversial, and I have just three short questions for the Minister. First, what distinct conclusions and recommendations resulted from the MoD’s consultation with the Defence Police Federation and the Chief Police Officers’ Staff Association? The Minister may have covered the second question in his opening speech, but I will ask it anyway in case he wants to add to his original point. What strategy have the Government devised to ensure that the new regulations are understood and are being fairly and consistently applied? Finally, how much do the Government envisage spending on retraining their officers in the light of these new regulations?

My Lords, first, I enjoin these Benches and my party in the earlier tribute to our Armed Forces. Twenty-five years ago, I had ministerial responsibility for the Ministry of Defence Police and came to form a very high regard for it. I have particular sympathy with the conditions in which the officers have to work at many MoD facilities, bases and sites. I remember working very hard to try to get adequate winter clothing for the MoD police who were guarding the cruise missile site at Greenham. Despite the size of the MoD budget at that stage, I had the greatest difficulty in managing to get resources for adequate clothing, and I hope that they have it today.

In more recent years, on a golfing trip to Loch Lomond, I met one of the former officials of the MoD Police, who seemed very pleased to see me. He is in charge of the locker room at Loch Lomond and he gave my golf shoes an extra clean. I do not know whether I need to refer that to the Register of Members’ Interests, but I happily declare it to the Committee.

In a rather more serious vein, we, too, have no fundamental queries with regard to the use of the regulations, but I should like to ask the Minister three specific questions. First, given that the related Home Office orders—the Police (Conduct) Regulations 2008, the Police (Performance) Regulations 2008 and the Police Appeals Tribunals Rules 2008—all came into force on 1 December 2008, why has it taken the MoD effectively a whole year to bring these orders into force, in November 2009?

Secondly, the Explanatory Memorandum talks of the orders being monitored and reviewed and says that the Ministry of Defence Police Committee will provide a quarterly external review and offer advice and guidance where necessary. That is welcome, but can the Minister confirm under what mechanism reviews and guidance will be made available to parliamentarians? Will copies be placed in the House of Lords Library or will they be restricted to being online on the MoD website? Linked to that, can the Minister give me an indication of the make-up or composition of the Ministry of Defence Police Committee? Thirdly, what discussions have there been between the MoD and the Home Office in devising these regulations? Specifically, has the MoD monitored and incorporated issues that have arisen out of the Home Office orders in the past 10 months, or are these regulations simply a like-for-like duplication of the Home Office orders?

My Lords, I thank both noble Lords. I turn, first, to the comments of the noble Lord, Lord Astor. Consultation took place with the Defence Police Federation and the Chief Police Officers’ Staff Association. No specific issues of concern were raised and they were broadly supportive of the new procedures and the new standards of professional behaviour.

I turn to the strategy for bringing the procedures into effect. I can specifically respond on the matter of training, and I think and hope that this will be a full enough answer. As part of the implementation programme, a comprehensive package of training has been developed and delivered, based on Home Office police training. All ranks of chief inspector and above have received or will receive a mandatory two-day hearing or meetings course delivered by an external approved training provider. The cost is in the region of £50,000, although clearly the full cost will be greater when the time of the staff attending the courses is taken into account. Improvements from the procedures will pay back very rapidly in terms of efficiency. Constables, sergeants and inspectors will receive mandatory awareness training via the MoD Police e-learning package, which is based on the Home Office police model developed by the National Policing Improvement Agency. In addition, the force has implemented a comprehensive awareness package of posters, leaflets, articles in magazines, presentations and monthly bulletins.

The MoD Police regulations needed to be drafted separately. They are under separate primary legislation and require a further additional consultation process with the Defence Police Federation and the Chief Police Officers’ Staff Association. The devolved authorities and others in Scotland had to be consulted. Copies of the guidance and, I believe, the outcome of any review—I will write to the noble Lord if that is not accurate—will be placed in the Library of the House.

I was asked: who is on the MoD Police Committee? This committee was established under the Ministry of Defence Police Act. It is appointed to deal with the governance of the Ministry of Defence Police. It consists of one independent chair, three independent members, two police advisers and two senior MoD officials. Its role is to provide assurance to the Secretary of State for Defence on the Ministry of Defence Police and the use of constabulary powers, and confirm that they meet the standards required for a police force. The police committee formally meets quarterly.

There were continued discussions with the Home Office. The MoD has maintained a dialogue with Home Office officials in preparation of the regulations and procedures, and since the police conduct and appeals regulations were implemented. We understand that the Police Advisory Board sub-committee, which is responsible for overseeing the reforms, is pleased with the progress and there is every indication of their success. We are informed that there is still a requirement for cultural changes, as would be anticipated at this stage. There are also indications of signification savings being accrued. Like the Home Office, we also intend to keep the regulations under review. Any changes will be subject to further regulations being laid in Parliament.

Motion agreed.

Ministry of Defence Police Appeals Tribunals Regulations 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Ministry of Defence Police Appeals Tribunals Regulations 2009.

Relevant Document: 22nd Report from the Joint Committee on Statutory Instruments.

Motion agreed.

Misuse of Drugs Act 1971 (Amendment) Order 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Misuse of Drugs Act 1971 (Amendment) Order 2009.

Relevant Document: 23rd Report from the Joint Committee on Statutory Instruments.

My Lords, if this order is approved it will come into force on 23 December 2009 and will bring a number of substances, many of them known as “legal highs”, under the control of the Misuse of Drugs Act 1971. The substances concerned are GBL and 1,4-BD; 1-benzylpiperazine—BZP—and a group of other substituted piperazines; synthetic cannabinoid receptor agonists, which I shall refer to as synthetic cannabinoids for short—that shows what a complex issue this is—15 anabolic steroids, two non-steroidal growth-promoting agents and oripavine.

As is required by the Act, the Advisory Council on the Misuse of Drugs has been consulted and agrees with the proposals. On 25 August, following the completion of a 12-week public consultation, my right honourable friend the Home Secretary announced that the Government had decided to control a range of “legal high” drugs to protect the health of the public, especially young people. These “legal highs” carry varied but significant health risks. Young people in particular may often equate “legal” with “safe” and do not always understand that the drugs carry risks. By banning the drugs we will send a clear public health message to users and sellers.

New legislation is only part of the work that we are doing to tackle the emerging threat. We have also launched an information campaign to educate young people on the dangers of these substances, particularly when they are mixed with alcohol. As with all FRANK campaigns, ours is targeted to ensure that the message reaches the people most at risk of using the substances, and we have worked with leading experts in the field to develop the campaign. We are also targeting people looking to purchase the drugs online with key risk messages that will appear while they are searching the internet.

We must be prepared to adapt our drug legislation to tackle emerging threats to health. We propose to introduce generic definitions for a number of these drugs to capture closely associated chemical compounds that otherwise might be misused instead. This is not a new approach—we have used it for other synthetic drugs—and again we are taking the opportunity to future-proof our drug legislation, responding to current and foreseeable trends to ensure that we keep one step ahead of the unscrupulous manufacturers of illicit substances.

Gamma-butyrolactone—GBL—is perhaps the best known of the drugs that we propose to control with noble Lords’ approval. Noble Lords may recollect that much concern has been expressed about the dangers of misusing GBL following the tragic death of Hester Stewart, a young woman with a bright future ahead of her. It is important that we impose suitable controls on the drug’s availability to help to ensure that other families do not suffer a similar loss.

When ingested, GBL and a similar chemical, 1,4-BD, are rapidly converted to GHB, which is already controlled as a class C drug. The effects and risks associated with the misuse of GBL and 1,4-BD are unconsciousness, a dependence syndrome if used regularly and a risk of death by intoxication. However, unlike GHB, GBL and 1,4-BD have a wide range of legitimate industrial uses. For example, they are used in the manufacture of cleaning agents, paints and nail polish. Our recent public consultation focused on ensuring that a control option for GBL and 1,4-BD was chosen that provides the best protection to the public from the harms that these drugs can cause while taking fully into account the uses of these chemicals for legitimate business purposes.

We intend to amend the Misuse of Drugs Regulations 2001 so that the prohibitions relating to GBL and 1,4-BD as class C drugs, and the consequential offences, will apply only when the substances are intended for human ingestion. The amending regulations to allow the legitimate use of GBL and 1,4-BD are subject to the negative resolution procedure. They will be laid shortly, to come into force on 23 December at the same time as the Order in Council if it is approved.

The Government accepted the advisory council’s advice on the class C classification of GBL. Current evidence, especially in relation to societal harm, suggests that GBL, like the related GHB which has been a class C drug since July 2003, is less harmful than current class B drugs. The health risks, including the risk of death, are increased when the drug is combined with alcohol or other depressant or stimulant substances, but classification of any drug under the 1971 Act does not, and should not, depend on whether it is used with other substances.

The control of BZP is the Government’s response to the European Council’s decision to require all EU members to subject BZP to “control measures and criminal provisions”. The decision states that,

“due to its stimulant properties, risk to health, the lack of medical benefits and following the precautionary principle, there is a need to control BZP”,

through measures,

“appropriate to the relatively low risks of the substance”.

The advisory council advised a class C classification for the drug, but also recommended that controls be levied on the related group of substituted piperazines, not just BZP, using a generic definition, as BZP is only one of several substituted piperazines that have been found in the United Kingdom and are, or are capable of, being misused, with the same or very similar harms. For the very reasons I gave at the start of my remarks on the need for durable legislation, the Government support this recommendation.

For similar reasons, we have proposed generic definitions to deal with synthetic cannabinoids—the man-made chemicals that mimic the psychoactive effects of the active ingredient in cannabis and can be sprayed on herbal smoking products such as Spice. After consideration of the available evidence, the advisory council concluded that the harms of synthetic cannabinoids are broadly commensurate with those of cannabis and that they should be classified accordingly under the 1971 Act. Cannabis was reclassified as a class B drug, with effect from 26 January 2009, and it is logical that synthetic cannabinoids should also be controlled as class B drugs.

Controlling the potential range of synthetic cannabinoid substances that are or could be used in these herbal smoking products presents a challenge. As with piperazines, the council calls for the wider legislative control obtained by using generic definitions. By using the scientifically elegant definitions provided by the advisory council, our controls will capture a range of synthetic cannabinoids and therefore address current and foreseeable trends.

Bringing 15 anabolic steroids and two non-steroidal substances, which are growth promoters, under the control of the 1971 Act brings UK legislation into line with the World Anti-Doping Agency’s prohibited list. As class C drugs, they will join more than 50 anabolic steroids. The original group of steroids that came under the control of the 1971 Act as class C drugs in 1996 was identified by reference to the International Olympic Committee’s prohibited list. It is therefore appropriate for the Government to update the control of such drugs by reference to its successor, the World Anti-Doping Agency’s prohibited list. We must have this legislation in place to underpin the anti-doping work that is being led by the Department for Culture, Media and Sport, particularly in the run-up to the London Olympics in 2012.

The control of oripavine under the 1971 Act meets the United Kingdom’s obligation to control the substance following its international control under the UN Single Convention on Narcotic Drugs 1961. Oripavine is an alkaloid that is found in the poppy straw of the opium poppy. It can be converted into thebaine, which is controlled under the 1971 Act as a class A drug and is used in the production of semi-synthetic opiates such as hydrocodone and oxycodone. I apologise for all these different names. They are quite mind boggling, I know, but there is no way of getting around them, I am afraid. There is currently no evidence of oripavine’s misuse in the UK, nor of its illicit conversion in the UK to thebaine and other opioids. For these reasons, the advisory council concluded that its potential harm is more commensurate with class C drugs such as the opioid, buprenorphine. The Government have accepted this recommendation.

If the order is approved, the Government will publicise the law changes through a Home Office circular and through the Talk to FRANK and websites. Reference to the law change and health risks relating to the drugs will be included in future government materials for young people. The order will ensure that we have up-to-date and durable legislation for these dangerous or otherwise harmful drugs to enable us to respond to current and foreseeable trends. I commend the controls proposed in the order. I beg to move.

My Lords, as the Minister said, this draft order will classify various substances as controlled drugs under the framework set up by the Misuse of Drugs Act. On these Benches we support the Motion for approval but we have a couple of concerns about the approach to the classification of, in particular, GBL and 1,4-BD.

I have two points to make. The first concerns the length of time that it has taken to classify GBL. It was recognised as a pro-drug of GHB, meaning that when ingested it has similar effects and risks. The class C classification was given to GHB in 2003. In 2007, the Advisory Council on the Misuse of Drugs recommended that GBL should be classified as a controlled drug. However, it has taken a further two years for the Government to get round to that classification and, although I take the Minister’s point about the need to ensure that legitimate use is not impeded, that seems a very long time. I should be grateful to know the circumstances that caused this delay and whether in the future action can be speedier.

There is no doubt that during the time this drug has been under consideration but not classified there has been a significant increase in the use of the substance, including, in particular, in date rape cases. It now appears to have a faster onset of action than its related drug, GHB. Therefore, I should be very grateful to know the Minister’s analysis of the speed at which these classifications take place and whether they can be somewhat speeded up.

My second point concerns the Government’s decision to treat GBL as a class C drug. There have been cases of sudden death when this substance has been consumed with alcohol and, as I have already said, it has been linked to date rape cases, which is pretty serious from a public protection standpoint. On these Benches we do not consider that treating this substance as a class C drug will provide the required emphasis on either the potential harm or the need for robust enforcement.

One consequence of the chaos over cannabis reclassification is the damaging impression that class C drugs are not particularly harmful. The Minister himself mentioned, and I entirely agree, that because it is legal it does not necessarily harm less. I think that there is a mistaken impression that these drugs, if only class C, are not particularly harmful.

The situation is not helped by the problems that there have been with the Government’s drugs helpline, FRANK, which, in one case, as the Government admitted, gave out the wrong advice earlier this year about the strength and health effects of cannabis. In the context of this order, it would be very helpful if the Minister could say what steps the Government have taken to ensure that that kind of slip-up does not occur in future, because its consequences can obviously be serious.

Does the Minister accept that we are still learning about the potential effects of GBL and that its serious effects are becoming clearer over time? It would be helpful if he could say on what basis the Advisory Council on the Misuse of Drugs and the Government made the decision to classify GBL at the lowest level. Did they, for example, consider the potential harm caused by GBL if it is consumed with alcohol? When the Government announced their decision to reclassify cannabis last year, they said that with,

“doubts about the potential harm that will be caused, we must err on the side of caution and protect the public”—[Official Report, Commons, 7/5/08; col. 705.]

I absolutely agree. Therefore, my view is that we should err on the side of caution when it comes to GBL and that we should take a more precautionary approach than I believe a C classification gives us.

The Misuse of Drugs Act is supposed to put in place a flexible framework where, if evidence of greater or lesser harm of a drug emerges, the classification can be changed accordingly. It would be helpful if the Minister could tell us on what kind of basis a review would take place. Will there be continuous review or a time-to-time review? What would be the possible consequences of review? We think that GBL should be classified as a class B drug and not a class C drug. I should be grateful for the Minister’s comments.

My Lords, I am grateful to the Minister for sharing the Government’s thinking on this order, which we support, and for his manfully struggling, if I might respectfully say, with the names, which are incredibly difficult. I was also very grateful for the particularly clear Explanatory Memorandum, which was very good in setting out the options and why the Government had taken them.

The Minister mentioned that the generic approach has been taken before, so obviously the Government have experience of the legal term “structurally derived”. I highlight this because, with the ever-increasing amount of scientific knowledge available about what stimulates the brain and how, there is a worry that it will be quite easy for chemists to move from one chemical make-up to another with the same effect. It is the effect that we are worrying about, as opposed to which chemicals are causing it, although the Minister may tell me more about that.

I worry because, as fast as the Government can move and classify, people interested in selling drugs can move equally fast to another chemical make-up. Given the discussion around GBL and the fact that it has other uses, children and young people might revert to something commonly used in other countries where the marketing is probably less slick. It might not be marketed as GBL and there might be far more sniffing of glue, paint-stripper, nail varnish remover, aerosols and all sorts of things. It is not that by classifying these things the problem will disappear. The biggest effort should still be the educational campaign. What is the current spend on the educational campaign that the Government call FRANK and what is the budget for next year? It is only by adequate education that the health of young people can be safeguarded.

There has been much controversy on the classification and advice from the advisory council, and we are sad that the Government chose to disregard its view. You could consider any substance: for example, alcohol is legal but in A&E departments there are many cases of much harm and sudden death from drinking too much. Again, ultimately, that is a question of education, unless we go down the line of prohibition of alcohol.

The Minister did very well when he was talking about the objective as regards synthetic cannabinoids. The Explanatory Notes state:

“The ACMD advise that the potential harms of synthetic cannabinoids are broadly commensurate with those of cannabis”,

which I think should be followed with a full stop because the ACMD agrees that synthetic cannabinoids are fully commensurate with the harms caused by cannabis. If there was a full stop, it would continue with, “which” the Government chose to reclassify,

“as a Class B drug under the 1971 Act”.

That would be against the scientific advice, which the Explanatory Notes do not say. I do not believe that classification is the key; education is the key, and that can begin with children as young as is reasonably possible so that they are not a sitting target for marketing.

There was no population or household survey data collection on BZP so there was a pretty limited insight into usage. Although we know when tragedies happen and someone takes something and dies, do the Government have any idea of how widespread the use of most or all of these products is? It is difficult to apply for a budget for education if we do not know how widespread the problem is. It is also a problem in health terms. We do not know how many people are likely to have health issues. Ultimately, that prevents a proper debate taking place.

I thank noble Lords for their contribution to the debate. There is no doubt that we all agree that drug misuse wastes lives, destroys families and damages communities. We have to face the problem head on. We know that we can succeed in tackling drugs and reducing the harm they bring. In the past 10 years we have seen some progress and notable successes. Drug use is down but we have to be prepared to respond to the nature and force of the problem as the environment changes, and as part of that response we must look to our drug laws.

The noble Baroness, Lady Neville-Jones, referred to things such as Spice and so on, which are a way for unscrupulous people with shops to get round the drug laws and sell things to people who feel they need them. The noble Baroness mentioned the issue of date rape, which is important, and particularly unpleasant. The ACPO forensic science service and sexual assault referral centres conducted a 12-month study into DFSA, which is drug-facilitated sexual assault—yet more acronyms—in a number of police areas in England. It found that GHB, which is a like drug to GBL, was detected in only two out of 344 cases. It is quite a small number but that does not mean that it is not important. We have to be aware that some of the assessments may not be correct, but it is not as great an issue as we thought it might be.

The noble Baroness touched on how long it has taken to do this, and she was a little hard on us. The ACMD recommended control of GBL in August 2008, not 2007. As the noble Baroness alluded to, it was not straightforward because of the number of legitimate uses. We remain committed to protecting people. The consultations had three options, with a view to ensuring a better understanding before moving down that route. We are working with the ACMD to expedite our response when we have better evidence of harm. For example, advice on the synthetic cannabinoids was received in August 2009. We laid the order in Parliament in October and we are debating it now. We may have been a little faster than was said, but I would not be complacent because it is important to act quickly. The people who do these things are willing to move quickly to try to get round all our attempts to protect people.

On classification, the ACMD clearly advised us that harms for GBL are equivalent to class C. We accepted that advice in full and the current evidence in relation to societal harms suggests that it is less harmful than some other drugs, but there are still a number of risks. That is why we agreed with its view. We could debate and talk about the issue, but we have made a reasonable assessment. My honourable friend Alan Campbell, the Minister responsible for drug policy, made a commitment in the other House to keep classification of GBL under review, and we will take steps to do so. If we have got it wrong, we will review it.

The noble Baroness, Lady Miller, asked what other steps we could take to prevent misuse. There is no simple solution to the misuse of drugs—that is why we need a drugs strategy that encompasses enforcement, education and treatment. Often the education and treatment achieve more, but you must have enforcement as well, not least because of the unpleasant people who push the drugs. When we face the complications of responding to the misuse of a chemical, and the clever changing of chemicals that I can hardly pronounce, it adds to the complexity. However, as the noble Baroness said, we must look at this across the board.

I do not know the precise budget of FRANK, but I will write to the noble Baroness. There was concern about the FRANK helpline giving out wrong information. I was aware that this had happened. When these incidents have come to light, we have taken immediate action and will continue to keep an eye on the situation. We cannot take more draconian measures. We continually monitor the helpline and the operators have a clear view of what they should be saying. However, human beings are what they are and sometimes things go wrong.

One question touched on paying attention to the ACMD. Since the advisory council was formed, on three occasions the Government in power—whether the Conservatives or ourselves—have not agreed with one of its statements. That is a tiny number when one considers all the recommendations that it has made. Other factors are in play. The council members are scientists who provide brilliant advice. Generally we listen to it, but on occasion there are policy issues that they are not best placed to judge—it is up to Ministers to make the decision. That is correct, and when one looks at the hundreds of recommendations that the council has made and realises that only three times has the advice not been taken, one can see that the balance is about right.

The noble Baroness, Lady Miller, touched on concern that chemists change the chemical nature of substances outside the law. That is absolutely right. Pronouncing the names of the substances is difficult enough, and they keep changing them. That is why we are applying generic definitions to control these drugs. Again, we cannot be complacent. This is a dangerous area. However, it is super that we will be able to get hold of the people who run shops for potheads and stop this happening. That is important.

I hope that I have answered most of the questions. If there is anything that I have not touched on, I would be happy to come back in writing—but I cannot see that I have missed anything. Approval of this order will help us to ensure that necessary controls are in place to protect the public. We all have the same aim. In particular, what is important is to protect the health of our young people from the harm done by these drugs.

Motion agreed.

Rail Vehicle Accessibility (Networks) Exemption Order 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Rail Vehicle Accessibility (Networks) Exemption Order 2009.

Relevant Document: 22nd Report from the Joint Committee on Statutory Instruments.

My Lords, we introduced mandatory accessibility requirements for all new rail vehicles—commonly known as RVAR—more than a decade ago. Already there are 5,600 compliant rail vehicles in service—more than one-third of the national fleet. However, we knew that there was more to do and have further strengthened the regime by taking powers to apply accessibility standards to older rail vehicles—those in service before 1 January 1999—when they are refurbished. We have set an end date of 1 January 2020, by which time all rail vehicles must be compliant. The House took a keen role in scrutinising the provisions and noble Lords suggested a number of significant improvements.

However, in expanding RVAR to capture older rail vehicles used on public transport services, older heritage and tourist vehicles have been brought within the scope of the requirements. Applying modern accessibility requirements to heritage and tourist railways would clearly damage the experience of a train or tram journey from the past which they wish to recreate and in which this country has such a wonderful tradition. We have no desire to destroy this heritage or to restrict the important contribution that this sector makes to increasing tourism and, given the location of many of these networks, to bolstering regional economies. The draft order therefore provides an exemption for these vehicles to ensure their preservation. It may be helpful to the Grand Committee if I briefly summarise its provisions.

The draft order will provide an exemption for all heritage and tourist rail vehicles that were introduced into service before 1 January 1999 and that are operated on any of the many heritage and tourist networks named in the schedule. It will also exempt all heritage and tourist rail vehicles that were introduced into service before 1 January 1999 and that are operated solely within the confines of a depot, whether on an exempt or non-exempt network, and all rail vehicles, regardless of their date of entry into service, that are operated on miscellaneous networks. These networks include those that are used for industrial purposes, engineering or building works in the grounds of a private house, fairground ride and so on that would otherwise be within the scope of RVAR.

Vehicles covered by the exemption will be able to operate on any of the networks listed in the schedule without impediment. However, we also know that some operators occasionally run their vehicles for special events or excursions on networks, such as the Blackpool tramway, that have no exemption as they primarily provide a public transport service. We do not want accessibility legislation to stop this practice, so provision is made to allow individual vehicles to operate on non-exempt networks for a maximum of 20 traffic days each in any calendar year. A traffic day runs from 3 am to 3 am in recognition of the service patterns that some operators adopt. This provision came out of the consultation process.

In preparing the draft order, we considered carefully the interests of disabled people and sought a balance between these and the legitimate interests of railway enthusiasts who wish to preserve our rich railway heritage. I suppose at this point I ought to declare an interest as one of those enthusiasts. We believe that this approach is sensible and pragmatic. It has received solid support from stakeholders, including the Disabled Persons Transport Advisory Committee, and I commend it to the Committee.

My Lords, this is a largely uncontroversial order, and I make it clear from the outset that I am not minded to oppose it. We all subscribe to the fact that disabled people should be able to access all public service and leisure vehicles and be in a position to enjoy, as able-bodied people do, the full range of leisure activities, but one has to accept that there may be rare occasions when this is simply not feasible. Heritage rail vehicles surely fall into this latter category. Many are run on small gauges and cannot be adapted, as the order says, in a way that complies with the Disability Discrimination Act or the rail vehicle accessibility regulations, and a valuable and enjoyable attraction would become unavailable to all those who want to take advantage of it if either were enforced.

I have a couple of questions. I see that the Disabled Persons Transport Advisory Committee was consulted on the resolution procedure suggested in the order, but there is nothing to indicate its response to the general consultation on this matter. Given that there was a consultation and that the responses were taken into account, can we take it that this organisation was content on this occasion to accept limited access to this leisure activity for those whom it represents? Will the Minister clarify what its response was to the main consultation? He may also know whether the owners of these pre-1 January 1999 heritage vehicles can give some access to people with disabilities, particularly those who are in wheelchairs, so that they can participate where possible, or is this largely too difficult? Does the Minister know what limited access is provided on at least some of the areas listed in the schedule? Can he also confirm that all vehicles of this type constructed since 1 January 1999 will comply with the Disability Discrimination Act and will therefore not need to be exempted at a later stage?

With regard to the 20 days, we also note that these rail vehicles can have access to the main non-exempt rail networks, and that they will be exempt from these provisions when they do and when they are in their depots—not necessarily for repair and maintenance but for the purpose of “depot days” for visitors. We think that that is a very sensible provision.

We are satisfied that the order provides a flexible and sensible exemption to an otherwise firm commitment which all Governments have made to try to ensure that those with disabilities are not disadvantaged in doing what they wish to do due to access being limited.

My Lords, I have one question for the Minister and one comment. I start with the 20-day exemption under which a heritage vehicle may be used on the main line. Many heritage railways operate where mainline trains operate—in future more will probably do so—and therefore the heritage railway will meet the national railway on perhaps 120 days a year. I am sure that, without my reciting them, the Minister will be able to tell the Committee the number of places where that situation exists. I should like an assurance from him that, where there is, as it were, a junction between the heritage railway and the national rail network, those places will not be subject to some sort of 20-day limitation. That would be totally artificial because people go on the national railway for the purpose of getting on to the heritage railway. In fact, I think that some heritage railways would do rather badly if that did not happen.

My other point is that, in his introduction, the Minister recited the fact that the Rail Vehicle Accessibility (Networks) Exemption Order provides for all railway vehicles to be compliant with the provisions of the Disability Discrimination Act by, I think, 2021. This is probably a leading and contentious question, but how does the Department for Transport propose to meet that deadline, with proper accessibility provision in all vehicles, bearing in mind that there is an absence of orders for new vehicles and you cannot go through a period of famine and suddenly catch up with yourself after a few years have elapsed? I foresee that the Government will be obliged to come back and ask for further exemptions because the vehicles will not be available. I refer in particular to the cancellation by the Government of the order for 200 diesel vehicles. Although that rests on the premise that much of the railway will be electrified, I somehow think that the process of electrification will take rather longer than the Government think and that we will see some pretty old and inaccessible vehicles continuing in use at the expiry of the exemption period.

My Lords, I am grateful to both noble Lords who have contributed to this short but excellent debate. They have reflected the interest in the House in the provision of an accessible public transport system, and at the same time they have been very supportive of our heritage railways.

In our commitment to increasing accessibility on public transport services, we do not want to spoil the things that are part of the historical charm of heritage and tourist railways, that make them so popular with the public and that contribute so significantly to the nation’s tourism industry. The Heritage Railway Association has advised that heritage railways and tramways employ 17,000 people directly and benefit from the services of 16,000 part-time volunteers. The public seem to appreciate the services that they provide, as they make 13 million passenger journeys a year on these railways and tramways.

As the noble Baroness, Lady Hanham, said, the vehicles that heritage railways use were never designed with accessibility in mind, and we have to be sensitive to some of the physical and technological difficulties that prevent heritage operators from complying with accessibility standards. Let me give one example. One of the most basic requirements of RVAR is that audio and visual passenger information about route and destination is provided. While it is obviously essential on a public transport service when people are travelling from one point to another, passengers on heritage or tourist networks are usually there to enjoy the journey itself and usually end up at the point at which they started from. If information is needed, increased levels of staffing on these networks will provide that increased information. The idea of putting in wiring that has flashing signs and a voice announcing where the heritage railway is going to would put the costs of the operation completely out of the court.

Sitting suspended for a Division in the House.

My Lords, I was making the point that adopting accessibility standards that apply to new vehicles in the heritage sector would cause a great deal of damage to the viability of heritage railways, which is why the exemption order has been brought forward. I am very pleased that it has the support of the noble Baroness, Lady Hanham, and the noble Lord, Lord Bradshaw.

They both raised questions that I shall try to answer. I was asked particularly about consultation. The order was subject to public consultation in the summer of this year and was sent to all the networks listed in the schedule, as well as representative industry groups, including the Heritage Railway Association. Crucially it was sent to the Disabled Persons Transport Advisory Committee, the Government’s statutory advisers on the transport needs of disabled people. Forty-nine responses were received, and a summary of these is available on the Department for Transport’s websites. The provisions in the order were widely supported by all respondents as being a proportionate and effective way of dealing with the issue. The two bodies to which I referred were entirely content with the line that we have taken.

The noble Baroness asked about the efforts that the heritage network makes in attempting to deal with the needs of disabled people. It is important that it does so as its clientele tends to be elderly and sometimes disabled. It is an important part of a holiday or tourism experience that they should be able to use heritage railways. I am pleased to say that the great majority of heritage railways and tramways have made a special effort. I mention, in particular, the Kent & East Sussex Railway, the Bluebell Railway and the Severn Valley Railway, which are three very large heritage railways. The National Tramway Museum has also made special provision for disabled people. Sometimes it is a question of adapting vehicles to make them accessible to wheelchairs, which I have seen on a number of railways. With tiny railways, it is obviously difficult to accommodate them, but even on some of the narrow gauge lines in Wales similar provisions are made.

The noble Lord, Lord Bradshaw, asked about the 20-day exemption. I think that he is perhaps confusing two different things. The exemption applies to networks such as the Blackpool tramway, which provides a public transport service. The national railway is subject to the European accessibility regime, which would cover, for example, the North Yorkshire Moors Railway extending down to Whitby on the national railway. Those vehicles will be subject to the end date of 1 January 2020 when the European accessibility regime comes in, but we would hope that there would be consultations and discussions well before then to see how these could best be accommodated. They are not subject to the 20-day rule. If they want to operate on many more days, it will not be a problem.

The noble Lord also referred to whether we can meet the 2020 standards. We are working with the operators to see what needs to be made accessible by 2020 on the older vehicles, and here, too, we are engaging early. We have started the process of discussion and are embarking on something called targeted compliance.

My Lords, I am sorry to interrupt. Will the Minister confirm that when a heritage railway runs into a station into which the national railway also runs, it may use the platform on the station for as long as it runs rather than for 20 days per year?

My Lords, the noble Lord is correct. I believe that I have covered the questions raised by the noble Lord, Lord Bradshaw, and the noble Baroness, Lady Hanham. I have pleasure in commending the draft order to the Grand Committee.

Motion agreed.

Committee adjourned at 5.50 pm.