My Lords, I remind noble Lords that in the case of each statutory instrument, the Motion before the Committee will be that it has considered the statutory instrument in question. The Motions to approve statutory instruments 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.

That the Grand Committee do report to the House that it has considered the Electronic Commerce Directive (Hatred against Persons on Religious Grounds or the Grounds of Sexual Orientation) Regulations 2010.

Relevant document: 5th Report from the Joint Committee on Statutory Instruments.

My Lords, these regulations are a technical measure to implement the EU directive on electronic commerce—known conveniently as the e-commerce directive—in respect of the offences in Part 3A of the Public Order Act 1986. The regulations will enable us to commence the offences of stirring up hatred on grounds of sexual orientation. The offences themselves are found in the 1986 Act. They were inserted by the Criminal Justice and Immigration Act 2008. I will not go into the details of the offences here; this is not the right place to have that debate. We want to commence those offences as soon as possible. The regulations also implement the e-commerce directive in respect of the offences of stirring up religious hatred. That also appears in Part 3A of the Public Order Act 1986.

The e-commerce directive plays a significant part in the way that Europe ensures free movement of services within the European economic area. Meeting our obligations under the directive is of importance and helps to ensure a level playing field for service providers.

The directive deals with providers of “information society services”—which are, broadly speaking, commercial activities that take place online. It covers a wide range of online activities, such as selling goods and services, as well as video on demand, hosting a website or providing web or e-mail access. As I said, the directive deals with commercial services provided online and how the providers of such services should be regulated by member states. Such regulation includes the criminal law, if that law affects providers of information society services.

The directive applies to the offences of stirring up hatred on religious grounds and on grounds of sexual orientation. Those offences can cover stirring up hatred through any medium, so it is possible to commit the offences by providing commercial services online.

Turning briefly to the detail of the regulations, I say that Regulations 3 and 4 implement the directive’s “country of origin” rules. Those rules broadly say that a provider of information society services must be regulated by the law of the state in which the provider is established, not the law of the state in which the services are received. That is what Regulation 3 does.

Similarly, the “country of origin” principle has the effect that the UK must not restrict the freedom of service providers established in another European economic area state to provide their services in the UK unless certain conditions apply. Such providers will generally be regulated by the other state in which they are based. Therefore, Regulation 4 provides that proceedings for these offences may not be brought against a service provider from another European economic area state, unless specific conditions are satisfied relating to the public interest.

Of course, intentionally stirring up hatred on either ground is a serious offence. In practice, it is therefore likely that the public interest conditions would always be met in such cases.

Regulations 5 and 7 implement the requirements of the directive in relation to intermediary service providers. These are mere conduit providers that cache or host information. The directive requires us to limit the liability of such intermediary service providers.

I will briefly mention some of the history regarding implementation of the directive, which was originally implemented by regulations in 2002. Those regulations applied the directive to all legal requirements then existing, therefore including all offences that existed at that time. For offences passed after that date, we have to implement the directive on a case-by-case basis.

I mentioned that the draft regulations cover the offences of stirring up hatred on the two grounds. The offences of stirring up religious hatred were created by the Racial and Religious Hatred Act 2006, which added a new Part 3A into the Public Order Act 1986. The directive was implemented in respect of the religious hatred offences by regulations in 2007.

The Criminal Justice and Immigration Act 2008 extended the offences in Part 3A to include stirring up hatred on grounds of sexual orientation. These regulations are therefore necessary to implement the directive in relation to the extended offences in Part 3A. They will do so in a way which ensures that implementation will be consistent for all the offences in that part.

The regulations are made under Section 2(2) of the European Communities Act 1972. That Act provides that regulations made under Section 2(2) cannot result in the imposition of a penalty of more than two years’ imprisonment. That produces an unfortunate and undesirable anomaly. The offences in Part 3A of the 1986 Act carry a maximum penalty of seven years’ imprisonment. If the two-year penalty limitation were to be applied to the regulations, it would mean that offences committed by an England and Wales service provider elsewhere in the EEA would attract a maximum penalty of only two years, whereas the identical offence committed here would attract a seven-year maximum.

To resolve that anomaly, Section 143 of an Act that noble Lords will well remember, the Coroners and Justice Act 2009, provides that the penalty limit will not apply to regulations made to implement the e-commerce directive. The same issue arises for the EU services directive, and Section 143 applies to both. That section came into force when the 2009 Act was given Royal Assent. The regulations make use of that section and will ensure that the penalties available for offences committed under Part 3A are always the same.

At the same time, to ensure a consistent approach, we are revoking and replacing the previous regulations that covered the religious hatred offence. Those were made in 2007, so the anomaly I have just mentioned applies to them. These regulations will correct that anomaly. There will be a single set of regulations covering all the offences in Part 3A of the Public Order Act 1986.

I began by saying that the regulations would enable us to bring into force the offences of stirring up hatred on the grounds of sexual orientation. We intend to do that as soon as possible.

My Lords, I thank the Minister for introducing the draft statutory instrument, which he described as a technical measure. I have to say that it is a very technical measure, which I had considerable problems trying to understand as I travelled down on the train this morning. I was of the view that this might be legislation by obfuscation, in that I found it difficult to understand what on earth it was getting at. I was grateful for the Explanatory Memorandum, which at least had—as always—something about what was being done and why, under paragraph 7 on the policy background. Even then I was still somewhat confused, and I have only one or two questions to put to the noble Lord.

First, I noted the title, but could not work out why race and sex—for example—were not included in the list of things that discrimination might be applied to. They might be covered by other regulations that I have had the privilege of listening to the Minister describe on an earlier occasion.

My next point—again it is very minor, but perhaps the noble Lord will be able to help me—is that the Explanatory Note to the regulations explains, in the last paragraph, that a transposition note has been prepared. I understand that I can get that from the Criminal Law Policy Unit at the Ministry of Justice. No doubt I ought to have got hold of it before this debate. Perhaps the noble Lord can tell me what is in the transposition note, and in the regulatory impact assessment that was prepared by the Department for Business, Innovation and Skills. No doubt the noble Lord referred to that in his opening speech, but I missed it. I would be grateful for an assurance from him that there is no major regulatory impact, which is why the assessment was made.

I have no further points to make on the regulations.

My Lords, as the Minister describes it, this is a technical measure and I, too, was slightly confused by it. I decided that this was due to it being above my pay grade, rather than being unclear also to those who were slightly better versed in the measures. It is somewhat clearer to me now, after the Minister gave us such a clear explanation, for which I thank him.

As we understand it, the regulations on information society services are tweaked to fit in with the amended Part 3A of the Public Order Act 1986. They are narrow regulations, constrained in their scope. We hope that they will be applied proportionately. We are in broad agreement with them, but seek one or two clarifications. The first is on the “country of origin” rules. While I understand the way that they will work in England and Wales and in other EEA states, what is not immediately clear is what happens if an offence of stirring up religious hatred or hatred on the grounds of sexual orientation under UK law is committed when the commercial service provider is not based in either the UK or the EEA area—when it is based, for example, in the Middle East or another part of the world. Do we have any mechanisms to deal with that material? This is a wide question, and I will understand if the Minister cannot deal with it today.

My final question is: can the Minister give us an indication of when the regulations will come into effect? He said that he wanted them to come into effect as soon as possible; I wonder whether he has some dates in mind. Will he also clarify whether only England and Wales are covered by the regulations, or whether Scotland and Northern Ireland are also included?

I am grateful to both noble Lords for their support and contributions. I am delighted that these technical regulations have become marginally clearer as a consequence of my describing them. I will attempt to answer the questions raised.

On the issue of racial and sexual equality, the Acts of Parliament that established offences in that area came before the 2002 directive, and existing regulations cover the position adequately at the moment. There is no major regulatory impact, I am glad to say. The transposition note simply states, in tabular form, how the regulations implement each requirement of the directive. With regard to the other matters, we hope to put this part of the Act into effect in weeks rather than months. That is the best I can do regarding that.

Could a provider based, for example, in the US or the Middle East commit an offence here? A person who commits the offence in England and Wales is liable, so if a service provider commits the offence in the course of providing their services in England and Wales they will be guilty like anyone else. The relevant material to meet the threshold of the offence would need to be threatening and intend to stir up hatred on the grounds of either religion or sexual orientation, but the regulations do not impact on non-EEA providers.

Like anyone else, Scottish service providers that commit the offence in the course of providing their services will be liable for the offence, but the offence extends only to England and Wales so Regulation 3, which extends the liability of service providers to acts committed in other European economic area states, applies only to service providers established in England and Wales.

I am grateful to both noble Lords for their contributions.

That the Grand Committee do report to the House that it has considered the Data Protection (Monetary Penalties) Order 2010.

Relevant document: 6th Report from the Joint Committee on Statutory Instruments.

My Lords, this order relates to the power of the Information Commissioner to impose a civil monetary penalty on a data controller that seriously contravenes the data protection principles.

The order supplements the provisions of Sections 55A and 55E, which were inserted into the Data Protection Act 1998 by Section 144 of the Criminal Justice and Immigration Act 2008. These amendments provided the Information Commissioner with the power to impose civil monetary penalties.

This order, alongside the Data Protection (Monetary Penalties) (Maximum Penalty and Notices) Regulations 2010, which are subject to negative resolution, will bring the provisions on civil monetary penalties into force. The Government’s proposal is for these provisions to commence on 6 April 2010, along with other amendments to the Data Protection Act. The order was debated and approved in the other place last month.

The order contains provisions on data controllers’ written representations, cancellation, variation, enforcement and appeals against monetary penalty notices. The other statutory instrument provides details on the maximum penalty amount, which has been set at £500,000, and sets out information that a notice of intent and a monetary penalty notice must contain.

A civil monetary penalty may be served if the commissioner is satisfied that a data controller has committed a serious contravention of the data protection principles that is likely to cause substantial damage or substantial distress, and which was either deliberate or committed by a data controller that knew or ought to have known that there was a risk of this type of contravention occurring, but failed to take reasonable steps to prevent the contravention.

It is important to note that a number of conditions must be fulfilled before the commissioner can impose a civil monetary penalty. These conditions, which are explained in the guidance issued by the Information Commissioner, will ensure that only those contraventions that are sufficiently serious and deliberate or reckless warrant the issuing of a civil monetary penalty, and will ensure that the penalties are administered fairly.

The Government know how important it is to safeguard personal data. The ICO’s Annual Track survey 2009, recently published, shows that protecting people’s personal data is considered a top concern, only behind preventing crime. Only a small amount of data need to be misused for damage and distress to be caused.

There is widespread support for the introduction of this power. In particular, your Lordships will remember that the Data Sharing Review Report, the Thomas-Walport report, published in July 2008, specifically called for stronger penalties and sanctions and for the Information Commissioner to be given increased powers and resources to carry out his duties more effectively.

More recently, in November and December last year, we held a public consultation on the Government’s proposal to set the maximum amount for civil monetary penalties at £500,000. The large majority of respondents agreed that there was a need for such a power and supported its immediate introduction. In addition, there was cross-party support in another place for the introduction of this power.

Additionally, we have worked closely with the Information Commissioner’s Office and involved other stakeholders in the development of this policy. We held two stakeholder events to discuss the new regulations and the commissioner’s guidance on civil monetary penalties. The Information Commissioner’s guidance was also available for comment on the ICO website.

I stress that the majority of data controllers of course comply with the data protection principles, but a small number do not, and it is the irresponsible actions of those organisations that we are trying to address. We believe that civil monetary penalties will act as an effective sanction and deterrent against serious and careless or deliberate non-compliance. We estimate that the likely number of cases in which the Information Commissioner will use this power will be around eight a year.

It is clear that appropriate action must be taken where a data controller deliberately or recklessly contravenes the data protection principles—for example, when a data breach occurred because the data controller processed personal data in a completely unsecure environment, and knew that there was a high risk of a data breach but did not act to address that risk, such as by using unencrypted laptops which contained personal data.

To ensure that the ICO has the resources necessary for this new power and other new responsibilities under the DPA, the Government in October 2009 introduced a new fee structure for notification purposes. It consists of two tiers and will lead to greater funding for the ICO’s data protection work. The new fee structure reflects more accurately the costs to the ICO of regulating data controllers.

I will say a few words about how this power will operate. The commissioner will need to be satisfied that there has been a serious contravention of the data protection principles of the kind liable to a civil monetary penalty. The commissioner will consider each possible contravention on a case-by-case basis. The commissioner laid statutory guidance before Parliament on 12 January this year which sets out his interpretation of the power and how his office will assess the meaning of “substantial”, “serious contravention”, and “damage and distress”.

A number of safeguards are in place to ensure the fairness of this power. First, once the Information Commissioner is satisfied that a serious contravention has been committed, he must issue a notice of intent setting out the details of the contravention, the proposed penalty, next steps and how the data controller can make representations to the Information Commissioner. Next, a penalty notice would be issued only after representations had been received and considered by the commissioner, or after the deadline for representations to be received had elapsed. In addition, data controllers have the right to appeal to the General Regulatory Chamber against any penalty notice received. On points of law, those appeals can reach the upper tribunal and, further, the Court of Appeal. Finally, the IC’s guidance must set out how the power will be used. The Government therefore believe that sufficient safeguards are in place to ensure that the Information Commissioner is not the policeman, prosecutor, judge and jury, as was said in the other place.

As I have tried to explain, this order sets out some of the provisions required to ensure that the monetary penalty framework for serious contraventions of the data protection principles is robust and fair to data controllers and the Information Commissioner. Although the Data Protection Act already gives the Information Commissioner an effective framework with which to regulate the Act, the power to impose monetary penalties of up to £500,000 will provide the commissioner with an important additional tool. It will act as an effective sanction and a deterrent against non-compliance. The commissioner will have no financial incentive to issue monetary penalties because any money recovered as a result of the issue of these penalties will go to the Consolidated Fund, managed by the Treasury. The new powers will contribute to increased compliance with data protection principles and strengthen public confidence that data protection safeguards are observed. I beg to move.

I thank the noble Lord for his explanation of the order, which brings in a new and quite high monetary penalty of £500,000 for people in breach. I thought that it was the order itself that did this but, on going through it, I cannot see where the sum of £500,000 is mentioned.

I have the advantage of being briefed on this. The second, negative instrument that I referred to sets out the amount, and the two go together.

I had forgotten that there is a negative instrument as well as the affirmative one before us. As I said, it is quite a high figure and therefore it is only right to ask one or two questions. First, I am grateful to the noble Lord for reminding us that there has been consultation on this. As the Explanatory Memorandum makes clear, some 53 per cent of the respondents supported the proposal, believing it to be a fair and proportionate approach. Some 32 per cent were against the maximum penalty, but they were not united because that percentage again split more or less half and half, some in favour and some against. Would the noble Lord expand a little on that?

Secondly, I should like to know more about appeals, dealt with in Article 7 of the order. We are told that Section 49 and Schedule 6 have effect in relation to appeals, but I think the noble Lord explained that we go through the whole tribunal process even though there will be only something in the order of around eight cases a year.

Thirdly, I have some concerns about the costs of implementing the civil monetary penalties, which are dealt with in paragraph 10.2 of the Explanatory Memorandum. It states that the costs,

“will be met by the recent increase in the notification fee from £35 per year to £500 a year for those data controllers with either a turnover of £25.9M and 250 or more members of staff, or, public authorities with 250 or more members of staff”.

I am not clear from that whether those who do not meet the figures will pay just £35 a year, or will they not pay anything? Also, I do not see why we need quite such a large increase. A rise from £35 to £500 a year is quite a big percentage increase. The Minister is better at maths than I am, so he could tell me exactly what it is, or indeed he could look to his noble friend Lord McKenzie. I would guess that it is an increase of several hundred percentage points. I would be grateful to know why it was felt that such a large increase was necessary. No doubt the noble Lord will be given some advice on this before he comes to reply.

That deals with the various questions I have on the order. Again, we on this side do not object to the order, but we would be grateful for responses to our particular points.

My Lords, we support the order. Indeed, the amendment to the Data Protection Act which made it possible was introduced to the Criminal Justice and Immigration Bill following amendments from the Liberal Democrats.

The Liberal Democrats calculate that in 2007 alone a record 37 million items of personal data were lost, including the notorious case where the details of 25 million child benefit claimants were lost in the post. I should declare that I was affected by that. Matters have not improved noticeably since then and there have been additional high-profile cases, including, in 2008, the loss by an external contractor of a memory stick containing sensitive information about thousands of persistent offenders and, in 2009, the case where an employee of T-Mobile sold customers’ details to rival companies.

It is right that data controllers should be subject to sanctions when such breaches occur. However, the T-Mobile case raises a question about the operation of the new sanctions which I hope the Minister will be able to clarify. If a deliberate breach is committed by a junior employee and the organisation denies all knowledge of or responsibility for it, how will the Information Commissioner’s Office determine whether the data controller took reasonable steps to prevent it and, therefore, whether the organisation is responsible for the breach? I am aware that, to some extent, this is probably dealt with in the draft guidance, but it would be helpful to have an example, if the Minister can think of one, of how these provisions might have applied in the T-Mobile case.

It is also right that the Thomas-Walport review highlighted that the Information Commissioner’s Office should be given the powers and the resources to do its job properly. In conjunction with the new powers in the Coroners and Justice Act, we welcome this order’s move to give the ICO real teeth in data protection.

I have two questions, the first of which concerns the public response. The noble Lord, Lord Henley, has already raised some issues on this subject but my question is quite simple. We notice that the Ministry of Justice press release states that, of the 52 responses received, 27 agreed that £500,000 was the correct maximum level. Fifty-two responses is a small sample and I wonder for how long the consultation was open. My second question looks forward. While these measures are extremely welcome and we hope that they will go some way towards making data controllers more responsible, will the Government consider improving the regulations earlier on in the system rather than simply imposing penalties?

I refer the Minister to an excellent series of articles in the Economist this week, one of which proposes that regulations could require companies or data controllers to provide annual security audits. These will be similar to financial audits as exist for listed companies, and could be used by companies not only to improve their performance but to assist the regulator by providing evidence should a problem come to light subsequently. So we would like a data information annual audit, please.

That is all I have to say, other than to congratulate the Government on bringing forward the order.

I am grateful, again, to both noble Lords for their support and helpful questions. On the issue of why there is such a large increase in the tiered fees to the Information Commissioner, tier 2—the £500 tier—represents about 5 per cent of data controllers. For a data controller to be subject to a tier 2 penalty, it must have a turnover of more than £26.9 million and more than 250 staff. We believe that is an appropriate amount. Clearly the Information Commissioner’s Office needed some extra resources and we thought that this was a fair way of obtaining them. Everyone will pay at least £35.

I shall deal with the appeal processes. Following the imposition of a monetary penalty, a data controller may appeal the imposition of the penalty and/or the specific amount imposed. Those appeals go then into the tribunal system. Most cases will be heard in the first tier, with the most complex going to the upper tier. Appeals from the first tier to the upper tier can only be on a point of law. Appeals from the upper tier lie on a point of law again to the Court of Appeal.

As for the 32 per cent against the £500,000 maximum penalty, the respondents against the maximum figure were split between those wanting a penalty of up to £1 billion and those wanting a sum less than the £500,000. On balance, we felt that the penalty of £500,000 was proportionate. It will be reviewed in three years.

Of course the noble Baroness is absolutely right that the cases take place and the commissioner acts only after discussions have been had with the data controllers. The last resort is to use the law to get penalties so as to persuade against that data protection action. It is not to be used regularly—only about eight times a year, we hope—so she is right to mention the articles in the Economist this week. Any help that can be given to make sure that we do not get into this situation too often is very much to be welcomed.

The consultation period lasted six weeks.

There remains one outstanding matter: how the Information Commissioner will determine whether reasonable steps have been taken. The noble Baroness referred the Committee to the T-Mobile case and how provision might have applied to it. The Information Commissioner would need to investigate each case on its merits, of course. Each breach would be different and have its own character. Technical data security breaches will require different reasonable steps such as proper electronic data security, whereas a breach relating to an employee failure may require proper levels of staff training. I emphasise that the penalties available if the order is carried come after discussion and debate in an attempt to make sure that data protection really means what it says.

That the Grand Committee do report to the House that it has considered the Personal Accounts Delivery Authority Winding Up Order 2010.

Relevant documents: 5th Report from the Joint Committee on Statutory Instruments and 9th Report from the Merits Committee.

My Lords, the Committee will now consider the draft Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010, laid on 27 January, the draft National Employment Savings Trust Order 2010, and the draft Personal Accounts Delivery Authority Winding Up Order 2010, which were both laid on 12 January. I am satisfied that these instruments are compatible with the European Convention on Human Rights.

This House provides irrefutable evidence that we are all getting older. By that I mean, of course, that life expectancy is increasing and that more and more people are able to lead full lives and make an active contribution at an age when, not so very long ago, they might have expected to have been put out to pasture. But increasing longevity brings its own challenges; millions of people are not saving enough to generate the retirement income they either want or expect. Nearly half of working-age employees are not making any private pension savings at all. That is why the Government embarked on the workplace pension reform programme and why we are debating the secondary legislation that makes detailed provision in support of these landmark reforms.

It is some time since this House discussed the provisions now enshrined in the Pensions Act 2008. Over the past 18 months our policy has developed and been refined, in large part because of extensive engagement with stakeholders. We, alongside our delivery partners—PADA and the Pensions Regulator—have made significant progress and our programme of work has evolved as we focused more on the practicalities of implementation. We have already brought forward two sets of regulations that begin the process of making these reforms a reality: the Employers’ Duties (Registration and Compliance) Regulations, which cover the compliance regime and the employers’ registration obligations to the Pensions Regulator; and the Employers’ Duties (Implementation) Regulations, which prescribe the arrangements for the staged implementation of the employer duty and the phasing of contributions. The latter regulations set the timeframe within which these reforms will be put into operation. We propose bringing employers into the duty by size from October 2012, beginning with the largest employers and ending with the smallest, with all employers brought in by September 2016. This is a longer period than originally envisaged.

We went out to consult on an approach whereby employers would be brought in over three years, reflecting the need to deliver the reforms in an operationally achievable and safe way. Following careful consideration, we made a further adjustment to the implementation plan to ensure support for individuals who are new to saving and provide support to the newest and smallest businesses in adjusting to the costs. That means that employers will now be brought in over four years.

Our implementation plan also phases in minimum contribution requirements over time to help employers and individuals gradually adjust to the additional costs. Employers using defined contribution schemes will be required to pay contributions of 1 per cent until staging is complete, 2 per cent for a further year and 3 per cent thereafter.

Increased access to workplace pension saving is crucial to tackling undersaving. By introducing a new duty on employers automatically to enrol their workers into a workplace pension scheme and to pay a minimum contribution towards their pension saving, we are extending access to workers in every employment sector.

The automatic enrolment regulations set out the practical detail that will make the reforms work. They specify what employers must do and prescribe the information flows between the employer, the pension scheme and the worker. We want these regulations to be as simple and flexible as possible and to minimise burdens on employers. That is why we have consulted extensively throughout the past year. Drawing widely on expertise from the pensions industry, employers, business and consumer representatives, and across the political spectrum, we have tested and refined our proposals. We have listened carefully and responded positively to concerns.

This useful engagement has resulted in a range of changes that will ensure that these regulations will work in practice. Joining arrangements are simpler and should minimise burdens on business, timescales have been extended and information requirements cut back; the refund process has been aligned with payroll cycles; and employers will be able to hold on to contributions until the end of the opt-out period. Stakeholders tell us that these draft regulations now reflect a more straightforward and common-sense approach, which is essential if the new rules are to operate in the real world of pension provision.

The Pensions Act 2008 established who should be automatically enrolled by setting age and earning thresholds. The regulations define pay reference periods. This is the device that will enable employers to identify jobholders with earnings above the threshold which trigger automatic enrolment, and then to calculate pension contributions. We have also provided mechanisms that will help employers manage the process more easily. The regulations enable employers to avoid accidentally enrolling jobholders with annual earnings under the threshold but who occasionally have pay spikes. They provide for the postponement of automatic enrolment, although to protect workers’ interests, especially those on short-term contracts of three months or less, employers may postpone automatically enrolling an individual only once in any one year. Automatic enrolment is compulsory. Pension saving is not, so we have prescribed automatic enrolment joining and opt-out periods—now one month—and opt-out rights.

My Lords, I thank the Minister for his thorough presentation of the three statutory instruments, two orders and an important set of related regulations, and for his explanation of the background. They are derivative of the Pensions Act 2008, which the Minister steered through this House, and enable the implementation of the provisions of the Act.

Taken as a whole, I agree with him that they are not particularly contentious, although I suspect that were they subject to the forensic skills of my noble friend Lady Noakes, the Minister might find himself under some pressure to be light on his feet. As the Grand Committee will appreciate, there is a degree of consensus on the policy; indeed, my honourable friend Mrs Theresa May has today published a pamphlet entitled Providing for Pensions: Principles and Practice for Success. For my own part, I declare an interest as an employer in a family business and as chairman of the trustees of the Conservative Agents’ Superannuation Fund.

We are initially invited to approve the winding up of one acronym, PADA, and the establishment, with its property rights and liability, of NEST. However fond any of us might have become of the Personal Accounts Delivery Authority and its personal accounts, we cannot pretend to be greatly exercised by its passing and reincarnation as the National Employment Savings Trust. We should ensure, though, that the new body is constituted to reflect the concerns expressed during the consultation process. Not all the elements raised in the consultation are reflected in the order. Some will depend on the final version of the rules, which will be a matter for the NEST corporation. Perhaps the Minister could confirm that that is the case.

We agree with the National Association of Pension Funds that the new body needs to remain focused on employees without access to a workplace pension. We also think it is important that NEST is as free as possible from political interference. It would be useful to have the Minister’s assurance that that is an objective. There has been some modest movement in this direction on the power to remove trustees and on the area covering workers without qualifying earnings. The role of NEST in awareness-raising could distract from its central purpose, which is to extend workplace pension savings to low-income groups that do not currently have access to them. Article 14 appears to tighten up the wording, although it would be useful if the Minister could elaborate on that.

I turn to the original proposal that gives the Secretary of State the power to remove trustees. The National Association of Pension Funds rightly argued that the Secretary of State should be able to use the power only in certain specified circumstances. It is encouraging to see that this power has been removed in the final version of the order.

I turn to the creation of the panels. The original proposal said that employers and members panels should be established within one year of the commencement of the scheme. The NAPF argued that they should be in place from the start. There is no change in the final version, so this remains a cause for concern. It is essential that strong governance is in place from scheme launch. Indeed, I would argue that it is perhaps the most critical time to have the panels up and running. I hope that the Minister can reassure the Committee on this point.

A further question concerns default funds and arises from Article 29(7). I note that the final version of the order gives NEST extra powers to limit the number of occasions on which a member may choose where his or her assets are to be invested and the number of investment funds to which the scheme’s assets may be directed. This was not included at all in the original consultation draft. Will the Minister therefore explain the background to its inclusion in the final version?

Article 27 of the order, as the Association of British Insurers has said, provides that:

“The Trustee must make deductions from members’ pension accounts to contribute to the general”—

a key word that does not appear in the original wording—

“costs of the setting up, administration and management of the Scheme”.

What is the significance of the introduction of the word “general”—are there non-general costs that will not be so transferred?

The Minister will be aware of the widespread concern that NEST must not receive government funding that would distort competition. Given that the setup costs for NEST and, for that matter, PADA, are to be reclaimed through scheme charges, how long is the payback period projected to be, and at what point will NEST be self-funding? It would have helped all of us if the Government had published their decision on the charging level and the structure for the personal accounts scheme. Why have they failed to do so to date, and when can we expect it? It is the lack of transparency that disturbs the ABI.

The Minister would acknowledge that spiralling public expenditure on a new national pensions scheme presents a barrier to reinstating responsible fiscal control in the micro-economy. Secondly, a national scheme enjoying taxpayer subsidy and continued funding from the Government for a significant period distorts the market for existing pension provision, and could certainly breach competition law.

My Lords, the noble Lord, Lord Taylor, is selling himself short. He did at least as good a forensic job as the noble Baroness, Lady Noakes, would have done in his place and he should not be modest about it. We broadly support these orders. We support the principle of auto-enrolment and we believe there is now a desperate need to rebuild private pensions after the collapse—that is not too strong a word—of provision under this Government. In 1997, a third of private sector employees enjoyed a defined benefit—that is, final salary—public sector-style pension scheme. Today the figure is 12.3 per cent. That is a dramatic collapse by any standards. The latest figure for private sector employees who have no private pension provision at all is 64.6 per cent. We are starting from a desperate position.

On the detailed points, I do not propose to rehearse, as the noble Lord, Lord Taylor, has, the now broadly sensible and supportive comments of the National Association of Pension Funds, the Association of British Insurers and the Confederation of British Industry. Having worked closely on the Bill and with these important interest groups over the last few years, I am pleased to see that the Association of British Insurers in particular is now taking less of what started as a rather “dog in the manger” attitude towards PADA and NEST. I think everyone is now working in the same way to try to make the scheme a success.

Having said that, the task is enormous and this will be a very modest and slow-moving contribution. We on these Benches are concerned about the slow staging of bringing this in. Does the Minister see and share those concerns? It seems that people believe that their pension is being covered when a total 8 per cent contribution to a DC scheme is very much on the fringe of whether, over a lifetime, it will provide a decent pension. Starting off at the lower levels risks sending the wrong message. If people think that a 1 or 2 per cent contribution will be enough, they are making a very big mistake.

The biggest concern is about the investment policy that NEST will now carry out. I should like to press the Minister on this, although he may not have the full answer today. I would be grateful if he could look into it because it is a serious concern on these Benches. I do not want to name the individual because I do not have any objection to him or even know him, but we are particularly concerned about the background of the investment director who has been appointed and comes from the hedge fund Thames River Capital. He has been quoted as saying that hedge funds must certainly be a part of the NEST investment policy. I was horrified to read that, given the tenor of our discussions on the Bill and the Minister’s assurances that there would be a small number of low-cost, simple investment options—probably a bond fund, a mixed fund, a default fund and maybe an ethical fund. I was shocked by the idea that there could be hedge funds or private equity funds with their very high charging structures and costs. I do not know what the recruitment process was, and I wonder if, again, the Minister could look into that and come back. One would have thought that the investment policy and the people running this would come very much from the mainstream of the investment world, such as pension funds or big insurance companies. This causes us serious concerns and I would be grateful if it could be looked into so that we can be reassured about the options on that front. It will be difficult to persuade many people that part of their pension fund should be in even a mainstream equity index product—which, in my view if there is a long-term horizon, it should. I should have declared my interest at the beginning as a pension fund manager for the last 34 years. I speak with some knowledge of these matters. They are very important, and I was concerned to see those remarks.

The Minister will not be surprised to hear that the other key concern on these Benches is the gaping advice gap. It will not pay for people, particularly those aged over 50, to save a small amount in NEST when there is clearly a high risk that many of them will lose it in means-tested benefits and therefore not be any better off. Again, we are concerned that not enough serious attention is being paid to this worry. Having said all that, within the existing framework that the Government are working to, this is a sensible way forward, but we are very concerned about the individual points that I have raised.

My Lords, I thank the noble Lords, Lord Taylor and Lord Oakeshott, for their contributions. I took from each that they were supportive of the broad thrust of what we are trying to achieve, but they enunciated particular concerns, which I shall try to allay. I agree with the noble Lord, Lord Oakeshott, that the noble Lord, Lord Taylor, should not feel outgunned by his noble friend Lady Noakes. I am sure that she would have given me a hard time. The noble Lord did equally well.

He also said that he would not be exercised by the passing of PADA because its activities would be inherited by NEST. That is not completely correct, because PADA’s role was to advise the Government as well as to prepare for the setting up of the scheme. NEST’s role is to run the scheme in the interests of members. That is why the PADA order pushes assets and obligations in two directions, one to NEST and the other to the Secretary of State. The noble Lord asked when the employers and member panels would be up and running. That will happen by the time auto-enrolment starts in October 2012.

The noble Lord said that, should he and his colleagues have the opportunity to implement such reforms, they would look to do so before 2012, with early enrolment into existing schemes to create greatest value—I think that that was the point made by the noble Lord. It is reassuring that others share our view on the critical importance of automatic enrolment; however, it is not possible automatically to enrol workers into personal pensions outside the employer duty, as it would not be consistent with European consumer directives, the distance marketing directive and the unfair commercial practices directive. Our work with our delivery partners confirms that implementation of the employer duty cannot be achieved safely or effectively before 2012. An integral part of the implementation process is the protection offered to individuals through the compliance regime, and we need to make sure that this protection is fully in place for individuals who automatically enrol. That simply will not be possible before 2012. Thereby there are practical difficulties, although the noble Lord would not in any event expect me to concede that he would have the opportunity to test those.

While we are on that point, I think that I heard the noble Lord, Lord Taylor, make an important announcement that the Conservatives sought to bring in auto-enrolment for all private pension schemes, not just PADA. In that case, irrespective of the date, can the Minister say whether that would require separate legislation or whether that would be possible under European legislation? Is there a practical problem there?

Under European legislation there is a practical problem with existing schemes. I am receiving reassurance from the Box on that. I know that from time to time that issue has been the subject of intense discussion, but I am advised that the position is that it is outwith European requirements.

That was helpful. Will he write urgently to me and the noble Lord, because we may need to invite the Conservatives to go back to go back to the drawing board on this matter?

The noble Lord is tempting me. At Question Time he already gave me a good opportunity, for which I thank him. I shall be happy to drop a line to both noble Lords on a matter of fact.

The noble Lord, Lord Taylor, asked who actually determines the rules. It is for the trustees to do that. The first cut of the rules is made by the Secretary of State on the advice of PADA, but going forward it is for the trustees to manage these and to consult on any proposed changes.

The noble Lord asked specifically whether it was intended that this would be free of political interference. Absolutely, yes—that is the cardinal principle that we are dealing with.

I was part way through responding to the contributions from other noble Lords, so I shall continue. Perhaps I may turn next to the inquiry from the noble Lord, Lord Taylor, asking what Article 14 is about. It is important that employers have access to information about NEST so that they can make an active and informed choice about which pension scheme best meets their needs. The Government believe that the NEST corporation will be in the best position to provide information about the scheme. This sort of activity is not normally undertaken by occupational pension schemes, as they usually have close links to a specific employer, and therefore a group of companies. However, this is not the case for NEST as it has not been established by a particular employer for a particular group of employees. Instead, NEST will simply be one of the many pension schemes that employers can choose to use to enable them to fulfil their new duty. As a consequence, there is a clear need to create awareness of NEST and its features so that employers understand how it differs from other pension schemes available to them.

The noble Lord also asked about Article 27 and what the reference to general costs entails. These are the normal costs of a pension scheme, including the cost of collecting contributions, investing those contributions and managing members’ accounts. The NEST corporation may cover other costs such as excessive fund switches or non-default investment choice through further charges. The NEST corporation will also have some minor costs associated with its role as an NDPB and in advising Government on pension reforms. These will be met through grant-in-aid rather than through members’ charges. We therefore inserted the word “general” to draw an appropriate distinction between the general costs of running a scheme and specific costs where additional charges can be levied, which are set out in Article 27(7) and (8).

The noble Lord went on to ask about the contribution cap: whether in any circumstances the trustee has wide powers to disapply the contribution cap and if this would go against the policy intent. It does not give the trustee a mandate to disapply the contribution limit as it sees fit. The circumstances in which the trustee can exercise discretion are set out in the rules, and if the trustee wished to change the circumstances, it would need to consult. The trustee needs a degree of operational flexibility so that it does not become unnecessarily restrictive to administer the limit, and the rules set out the precise circumstances in which the trustee may exercise this power; namely, where a member dies or the trustee’s liability in respect of a member is discharged in a tax year.

The noble Lord asked about funding. My department continues to work closely with the Personal Accounts Delivery Authority to develop a funding strategy to establish the NEST scheme. However, it remains too early publicly to set out the cost of NEST or the detail of how it will be financed. We have always said that we can make final decisions only once procurement activity is complete—that is, when the “i”s are dotted and the “t”s are crossed—and we must avoid the risk that, by responding to understandable interest in the cost and financing of the scheme, we jeopardise PADA’s commercial negotiations. It is vital that we do all that we can to support PADA in securing the best deal for NEST’s members. We expect to be making announcements in this area shortly.

The noble Lord also referred to state aid. This was part of our debate during the passage of the Pensions Act. We have always been clear that we will not give NEST an unfair advantage compared to other schemes. The structure of NEST as set out in the legislation is explicitly designed to ensure that it complements the good quality provision that already exists. We need to ensure that all employers and employees have access to a low-cost scheme, even those that other providers do not want. That is why the regulations place a public service obligation on NEST to accept all employers and to charge all members on the same basis. Other providers would not do that.

Remember that automatic enrolment cannot operate unless all employers can access a suitable pension scheme, so NEST’s public service obligation will benefit both those currently excluded from pensions saving and the broader pensions industry, because it is necessary to enable auto-enrolment to be introduced, with consequent benefits due to a subsequent expansion in the market. However, this public service obligation, as well as the other limitations being placed on the scheme’s operation, could place unique funding pressures on NEST, and this is something that we will better understand once PADA’s procurement process is more advanced. It seems only right, however, that at this stage we do not rule out compensating the scheme in some way for the burdens being placed on it if the alternative is to undermine its low-cost aims. That concept is recognised in the European state-aid rules, whose purpose is to prevent anti-competitive behaviour.

The noble Lord referred to employment agencies and their significance in the current flexible labour market in the UK. Our estimates represent the aggregate costs of the reforms to business, and they factor in enrolment activity and job churn, and take employment agencies and temporary agency workers into account. The administrative costs are calculated separately by firm size, but cannot be separated into those businesses with high and those with low job churn.

The noble Lord referred to the length of the initial period in respect of the appointments of the NEST corporation. Prior to the corporation being established and during any initial period, all appointments to the corporation are made by the Secretary of State. At the end of the initial period, the corporation must have at least nine members in place. As I said, we have already recruited Lawrence Churchill as the NEST chair-designate, and we are currently focusing on a second recruitment exercise to appoint a deputy chair and about seven other members.

The noble Lord, Lord Oakeshott, referred to someone being appointed to deal with investment matters. I think that that was an appointment to PADA, not to the trustee corporation, but I will come to that point in a moment.

The noble Lord, Lord Taylor, asked about certification and avoiding individualised testing. We are committed to developing a user-friendly certification model for workplace money-purchase schemes. We understand that this is a particular concern for employers with existing pension schemes who calculate contributions based on basic pay. We decided to remove certification from the draft workplace pension reform regulations to allow us more time to work with stakeholders to develop a model that meets the needs of employers and ensures that individuals are protected. We have returned to first principles and are talking to employers, the pensions industry and consumer groups about what will work for them. My officials are already engaged in early discussions with stakeholders, including the ABI, the CBI and the NAPF to discuss possible options. The engagement to date has been very constructive.

The noble Lord, Lord Taylor, talked about restrictions on the times when members can change investment funds. As I say, this is simply a matter of good administration. It avoids the circumstances where a member makes unreasonable demands by changing funds with undue frequency. The trustee must be reasonable in setting the detail of this provision. We consulted on it, and for the sake of clarity it was included in the draft scheme rules to the order.

The noble Lord, Lord Oakeshott, said that the staging was too slow and could have an adverse impact on individuals and their savings. The challenge of implementing these reforms is unprecedented, because they affect more than 1 million employers and more than 10 million people. We are committed to providing the right balance between getting people into pensions saving as quickly as possible, and delivering the reforms safely and fairly. We have done a lot of work with our delivery partners to understand how they will implement the reforms, and we have concluded that staging over four years strikes the right balance to ensure that the effective systems will be in place to support employers in their new duties.

I am grateful to the noble Lord. I am sorry if I did not make it clear what my reservation was. I appreciate that there is an enormous logistical problem with the system, and do not disagree with the timing. However, it is quite wrong and even dangerous to have a scheme come in whenever it can on the basis of much less than a final 8 per cent. That is a snare and a delusion. The systems are the same whether the contribution rate is 1 per cent or 3 per cent. I am sorry if I did not make it clear that my worry is about that and not about timing.

I apologise to the noble Lord: I did not pick up his point correctly. It was always envisaged in the Act that there would be a phasing-in that would interrelate with the staging arrangements. That is partly to help individuals who have not saved in pensions schemes before to adjust to the costs and consequences of doing so; and similarly to help employers who have not previously engaged. On the issue of staging, we recognise that some people will have less time than others to build up savings. We estimate that somebody who enrolled last could have a pension fund 3 per cent lower than if they had enrolled first—but that is because of the staging rather than the phasing-in component.

The noble Lord asked about investment risk. These reforms are intended to enable individuals to make greater financial provision for their retirement by making contributions to a defined-contribution pension scheme that meets defined quality standards. Like any DC scheme—as the noble Lord is well aware, being an expert in these matters—NEST will aim to earn a return on contributions by making appropriate investments. Inevitably, this involves making a judgment on the balance between the anticipated return from investment and exposure to risk. PADA is carrying out the initial work on the investment approach for NEST. It will prepare recommendations for the NEST corporation which will, as the trustee of NEST, make all investment decisions. PADA has consulted extensively with the pension investments industry, unions, employer representatives, consumer groups and academics in order to develop recommendations that best meet the needs of NEST’s likely membership of low to moderate earners. That consultation was widely praised for its analysis and thorough coverage.

PADA’s emerging thinking, following consultation, suggests that the investment approach that many UK DC schemes take, whereby members' contributions are invested predominantly in the stock market, may not be appropriate for the members of the scheme, who are likely to have a low appetite for risk. Certainly one would not imagine the involvement of hedge funds. PADA is likely to recommend to the NEST corporation a strategy that invests members' contributions in a range of asset classes such as government bonds, stocks and shares, cash and alternatives. Such an approach would be designed to reduce volatility, as sharp falls or rises in the fund value would create the risk that some individuals would get back less than their contributions. In any DC scheme there are no guarantees of what an individual's final pension will be. A variety of factors can influence pension income, such as future annuity rates, inflation and interest rates, as well as returns on investment. I hope that that has given the noble Lord a flavour of where the exercise is heading.

Is that the end of the Minister’s answer? I raised a serious question about the appointment of Mark Fawcett, but the Minister does not seem to be aware that he was appointed. He appeared to say that that is for PADA and that he would deal with it later, but he has not dealt with it—so could he please answer the question? As I understand it, Fawcett will continue to be employed by NEST and lead the consultation and advisory processes for it. Can I have a substantive answer to the question? Why was someone appointed from that background in investment? What was the process? Why were mainstream people from pension funds and insurance companies not appointed? I am pleased to hear his assurance that it would not be investing in lots of hedge funds, but would hedge funds or private equity be appropriate at all for NEST? I cannot see how they would be.

I heard the word “alternatives” at the end of what the Minister was talking about. In the investment world, “alternatives” is shorthand for hedge funds, private equity and possibly currency speculation—I do not know. Can we face up to this issue? Will the Minister take this back and look at it seriously? I am horrified, and I believe that all the people who were involved in the discussions that we had on the Pensions Bill will be horrified, that even one penny of the pensions and savings of low-paid people, who are most at risk on a no-charging scheme, will be put into dangerous investments of this kind.

My Lords, this was a public appointment and the noble Lord might be most helped if I write to him setting out the background of the process.

On the issue of assurances about the investment profile of NEST, this is a matter for the trust corporation and its members. It is not for the Government or PADA to dictate how it should proceed, although it is given and will give advice. I hope the noble Lord will have gleaned from what I have just said that it looks as though the thrust of that advice will be towards lower-risk operations. I do not want to say too much because it is not for the Government to determine these matters; it is for the trust corporation to do that.

My Lords, I do not think that that is right. I am sure that the noble Lord will draw to the attention of PADA and NEST the detailed debates we have had about the investment policy and what the principle should be; I remember them well. I hope they are now drawn, fully and properly, to the attention of the people taking these decisions so that they are aware of what Parliament’s intention was. If they look at those debates and the noble Lord revisits them, they will see that there is no way that investment in hedge funds or private equity is appropriate.

I recall that we had a discussion on the PPF with Lawrence Churchill, who initially did not seem to take much notice of what Parliament had said. I am pleased to say that he then very quickly took notice and behaved in a more proper way. I hope that the Minister will focus on this, take the matter away and draw it to the attention of these people, who do not seem to be aware of what was said in Parliament. I am sure that if he looks at what he said and what we said in Committee on the Pensions Bill, he will see why I am concerned.

My Lords, I am happy to take the matter away but the noble Lord should not deduce from anything I have said that the way forward is likely to be other than on the basis we discussed in Parliament. The debate on social and responsible investment did a couple of rounds through the various courses of the Bill and that matter will also be before the trust corporation and its members.

We are setting up the trust corporation as an independent body to run the pension scheme in the best interests of its members. The people appointed to the board of the trust corporation should be experts and have knowledge in these fields. The direction of travel of investment policy that the noble Lord infers is probably wide of the mark. However, I will take the matter away. I am sure that those involved will take the opportunity to read what has been said in these debates and the debates in the other place around this issue so that the noble Lord’s position, and the position we discussed as the Bill was going through Parliament, are clearly understood.

The noble Lord, Lord Oakeshott, also raised the issue of information and advice for individuals. Again, that was a significant issue that, reasonably, preoccupied us for much of our time when we were discussing the Bill in Parliament. We are developing an information service as part of the Planning and Saving for Later Life campaign. People will be able to access the information they need via the “better future” pages on direct.gov or via a dedicated telephone helpline.

We have already launched phase one of the service covering state pensions. We are working closely with other expert organisations and carrying out research to develop the content on auto-enrolment. We will be providing information so that people can identify what options they have. Some individuals may wish to seek further information—for example, those considering paying off large, high-interest debt first. That is the case for any financial decision. We are working with other expert organisations, including TPAS and the FSA, to ensure that people with more complex financial circumstances are provided with the information that they need.

I remind the noble Lord that the analysis done at the time, which I think is the most up-to-date analysis that we have, could not identify any one group of people who would be likely to be worse off from saving in personal accounts—or NEST, as it now is. Sorry, that covered auto-enrolment, not just NEST. The analysis showed that 70 per cent were likely to get back twice what they put in and 95 per cent would get back at least what they put in. That was the analysis done at the time, and I believe that it still holds good.

While the noble Lord is reminding me of that, I am sure that he will also remember and want on the record something that concerned us a great deal. The independent PPI identified that women aged over 50 were definitely a high-risk group. That remains our most serious concern. I am sure that the Minister will accept that they are at higher risk of it not paying to save than other groups

Again, I am speaking from memory, but I believe that that question was considered in the analysis at the time. It did not conclude that we could assume that women aged over 50 were in large measure likely to lose out from the arrangements. I know that we had that debate at the time. Clearly, no one can be certain of an individual's passage through life and what may beset or become of them and therefore, from day one, what their pension profile will mean, but the analysis that we did in aggregate could not identify a particular group of people who would be missing out.

I hope that I have dealt with all the questions raised. If I have not, I would be happy to have another go, but I think that that has covered everything that was raised. If there are no further points, I commend the orders.

That the Grand Committee do report to the House that it has considered the National Employment Savings Trust Order 2010.

Relevant documents: 5th Report from the Joint Committee on Statutory Instruments and 9th Report from the Merits Committee.

That the Grand Committee do report to the House that it has considered the Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010.

Relevant documents: 7th Report from the Joint Committee on Statutory Instruments and 9th Report from the Merits Committee.

That the Grand Committee do report to the House that it has considered the European Union (Definition of Treaties) (Stabilisation and Association Agreement) (Bosnia and Herzegovina) Order 2010.

Relevant document: 8th Report from the Joint Committee on Statutory Instruments.

My Lords, the stabilisation and association agreement, or SAA, is an international agreement between Bosnia and Herzegovina and the European Union and its member states. This was signed on 16 June 2008. This treaty has not yet entered into force, but will do so once all 27 countries have ratified it. This order is a necessary step towards the UK’s ratification. The principal effect of the draft order is to ensure that the powers under Section 2 of the European Community Act  1972 would be available to give effect to any provisions of the agreement, and permit any expenditure arising from the SAA to be from the consolidated fund.

Like many other countries in the region, Bosnia and Herzegovina has a troubled past and experienced terrible suffering during the conflict of the 1990s. Since then, Bosnia and Herzegovina has made significant progress. However, much more remains to be done to embed long-term stability and prosperity. We believe that the draw of EU integration will continue to be a crucial factor in motivating and enabling BiH political leaders to agree and implement the necessary reforms. Within Bosnia and Herzegovina, there is support from all three constituent peoples and the main political parties for the objective of EU membership. Our task today is to debate how this reform process can move forward.

I should underline that the UK remains a strong supporter of the principle of EU enlargement, including the countries of the western Balkans. Enlargement has been one of the European Union’s biggest success stories, creating stability, security and prosperity across our continent. The prospect of EU membership was an important factor in supporting the peaceful transition to democracy in Greece, Spain, Portugal and central and eastern Europe. It is a vital tool in helping us to spread our values and freedoms across the continent. A larger EU gives us stronger influence in shaping global action to meet today’s challenges and helps business and our economy by providing access to a bigger market. Nevertheless, it is important that enlargement is based on conditionality—that a country may only join the EU once it has met all the criteria for membership and has undertaken the necessary reforms to do so. The implementation of the stabilisation and association agreement is an important step in the fulfilment of that conditionality.

The SAA recognises Bosnia and Herzegovina as a potential candidate for the EU. It is not a reward; instead, it is an instrument to enable BiH to move forward. It sets out stages for Bosnia and Herzegovina’s progress towards eventual EU membership via a closer partnership with the EU, under the EU’s stabilisation and association process. A track record of SAA implementation is required before Bosnia and Herzegovina can achieve candidate status. Bosnia and Herzegovina’s SAA has now been ratified by 18 EU member states, as well as by the Bosnia and Herzegovina Parliament and the European Parliament. The order is important and I commend it to the Committee.

My Lords, as we have heard, the purpose of the order is formally to give parliamentary approval to an EU stabilisation and association agreement with Bosnia and Herzegovina. The order that ratifies the SSA will provide enhanced co-operation between Bosnia and Herzegovina and the EU. The agreement was signed on 16 June 2008. It covers a wide range of agreements, including accession to the WTO, promoting further regional co-operation and fostering fair trade between Bosnia and Herzegovina and its neighbours, some of which are already undertaking similar processes. There are additional measures on co-operation to combat terrorism; on border and visa controls; on assistance to support democratic, economic and institutional reform; and generally to help the country to conform to EU standards. This country has declared its interest in joining the European Union and is now recognised by the EU as a potential candidate for membership.

We on these Benches agree that the SAA offers a powerful incentive for change. We hope that it will build towards peace and stability in the area. Bosnia has made remarkable progress since the end of the war. However, although it is no longer on the verge of armed conflict, it remains deeply divided, especially politically. There is still serious conflict over the nature of the state and the role of the international community. Bosnia has a significant way to go to provide better governance and services to its citizens. The SAA is not the most controversial treaty on European matters. I doubt that the order will face much, if any, strong opposition. However, if the order is passed, it will represent an agreement to which the United Kingdom will be party. Bearing this in mind, I have a few probing questions for the Minister.

Last month, Republika Srpska passed legislation to enable it to hold a referendum on secession. It has also attacked the work of impartial international judges and prosecutors in Bosnia. Undoubtedly, one factor that would most help the political stabilisation of Bosnia and Herzegovina would be the full co-operation of its neighbours, both Serbia and Croatia. What more could Her Majesty’s Government do to demonstrate to Republika Srpska that secession will not be tolerated by the international community? What are Her Majesty's Government doing to improve the authority of the international judges and of the Office of the High Representative? Does the Minister support the view that, although Bosnia and Herzegovina still has much work to do, it should be supported in its desire to join NATO? If so, what are HMG doing to encourage EU members to work with them on their NATO membership conditions?

Given Bosnia's background, the positive measures contained in this SAA will unfortunately be in danger of being held hostage in a fragile political environment. These difficulties could increase in the run-up to the elections planned for October this year. Will the Minister say what plans are in place to make certain that the elections in October operate fairly and peacefully? Will he assure us that there are no plans to remove EUFOR at least until the next Bosnian elections in October 2010?

The agreement aims to encourage free trade between the EU and Bosnia, and between Bosnia and its neighbours. Will the Minister tell the Committee what progress has been made in facilitating this, in the context of moving towards an overall free-trade area? Finally, will the Minister tell us why the SAA is being ratified only now, when the agreement was signed in 2008? What implications will this agreement have for visa and immigration arrangements?

My Lords, I thank the Minister for presenting these orders to the Grand Committee for approval. I also thank the opposition spokesman for her remarks and questions. I will support the questions that she asked, and look forward to positive answers from the Minister.

We considered a stabilisation and association agreement for Montenegro on 2 December. There are similarities here: we are dealing with the same geographical area. Anxieties were expressed, not least by my noble friend Lord Ashdown, about the breakaway tendencies that were referred to by the opposition spokesman today, and about the disturbing signs in the area and in Bosnia and Herzegovina. We are anxious that there should be no encouragement from neighbouring states for these tendencies, which would make it more difficult for Bosnia and Herzegovina not only to make internal geopolitical progress but also to keep to the conditions of the agreement. This is welcome and, as the Minister implied, is a stage towards possible future membership of the EU, although not a guarantee. However, there is an implication that that is the will. It was handled very well by the Slovenian presidency when this agreement and treaty were first promulgated, and indeed at the same time as Slovenia impressed us all by joining the euro—a long time before the United Kingdom, which remains a pity for many of us as observers.

Having said that, there is now tremendous good will not only in the neighbouring states, apart from the rather disturbing examples I referred to while deliberately not mentioning too many names, but also in the western side of the European Union for what may be a beneficial effect on the stability of the whole area and indeed on Bosnia and Herzegovina itself. This has been a complicated agreement that was not easy to reach. As we know, the UK is a strong supporter of EU enlargement, including to the countries of the western Balkans, and that is why we on these Benches welcome the order.

I thank noble Lords for their contributions and for their support for the important treaty that we are moving towards. They have raised a number of questions that are of concern to us all in a candid and apposite way. It is important not to see the SAA as the completion of the journey or even the completion of the beginning of the journey, but as the beginning. I am therefore grateful for the support expressed that we should continue to offer encouragement to Bosnia and Herzegovina while at the same time setting out the conditionalities to be met. If it aspires to EU membership, it must meet the values that most countries would eagerly sign up to as a matter of pride.

The noble Baroness asked about the referendum in Republika Srpska. We are deeply concerned about the ongoing ethnic and nationalist rhetoric in Bosnia and Herzegovina, and in particular the challenges made to the authority of the high representative as set out in the Dayton peace accord. It is important to state that we continue fully and strongly to support the high representative in his efforts to improve the functionality of the state and uphold the Dayton agreement. It is a view shared by our European partners and is a message that should be taken closely to heart by those in the country concerned.

As I say, we want to encourage the Government of Bosnia and Herzegovina, and we are doing that by preparing them for integration. We urge on the one hand for the politicians in that country to find common ground and to make the compromises necessary to ensure further progress on the reform agenda, and on the other to support the high representative and EU special representative in facilitating progress. We believe that by sticking to the principles of a firm application of conditionality, the draw of EU integration can be used to drive reform forward in the country. We are prepared to fund and support a number of projects aimed at helping the country prepare itself for further EU integration, particularly by building capacity in key institutions and supporting civil society engagement in the political process.

I was asked about NATO membership. In December, NATO Foreign Ministers decided not to invite Bosnia and Herzegovina to join the membership action plan. We strongly support the country’s ambitions for NATO membership and we recognise that progress—impressive progress in some areas—has been made in defence reform, and emphasise regularly that the door remains open to individual partnership programme status and ultimately to membership. Again, though, it is important to remember the need for conditionality. We therefore support NATO’s decision because we believe that the credibility of Bosnia and Herzegovina’s application would be strengthened considerably by making progress in addressing concerns about levels of legal and political functionality and by resolution of the outstanding issues of allocation and the disposal of defence property. These are not minor issues by any means, given the degree of concern that they cause in that country.

Another question was whether Bosnia’s neighbours are acting constructively. We believe that they are. I am certain that we have seen constructive action over recent months. The authorities in Serbia, Croatia and Montenegro all continue to underline their commitment to helping Bosnia and Herzegovina move forward. They are all signatories to the Dayton peace accord; as such, they are required to uphold the territorial integrity and constitutional structures of Bosnia and Herzegovina, and they have all reiterated that commitment. Good neighbourly relations are a key requirement for Serbia, Croatia and Bosnia themselves to make progress towards EU accession.

The final point was about why this taken quite so long. Not least, there are the difficulties that we have in putting these things before Parliament; the question of scheduling for parliamentary progress in these matters has played not a small part in the delay—but we are here where we are. We have an important decision to make. I hope that I have been able to answer the noble Baroness’s and the noble Lord’s questions.

This is about the UK fulfilling its role as a member of the EU, and the EU’s role as a source of stability. We believe that these are vital to the future peace of the western Balkans. The SAAs for the region are important building blocks in this regard. Ratification of this agreement will serve as a strong political message that the EU firmly supports the perspectives of Bosnia and Herzegovina and the wider region.

I thank noble Lords for their contributions.

That the Grand Committee do report to the House that it has considered the Health Protection (Local Authority Powers) Regulations 2010.

Relevant document: 6th Report from the Joint Committee on Statutory Instruments.

My Lords, there are three statutory instruments before noble Lords today. The first set of regulations deals with various matters relating to Part 2A orders, which a justice of the peace may make to protect human health. The second set of regulations relates to local authorities’ powers, while the draft order makes a minor consequential amendment to the Water Industry Act 1991.

I will set out brief details about the regulations. The Health Protection (Part 2A Orders) Regulations require the local authority, if it makes an application to a justice of the peace for an order, to notify certain people. This includes, as might be expected, the person who is the subject of the application, unless the local authority takes a reasonable view that the person is likely to abscond or to act in a way that would undermine the purpose of the application.

Next, the regulations specify the evidence that a JP must have available before he or she can make an order about a person. These are quite detailed evidential requirements and will be of considerable help to the JP in determining whether the criteria for an order, which are set out in the primary legislation, are indeed met.

Furthermore, the regulations provide a number of safeguards for people who might be affected by an order. They ensure that all orders relating to people are restricted to a maximum of 28 days. They set out who is an “affected person” with the right to appeal against an order, including the deceased’s next of kin in the event that an order is made in connection with a dead body. They require the local authority to help people subject to an order to understand what the order does, why it has been made and their right to appeal against it; and to tell the person of any support services that are relevant to their circumstances.

If a person’s liberty is restricted by an order—if they are detained or subject to quarantine—the local authority must have regard to the impact of the order on the person’s welfare and that of any dependants they might have.

The regulations also provide a discretionary power for a local authority to make a charge for any measures it undertakes as a result of an order. This could happen if an order requires someone to take certain measures but the person cannot or will not do so, whereupon the local authority has to take action itself. Finally, the regulations require all applications for orders and all variations and revocations of orders to be reported to the Health Protection Agency.

I turn now to the draft Health Protection (Local Authority Powers) Regulations. These regulations set out what local authorities can do to respond to public health threats, without needing to apply to a JP for an order. The powers are not very different to the powers local authorities have now. However, they are considerably updated and brought into line with the principle of the new legislation that, with some limited exceptions, powers imposing restrictions or requirements on a person should be subject to judicial oversight.

The regulations continue existing arrangements under which a local authority may keep away from school a child who could put others at risk from infection or contamination, subject to strict criteria being met. In the event that other children have been exposed, the authority can require a list of pupils at the school for contact-tracing purposes. A local authority may also prevent access to or contact with a dead body which presents a risk to health.

The regulations allow a local authority to make a formal request to someone to take certain action, or to desist from action, as the case may be, for health protection purposes; and to disinfect or decontaminate any thing—Members of the Committee will remember the discussion that we had about “thing”—or any premises on request. The local authority may, but is not required to, offer compensation. These powers will usually be adequate to deal with a health protection issue quickly and with minimum fuss. But if not, the authority may consider applying to a JP for an order.

The draft Health and Social Care Act 2008 (Consequential Amendments) Order is also before the Committee today. This makes a straightforward consequential amendment which is needed as a result of the repeal of Section 11 of the Public Health (Control of Disease) Act 1984. I do not need to detain the Committee any longer on this matter. However, that amendment to the 1984 Act reminds us that the regulations are part of an important programme to modernise the legislative powers available to those who deal with risks to public health from contamination or infection.

The Committee will be aware that the Health and Social Care Act 2008 made substantial changes to the Public Health (Control of Disease) Act 1984. Those changes introduced powers to deal with significant threats to human health from dangerous infections or contamination from chemicals or radiation. Out-of-date concepts have been removed and new arrangements for health protection are in place to meet the needs of modern society. However, we cannot bring these new measures into force without first making regulations to complement the changes made to the Act. These regulations will complete the picture of domestic health protection powers and allow us to bring all the new measures into force from this April.

Some noble Lords may recall that I spoke in Grand Committee in May 2008 about these changes to health protection law, then being introduced in the Health and Social Care Bill. In the course of those debates, my noble friend Lord Darzi of Denham and I made a number of commitments to Members of that Committee as to matters to be included in regulations under the proposed new powers. I am happy to say that we have met all of those commitments in these regulations on the Part 2A orders. I have briefly set out the provisions of the regulations and I hope that the Committee will see how we have met, and indeed exceeded, those commitments.

I will mention one issue which was raised last year in the course of our consultation on the regulations. Most respondents broadly supported them as they were then drafted, but a number raised concerns that the legislation could have an adverse impact on people with HIV or other sexually transmitted infections. We debated this very point in 2008 and I am sorry that it is still a concern for some stakeholders. We have tried to set minds at rest, because the legislation simply does not permit the use of compulsory powers other than in very narrowly defined circumstances, and certainly not just because a person has a particular type of infection. My honourable friend the Minister for Public Health recently met my noble friend Lady Gould of Potternewton about this matter.

My honourable friend endeavoured to reassure the noble Baroness, and I repeat the assurance, that there are strong, effective safeguards in place to protect people against the misuse of powers. I am pleased to say that, at the Minister’s invitation, stakeholders in the field have been contributing to the preparation of guidance on the new legislation. That work is nearing completion, and I hope that the guidance that will shortly emerge will reassure those who still have concerns. In addition, I assure the Committee that we undertake to publish information from the reports of applications for orders, as required by regulations. That will ensure that their use is monitored.

Noble Lords will be aware that we cannot be complacent about the threats to our health and society from unforeseen sources. Infectious disease is estimated to cause about a fifth of all deaths across the world. In a global society, with swift and frequent travel, international trade and movement of populations, there is potential for new strains of infection to emerge and spread. We also face increasing risks from contamination in various forms, whether accidental or deliberate.

Of course, most people suffering from infection or contamination would not dream of putting others at risk. Health protection legislation is needed for the very rare circumstances where someone refuses to take action to protect others and there is no other way to deal with the potential harm but through compulsory measures, proportionate to the risk presented. Any measure which includes powers to place restrictions on people, or requires them to do certain things, is rightly scrutinised rigorously for its implications for human rights. We believe that the amended Act and the regulations we are debating today achieve the right balance between the protection of human health and respect for individual rights. They provide an effective way to deal with threats, but at the same time contain safeguards. I commend the regulations and the order to the Committee.

My Lords, the Committee will be grateful to the Minister for introducing the regulations which, as she said, take us back to our debates on what is now the Health and Social Care Act 2008. Looking back on those debates, I think that we can be quite proud of the role that this House played in encouraging the Government to make sensible and desirable changes to the manner in which the provisions of the Act are brought into effect. Most of those changes are designed in one way or another to safeguard the rights of the individual in the face of the range of restrictions and requirements which the authorities can deploy for the purpose of public health protection. I remain grateful to the Government for being so receptive to the proposals that a number of us made in that regard.

I turn first to the Part 2A orders regulations, and to Regulation 4, which covers the evidence required for a justice of the peace to be sufficiently satisfied as to make an order under the provisions of the Act in relation to a person. First, under paragraph (2), he must receive a report giving details of the person concerned. The report need not be in writing and, as I understand it, has to include only one of the four elements listed in paragraph (2)(a). There is nothing wrong with that, it seems to me, as long as the combination of evidence presented is sufficient to purport to show that a particular person represents a significant risk to public health. In that context, my query relates to the third element,

“the outcome of clinical or laboratory tests”.

That is a rather non-specific phrase. I would have expected it to say “the outcome of clinical or laboratory tests in relation to P”. The point of the evidence listed in paragraph 2(a) is surely to show that a person, P, presents a significant risk. It is surely not sufficient to cite evidence of a general nature about the outcome of laboratory tests. I should be glad of the Minister's comments on that.

Paragraph (2)(b) of Regulation 4 relates to the nature and characteristics of the infection or contamination in question; for example, the mechanism by which it spreads and how easily it spreads between humans. The problem with that, it seems to me, arises with new infections such as swine flu, whose characteristics and mode of spreading may be completely unknown when it first manifests itself. Swine flu is a particularly good example, because not only were its characteristics unknown when it first appeared, but it was thought to have a greater degree of lethality than later proved to be the case. How is a local authority supposed to present evidence to a JP about an infection if the relevant facts about that infection are not yet available? Does this mean that in circumstances of this sort local authorities will simply have to rely on their power to request people’s co-operation, and that they will not be able to apply for a court order unless and until the relevant facts about the infection are established?

Regulation 7 provides for discretionary powers to enable local authorities to make a charge in relation to Part 2A orders as they apply to things and premises. I believe I am right in saying that this issue never came up in our debates on the Bill, and I was therefore a little surprised to see it. The power to make a charge is, I gather, not contained in the 2008 Act but rather in other local government legislation. In principle, this is not an unreasonable provision. However, paragraph (3) says:

“The amount of the charge imposed … must not exceed the actual costs (including staff costs) incurred by the local authority in taking measures in relation to the thing or premises pursuant to the order”.

Any student of accountancy will know that there is no such thing as the actual costs. To take an example of a different kind, if I have lunch in a restaurant, the cost of my lunch could be reckoned as just the cost of the raw food; or the food plus the wages of the chef and the waitress who serves me; or those things plus a share of the restaurant’s light, heat and power bill; or those things plus a share of all the overheads of the business including the overheads of its head office. Any of these, taken as the basis of a calculation of costs, could be presented as being reasonable, but each gives a very different result. A person on the receiving end of an invoice from the local authority might regard a figure nearer to the marginal cost as being more reasonable than one based on full-cost accounting principles. What guidance will be given to local authorities in this regard, and on what basis will local authorities be encouraged not to levy a charge where the person would find difficulty paying?

The regulations set a time limit of 28 days on all orders made in respect of a person. However, they do not do this in relation to orders made in respect of things or premises. Why is this? What are the remedies open to someone whose property has been seized and quarantined indefinitely?

One aspect of these regulations which has caused considerable concern is their potential use in relation to those infected with HIV and other sexually transmitted infections—an issue which the Minister raised. She will remember very well that we debated this issue during the passage of the Act in 2008. The particular concern in this area stems from the very nature of sexual health services, the effectiveness of which depends on people having absolute trust that any information about them will be kept completely confidential. If individuals who may be infected with HIV are afraid that the law may require them to disclose details about themselves and their sexual partners, it is highly likely that this will deter them from presenting for testing and treatment in the first instance. That would be against their own interests, as well as those of others with whom they may be in contact.

Against that background, can the Minister give an assurance that the Government will monitor the use of these powers to ensure that they are not being deployed unjustifiably in relation to people with HIV and other STIs? The Government have always been clear that the powers would be used only in the most exceptional circumstances and I accept that that is their intention. Nevertheless, the all-hazards approach adopted in the regulations makes it possible that local authorities may pursue an overzealous agenda. Therefore, I hope that the Minister will be able to confirm that the Government will keep a watch on these issues. The annual reports from the Health Protection Agency will provide them with the means to verify that the powers are being used in accordance with the published guidance. In addition, I hope that the Government will be alert to any unforeseen or harmful effects of the powers on sexual health services and on the communities most affected.

My Lords, I, too, thank the noble Baroness, Lady Thornton, for the thorough way in which she introduced the regulations. I have been looking forward to discussing them because, as the noble Earl, Lord Howe, said, they stem from a piece of primary legislation that was subject not just to detailed but to expert scrutiny in your Lordships’ House. I note in passing that my main disappointment is that the word “fomite” does not appear anywhere in the regulations. That was one of the many issues on which the noble Lord, Lord Walton, educated those of us who took part in the discussion.

I will reiterate part of the discussion that your Lordships had on the primary legislation. It is correct that we should update public health legislation, some of which has been in existence since the 19th century. It is right that we should take into account the exceptional nature of some of the new public health dangers that have emerged in the past 10 years. However, it is incumbent on us to remember that they are exceptional dangers. It is worth reminding ourselves before we go any further that the existing public health law is used largely in cases where people with mental health problems are a danger primarily to themselves rather than to others. While in future some public health risks may be of a magnitude much greater than that, at the moment it is envisaged that the legislation will apply principally to the group of people to whom it applies now. That is why the general thrust of criticism in your Lordships’ House of the primary legislation was that there was insufficient protection for people who are vulnerable, and who may be ill. The Government have addressed some of these concerns in the regulations, but there are some areas of emphasis where they have got it wrong. Therefore I, too, wish to start by considering the Health Protection (Part 2A Orders) Regulations.

Like the noble Earl, the thrust of my concern starts with regulation 4 in regard to clinical or laboratory tests. As far as I can see, there is nothing in the regulations which states that the tests have to have been conducted upon a person; that that person should know the outcome of the tests; and that that person should subsequently have behaved in a way which indicates that they are wilfully ignoring the outcome of those tests. That is a problem. Many thousands of people in this country have been tested for HIV but do not know the outcome of the test. They are not routinely told because the tests are conducted as part of a battery of tests for other things. Can the Minister clarify that that is the process which a person who is making an assessment of the level of danger posed by someone has to go through? In particular, the evidence that someone has wilfully ignored the level of threat that they may pose to other people is a crucial issue.

Regulation 4(5) states that the evidence upon which the justice of the peace will base a decision,

“may be given orally or in writing”.

Am I correct in assuming that evidence would be given orally only in a matter of extreme urgency and that it would routinely be the case that evidence was submitted in writing and then recorded? The Minister may feel that I am being slightly pedantic, but when you increase the likelihood of depriving someone of their liberty you have to increase the level of protection for that person.

I, too, want to focus on the issue of charges. The marginal and direct costs of decontaminating premises will vary dramatically depending on what is involved. This can vary from sending in a squad to clean out a house that has been left uncleaned for many years—which is the circumstance under which many orders have been issued in the past—through to chemical decontamination. Is there a right of appeal for someone who has such charges levied on them? If not, why not? Some people lead unstable and chaotic lives that lead them into situations where they come under the auspices of this law, and they do not have much money.

Another issue that I wish to raise concerns the next-of-kin lists. Quite rightly, donees give a lasting power of attorney, but do the next-of-kin lists include people who have been given a power of attorney under the old system, which pre-dated the current system, and who might therefore not be registered on the new list? Many of the people we are talking about are likely to become old and frail and they may have a power of attorney under the old system which has not been registered under the new system.

On the Health Protection (Local Authority Powers) Regulations, the noble Earl, Lord Howe, made a fair point about people to whom lists of schoolchildren could be given. I, too, want clarity on that. The question which underpins both orders is the training of local authority staff who have to make judgments in both cases. We have a set of regulations that are designed to meet all circumstances. That means that the people who have the power and responsibility to invoke these regulations need to know that they have available a variety of responses that are proportionate to different levels of risk. In her introduction, the noble Baroness talked about people who pose a threat to others. The majority of people who will fall under these regulations pose a threat not to others but to themselves. Therefore, the level of judgment which a local authority officer has to take in that case is somewhat different.

I echo what the noble Earl, Lord Howe, said about monitoring and reporting on the imposition of these regulations nationally. I very much look forward to the Minister’s response to my questions.

Before we started, when I was talking to the officials, I think I spotted pretty much the sort of areas with which the noble Earl and the noble Baroness would be concerned, with one exception. The noble Earl did not ask about the safeguards for children, but I have a response on that. I shall work my way through various questions.

The noble Earl asked about testing and evidence, as did the noble Baroness. Regulation 4(2)(a) makes it clear that the details in the evidence must be,

“insofar as known and relevant”.

“Relevant” is the important point there. The point about the clinical and laboratory tests is that tests may be carried out on things and premises, as well as on a person. I am trying to imagine what that may mean, but it is probably correct; you may be testing P’s environment as well. That is why that regulation does not mention P.

Why does the legislation extend to those who may be infected or contaminated? The issue here is that some diseases—for example, tuberculosis and mumps—are infectious before symptoms appear. New diseases with these characteristics may arise in the future. The noble Earl indeed said that the unknown may be a greater threat because it is unknown. Where there is a good reason to suppose that a person may have been infected and may be infectious to others, it may be necessary to take appropriate measures straight away, either through a medical examination or quarantine. A community could be placed at serious risk if no action were possible until after the infection had been confirmed by conclusive diagnosis or the onset of symptoms.

The noble Earl and the noble Baroness, Lady Barker, raised the issue of the reporting of orders. We discussed this during the course of the Bill and outside. I had several meetings on how one monitors this and why it is important to do so. Part 2A orders require local authorities to report all applications for an order, and all variations and revocations, to the Health Protection Agency.

That the Grand Committee do report to the House that it has considered the Health Protection (Part 2A Orders) Regulations 2010.

Relevant document: 6th Report from the Joint Committee on Statutory Instruments.

That the Grand Committee do report to the House that it has considered the Health and Social Care Act 2008 (Consequential Amendments) Order 2010.

Relevant document: 6th Report from the Joint Committee on Statutory Instruments.