My Lords, before the Minister moves that the first statutory instrument be considered, I remind noble Lords that in the case of each statutory instrument the Motion before the Committee will be that the Committee do consider the statutory instrument in question. I should perhaps make it clear that the Motions to approve the statutory instruments will be moved in the Chamber in the usual way.

That the Grand Committee do report to the House that it has considered the Building Societies (Insolvency and Special Administration) (Amendment) Order 2010.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments.

My Lords, I shall speak also to the draft Building Societies (Financial Assistance) Order 2010, which modifies the law applying to building societies to make it easier for building societies to receive financial assistance from a qualifying institution—the Treasury, the Bank of England, the European Central Bank or another central bank in the European economic area. The Building Societies (Insolvency and Special Administration) (Amendment) Order 2010 makes technical changes to the building society insolvency procedure and the building society special administration procedure.

The building society sector has weathered the financial crisis relatively well in the light of the especially harsh business environment of the past few years. During that time, however, there has been consolidation in the sector and one failure—the Dunfermline Building Society. The sector continues to provide valued services to members and customers throughout the United Kingdom, and the Government remain committed to supporting the financial mutuals sector as a viable alternative to banks and an important way of ensuring a more competitive financial services sector.

I turn, first, to the Building Societies (Financial Assistance) Order 2010. While the sector has generally held up well, the financial crisis brought about the need for liquidity assistance for financial institutions of all kinds. Liquidity support such as provided by the Bank of England under the special liquidity scheme was only one example of the type of schemes in place across Europe and elsewhere. Improving building societies’ ability to access emergency funding from central banks strengthens the resilience of an institution against potential failure and, in so doing, protects the interests of building society customers, who are also their members.

In most respects, the order replicates the provisions of the Building Societies (Financial Assistance) Order 2008, which was made under the Banking (Special Provisions) Act 2008. In particular, it modifies the application of Section 7 of the Building Societies Act 1986 to ensure that relevant financial assistance from a qualifying institution is not taken into account for the purposes of the 50 per cent limit on building societies’ non-member funding. It also disapplies Section 9B of the 1986 Act, which restricts the creation of floating charges, and applies insolvency law provisions on administrative receivers to make it possible for a qualifying institution to appoint an administrative receiver under a floating charge.

However, the order makes wider provision than the existing order. Whereas the 2008 order applied only to financial assistance offered or provided by the Bank of England, this order will apply in respect of financial assistance offered or provided by the Treasury, the Bank of England, another central bank of a member state of the European economic area or the European Central Bank. It therefore widens the sources from which financial assistance can be granted.

In addition, whereas the 2008 order applied only where the financial assistance is provided,

“for the purposes of maintaining the stability of the financial system in the United Kingdom”,

this order will apply where financial assistance is provided for any purpose, even where there is no wider threat to financial stability.

Prior to laying the order, the Treasury consulted in July 2009 on a wider order that would, first, modify building society law to make it easier for building societies to receive financial assistance from a central bank; and, secondly, allow building societies to grant floating charges in favour of payment and settlement systems to help them take advantage of such financial assistance. The consultation closed on 31 October 2009. Respondents to it expressed the view that both the provisions would be useful for accessing financial assistance. However, in light of further consideration, I have decided that it is appropriate to make an order that is a little more limited in scope. The wider order would have enabled building societies to grant floating charges for reasons unconnected with financial assistance. It would have given a general and indefinite permission to building societies to grant floating charges so that they could access settlement and payment and settlement systems directly. To do that would increase risk in the sector, and goes beyond the intention of the policy. The order therefore puts in place only the first of the two provisions, which will make it easier for financial assistance to be granted to building societies from a wider range of sources.

I make it clear that the proposals in the order are purely precautionary. They are intended to place building societies on a similar footing to banks, not single them out for special treatment. Extending the financial assistance order to cover assistance from the Treasury, the Bank of England, the European Central Bank or another central bank in the European economic area has been widely supported by stakeholders, including the building societies and their association. The Government believe that the order represents sensible and prudential contingency planning on the part of the authorities, improving the position of building societies and bringing them on to a similar footing as banks with regard to financial assistance.

I turn now to the Building Societies (Insolvency and Special Administration) (Amendment) Order 2010, which will make changes to the building society insolvency procedure and the building society special administration procedure. These were created on an urgent basis in March 2009 to enable the resolution of the Dunfermline Building Society. It was not possible at that point to undertake public consultation before making the necessary secondary legislation. The Government therefore committed to public consultation, and to bring forward an amending instrument if necessary.

The Government conducted a full public consultation from July to October 2009, and has received advice from the Banking Liaison Panel which has been published on the Treasury's website. Stakeholders supported the policy proposals, and the BLP has made three technical recommendations, which are set out in its published advice. In relation to building society insolvency, the BLP made two recommendations—that the FSCS should have certain conditional rights in the insolvency, and that building society members should retain rights to participate in the insolvency and to be informed about its progress. Those are matters for the statutory insolvency rules. The Government agree with the BLP's proposals, and they will be included in the rules when they are made in due course.

The BLP proposed that provision be made to ensure that the building society special administrator could change the name of the residual society after a partial transfer. Under the BSSAP as it stands, there are various routes by which the special administrator could pursue that goal, and he or she would ultimately have recourse to the courts. To put the administrator's ability to change the name of the residual society beyond legal doubt would require significant revisions to building society law. The Government do not believe that such wide-ranging change would be appropriate.

The order therefore limits itself to making essentially minor and technical amendments, some of which respond to the points made by the Joint Committee on Statutory Instruments when the original order was made.

My Lords, I thank the Minister for introducing these orders and I shall not respond to his opening words, which were broadly that the mutual sector is doing rather well. In the face of several consolidations and one failure, it has not been a good time for the mutual financial sector. But that is a debate for another day. When we considered the 2009 insolvency and special administration order, which will be replaced by the order before us today, I had rather a lot to say. I think that the Minister may be relieved to know that I shall not be repeating that performance and we have no fundamental problems with either of the orders.

So far as the Building Societies (Insolvency and Special Administration) (Amendment) Order is concerned, it was good to see the advice of the sub-group of the Banking Liaison Panel in full on the Treasury’s website and summarised fairly in the Explanatory Memorandum. The panel has been a good invention for all these highly complicated areas of law surrounding banks, building societies and financial transactions generally. It gives a lot of comfort to see that the draft order has been reviewed by the sub-group and I shall not pursue the relatively small points that remain from that review and from the consultation generally.

Turning to the Building Societies (Financial Assistance) Order, I can criticise the Treasury a little. The Treasury’s website for the consultation on these orders shows the responses from the Building Societies Association and the Insolvency Service, although in each case they are wrongly referenced to each other. If you click on “Insolvency Service”, you get the Building Societies Association and vice versa. I checked that again this morning and it is still the case.

The main response of the Building Societies Association says, at paragraph 30, that it has responded separately to the financial assistance consultation. But that is not on the Treasury’s website. The noble Lord will be relieved to know that I found it on the website of the Building Societies Association. Luckily for the Minister, that did not raise any points that I wish to raise with him today.

I have one point for the Minister on the financial assistance order. He said that it is wider in its potential application because the Banking Act 2009 defined “financial assistance” in a broader way than the 2008 Act, in that it was not confined to financial stability. I think that that was because Section 228 of the 2009 Act was intended to be a very broad definition of financial assistance for other purposes in the Banking Act.

I understood what the Minister said as regards this wider definition not being used to apply to floating charges, but it remains and can be used for financial assistance to building societies. Will the Minister say what the practical impact of this wider definition is intended to be? Do the Government intend to use the power under this Act in a way that they would not have used it under the 2008 Act? It looks as if the Government have rather a wide power now to prop up all kinds of ailing building societies and, if I go back to my opening remarks, I have noticed that they ail from time to time. Therefore, it is a potential concern that such a power exists.

My Lords, we support these two orders. I am afraid that I have not had the assiduity of the noble Baroness in that I have not looked at the Treasury website, but I was pleased to see that consultation had taken place over a relatively relaxed period and that it had been taken very seriously.

There is just one area where I have a question and it relates to the extension of the financial assistance provision to cover another central bank of a member state of the European economic area or the European Central Bank. Can the Minister explain the circumstances in which the Government envisage that that provision might be used? Secondly, can he say whether in this respect this order merely matches what is already on the statute book in respect of banks?

My Lords, I thank the noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, for their contributions to this debate. I fear that I shall never quite achieve the high standards that the noble Baroness sets, but that does not sadden me because it is a continued encouragement. I know that I may not make the mark but I like to feel that occasionally I make some progress in closing the gap. I give her the benefit of the doubt; I do not think that she raises the bar whenever she thinks I am getting closer. However, I shall hurry back to the Treasury, fiddle with the technology and try to make sure that the website is correct. At the same time, I shall satisfy myself that this was not some cunning plan to outfox the noble Baroness by putting the wrong information in the wrong place, although I cannot think why anyone would want to do that to help the Minister. I greatly appreciate the support expressed by both the noble Baroness and the noble Lord for the matter before the Grand Committee.

Consolidation is an inevitable feature of financial markets. I think that it is happening globally in banking, in mutuals and in insurance. There is probably no developed market in the world in which a process of consolidation has not occurred, and of course that applies to building societies as much as anything else. I do not think that the continuing trend to merge building societies is in itself a sign of distress; in fact, in some cases it creates more critical mass, it shares resources and it reflects the fact that, in a very competitive retail market, organisations constantly have to press to improve their efficiency. However, I am delighted that there is still room for small building societies. A particular favourite of mine is the single branch Stafford Railway Building Society, which I cited this morning to the Which? Banking Commission as an exemplar of good governance and good, responsible behaviour. However, I think that that explains the consolidation. The problems of the Dunfermline Building Society were idiosyncratic and came back to my old hobby-horse of poor governance being a critical contributory factor.

Last year, the Government set up an expert group, commissioned to look at reforming financial markets. It has addressed various challenges facing the building society sector, and we will have rather more to say about that in the Budget next Wednesday. The Banking Liaison Panel will be greatly encouraged by the noble Baroness’s comments about the success of this venture. The people who sit on that panel work hard and diligently in getting to grips with some quite technical issues. We all benefit from the quality of the work that it does.

The noble Baroness asked what the practical impact is of the wider definition of financial assistance. There may be a case where there is not a wider threat to financial stability but where it would still be appropriate to give assistance to an individual society. Such a decision would be made on a case-by-case basis but it is certainly not central to our planning here that we would be obliged to step in and support individual societies. Indeed, I have said that one of the tests of financial reform has to be to get to a position where financial institutions are allowed to fail without that doing damage to either retail depositors or the system. One of the lessons of the past few years is that we were not able to allow banking businesses to fail. As a result, the salutary consequences of failure were not always brought upon shareholders—subordinated to creditors—and the management of banks to the extent that a perfect model would have sought to achieve.

The noble Baroness asked why the range of qualifying institutions needed extending. Under the existing order, statutory barriers that might otherwise prevent building societies accessing financial assistance from the Bank of England are removed. However, as has been seen during the financial crisis, financial institutions may also receive financial assistance from other sources, such as central banks in other European countries or the European Central Bank. The Government are of the view that societies should wherever possible have the same ease of access to financial assistance as banks. By extending the definition of “qualifying institution” to include the Treasury, the ECB and other EEA central banks, the order better enables building societies to access the broader range of financial assistance that may be available to banks, particularly in the form of loans secured by a floating charge over their assets.

It was asked also why the order was necessary, as building societies are already able to get emergency liquidity assistance from the Bank. Does it mean that specific building societies are in trouble now, or are we anticipating something of that sort happening? I endeavoured in my opening comments to make it very clear that the order was not triggered by anything of the moment, but rather is prudent and anticipatory action that would contemplate increasing the range of options open to us should a building society experience difficulty in the future. The proposals in the order are therefore purely precautionary and the timing is routine.

While the existing order under the Banking (Special Provisions) Act is not subject to a sunset clause, it is desirable that this wider order be made so that the financial assistance can be provided by a range of qualifying institutions. The changes are intended to place building societies on a similar footing to banks, not to single them out for special treatment. At this stage, it is not possible to answer hypothetical questions about circumstances in which assistance might be provided by the ECB or another EEA central bank. I say simply that it is possible to envisage those circumstances, and it is wise and sensible to ensure that we do not find ourselves over a weekend—it is my experience that problems always seem to happen over a weekend; banks seem to manage to teeter through to a Friday before they experience real difficulty—suddenly realising that some restriction stops us reaching for an available and attractive source of liquidity and support.

I think that I have answered the questions raised by the noble Baroness and the noble Lord. If that is the case, I commend the order to the Committee.

Motion agreed.

That the Grand Committee do report to the House that it has considered the Building Societies (Financial Assistance) Order 2010.

Relevant documents: 10th Report from the Joint Committee on Statutory Instruments.

That the Grand Committee do report to the House that it has considered the Criminal Procedure and Investigations Act 1996 (Code of Practice for Interviews of Witnesses Notified by Accused) Order 2010.

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

My Lords, the order before us today is to bring into operation a new code of practice under Section 21A of the Criminal Procedure and Investigations Act 1996. The code has been laid before each House in accordance with the statutory requirements. The code of practice will enable us to bring into force Section 34 of the Criminal Justice Act 2003. I can confirm that it is our intention to do so on the same day as the code enters into force; namely, 1 May.

Section 34 of the Criminal Justice Act 2003 adds a new Section 6C to the Criminal Procedure and Investigations Act. This new section extends the existing requirement on the accused to disclose alibi witnesses before the trial in Crown Courts, and in some cases in magistrates’ courts, to defence witnesses generally in all proceedings. The new section will primarily strengthen the court’s case management powers and in so doing encourage the more effective progression of criminal proceedings. It will also enable the police to carry out criminal record checks at an earlier stage and so assist the prosecution to prepare more expeditiously any bad character applications that may be required before the trial.

The background to the code of practice lies in the parliamentary passage of the new witness disclosure requirement. Some concerns were expressed at the time by the Home Affairs Committee, and subsequently, that the requirement might enable the police to apply undue pressure on defence witnesses. These concerns were to some extent overstated; the police will often be aware of the existence of a witness, merely as a natural consequence of their ordinary investigative procedures, and that has always been the case. Our position then and now is that it is important to allay any possible perception of a risk of police impropriety in relation to witnesses disclosed under the new provisions, and that is why we legislated for the present code of practice.

The code is essentially a safeguard. It sets out clearly the procedures expected of the police and other investigators in arranging any interviews with the disclosed witnesses, and in conducting them. We anticipate that in practice such interviews will be relatively rare. The code of practice has been the subject of extensive consultation. The primary legislation requires only consultation with four named authorities, but we conducted a full public consultation exercise in late 2004. As a result of that consultation, a number of points came to light requiring further consideration. We have recently reconsulted the four statutory consultees.

It is fair to say that the code has grown somewhat as a result of the consultation process. During the passage of the then Criminal Justice Bill, we supplied Parliament with an indicative version, which covered rather less than a page of text. The final version before us today goes into considerably more detail and is set out more formally. I trust that the Committee will take that as a sign of the seriousness with which we have approached the exercise.

On the detail of the code, the fundamental point we need to bear constantly in mind is that the whole process of being interviewed is entirely voluntary on the witness’s part. The witness can decline to be interviewed at the outset and walk away from the interview at any stage. One could always suggest further areas in which the code might be more prescriptive but, given the voluntary nature of the process on the witness’s part, there is a limit to the usefulness of including further detail. Our view is that the document now strikes the right balance in this respect.

The case for the new witness disclosure requirement, and hence the code, remains strong. The case of R v Warley Magistrates is symptomatic. In that case, a magistrates’ court attempted to use the Criminal Procedure Rules to obtain advance disclosure of defence witness details very much along the lines that the statutory provision will require. The High Court determined that there was no power to do this under the Criminal Procedure Rules, but the court described Section 34 and its related provisions as,

“matters of some importance in showing how a case management scheme requiring defence witness disclosure might properly and efficiently operate”.

We endorse those sentiments of approval. We agree with the court that Section 34 forms the basis for a sound witness disclosure scheme and remain convinced of its case management advantages.

This code of practice has been widely consulted on and carefully prepared. I commend it to the House.

My Lords, I thank the Minister for introducing the order. I also thank the usual channels for removing the two statutory instruments that we were due to debate this afternoon on a separate Motion—the draft Damages-Based Agreements Regulations 2010 and the draft Conditional Fee Agreements (Amendment) Order 2010. They will be debated in the House next Thursday rather than the Moses Room. That decision follows comments by the Merits Committee on those two statutory instruments, and representations from others including the noble Lord, Lord Martin of Springburn, who has tabled a Motion to Resolve that the House regrets that the Government have laid those instruments before it. No doubt we will debate that in due course. The reason I mentioned those instruments is that one of the noble Lord’s principal concerns was that there had been a lack of consultation. On this order, therefore, I am grateful that the Minister emphasised that for once his department has had extensive consultation of the appropriate type.

On the code itself, as the Minister knows, my honourable friend Henry Bellingham in another place put a number of questions to the Government and received perfectly good answers, so I do not think it will be right to waste the time of the Committee this afternoon by asking anything further. I am grateful that the Minister emphasised the voluntary nature of the process and that it would apply only if the appropriate witness was prepared to come forward and be interviewed. It was right that he should emphasise that. We will not oppose the order.

My Lords, when Section 34 was introduced into this House in the Criminal Justice Bill 2003, I expressed my reservations about it in these terms:

“It is difficult enough to give evidence anyway, but even more difficult to give evidence for the defence when a policeman appears at one's door, asking ‘Are you really sure that that was what happened?’ Sometimes their nerves fail; on other occasions police statements are obtained and used to cross-examine in minute detail”.

I was referring to the experience with alibi notices. I said:

“The disclosure of defence witnesses would give rise to the possibility of police pressure, which will do nothing for the administration of justice”.—[Official Report, 16/6/03; cols. 570-71.]

Indeed, the administration of justice is my main concern.

In introducing the order, the Minister referred to case management and efficiency and that is all very well, but he will know from his own experience that very often issues arise during the trial quite out of the blue and it is necessary sometimes to call defence witnesses quite unexpectedly without going through all the giving of notices and so forth. I am concerned that this will cause injustice. I can see that in particular cases there could be a reference to the European court, ultimately, about whether this impinges on a fair trial.

Having said that, and having expressed my opposition to the principle, the code that has been produced after some seven years includes a lot of safeguards. I am interested about why it has taken seven years to produce. I think that indicates the sensitivity of the issue. In particular, I am very interested in the Explanatory Memorandum, which states that:

“It is intended to monitor closely the operation of the provisions in practice".

What has the Minister in mind by way of monitoring in future? How often will it take place and what sort of reports will be available to the profession and to the judiciary about how well the scheme operates? It is a very sensitive area, as I have said, and I can see that in certain circumstances there will be injustice. It is very important that the Government keep their eye on these provisions.

As always, I am grateful to the two noble Lords on the Opposition Front Benches for their contributions to this short debate. I am delighted that the consultation process has pleased the noble Lord, Lord Henley, on this occasion. He is right to stress its voluntary nature. It is fundamental to this order. It is not compulsory for a probable or possible defence witness to agree to be seen by the police. I acknowledge what the noble Lord, Lord Thomas of Gresford, said. These are very sensitive areas, and they need to be looked at closely.

The alibi notice requirements have been in place for so long that I was practicing at the Bar when they first came in. The noble Lord will know better than me how successful they have been. I do not believe that there has been any proof that they have not been by and large successful, although it is always essential that safeguards are maintained. The code, which the noble Lord was kind enough to say contains quite a number of safeguards, is a more solid piece of work than the original code of conduct intended some years ago.

The noble Lord asked why the code has been delayed so long. It is regrettable. The delay has had much to do with competing pressures on resources and the need to settle the detail properly. Police interviews of defence witnesses, like defence interviews of prosecution witnesses, are a sensitive area, and considerable caution is required in regulating them. Following the Warley judgment, I understand that policy and the relevant parliamentary instruments were almost ready by the Summer Recess 2008. Unfortunately, as both noble Lords will remember, in June 2008 there was a major House of Lords judgment in the Davis case on witness anonymity and the ensuing emergency legislation intervened. These developments, the need to re-enact the emergency legislation and the new provisions on witness anonymity in last year’s Coroners and Justice Act had the effect of pushing the code to one side again. It is regrettable, but the matters are now before the Committee.

As to the ECHR point, it is possible that any police pressure on witnesses could result in an Article 6 point being taken. However, Section 34 will not alter the position, and we hope that the code will protect police conduct regarding witnesses whose details are given. The usual PACE Section 78 considerations and other provisions are there to protect any defendant, and judges make sure that defendants have a fair trial.

The question on monitoring was perfectly proper and sensible. We are considering proposals from the Criminal Procedure Rule Committee relating to disclosure time limits in general. That includes defence statements. We will listen carefully to any concerns raised by the rule committee about the operation of the new provisions. We will be watching how this works closely.

Finally, I do not think that the noble Lord chides me, but he has pointed out that there are more important considerations than court management in the conduct of a criminal trial. Of course justice must remain the main consideration, but I think that all of us would agree that there is room for improvement in the way in which we manage our trials, particularly in the Crown Court.

Is it intended that the prosecution could in certain circumstances produce a notice of defence witnesses when those witnesses have not been called? As the noble Lord will know, the calling of witnesses by the defence is an extremely important issue. Very often, it depends entirely on the way in which a trial has gone as to whether a witness who may at one stage seem to be of help to the defence is seen to be no longer. It is very important to know whether a notice will be admissible.

It is not a question that I can easily answer. My experience of defending, many years ago, was that sometimes it was a bit of a game as far as defence witnesses were concerned. Occasionally, you heard tales of defence witnesses being brought into court in the hope that their evidence would be over before the police had had the chance to check up on their previous convictions. It sometimes worked and sometimes it did not. To be honest, I think that most often it did not work. But the noble Lord has asked a good question. I may even have had references made in trials on the question of defence witnesses, but any judge would be extremely cautious in allowing in in the normal course of events any list that talked about potential defence witnesses. We will have to see how it works and this is one of the areas we will be monitoring.

That the Grand Committee do report to the House that it has considered the Human Fertilisation and Embryology (Parental Orders) Regulations 2010.

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

My Lords, I shall speak also to the Human Fertilisation and Embryology (Disclosure of Information for Research Purposes) Regulations 2010 and the Human Fertilisation and Embryology (Parental Orders) (Consequential, Transitional and Saving Provisions) Order 2010. These statutory instruments are necessary in order to implement provisions that were the subject of debate during the passage of what became the Human Fertilisation and Embryology Act 2008.

I shall begin with the disclosure of information for research purposes regulations, which are made under Section 33(D) of the 1990 Act, as amended by the 2008 Act. Before going on to discuss the regulations, I should like to draw the Committee’s attention to two numbering errors in the printed regulations. In Regulation 4, paragraph (6) is numbered in error: paragraph (7) should be numbered (6), paragraph (8) should be numbered (7) and so on to the end of that regulation. The last sentence in Regulation 6 is numbered paragraph (2) in error. I apologise for these mistakes, which will be amended in the final version of the regulations.

The regulations provide for the Human Fertilisation and Embryology Authority—the HFEA—to authorise the disclosure and use of certain identifying information contained in its register for medical or other research purposes. The regulations set out the process whereby research establishments make applications to the HFEA for authorisation and make provision for the revocation and suspension of authorisations by the HFEA when the research establishment has failed to protect the information disclosed to it. Finally, they make provision for the authority to be assisted by an oversight committee, which will help ensure the governance of the regime created by the regulations.

The register maintained by the HFEA records every IVF and donor insemination treatment cycle carried out in the UK since August 1991. It is one of the most comprehensive databases in the world and contains more than 800,000 entries. It has long been recognised that the register has the potential to be of significant use to researchers, enabling more extensive research on different treatments, their effectiveness and any long-term implications. This may include, for example, whether the ovarian stimulatory drugs taken during IVF treatment have any causal links to the development of ovarian cancer in some patients.

Since the 2008 Act came into force on 1 October 2009, patients and their partners can consent to disclosure and can vary or withdraw that consent at any time. This is good news for future researchers, but the real value of the HFEA register for current research is the wealth of data already on it. The 2008 Act therefore introduced a regulation-making power to allow identifying information to be released for research purposes, under certain conditions, without consent. The authorisation process for such a release is set out in the disclosure of information for research purposes regulations. Under the regulations, researchers applying to the HFEA to be given access to identifying information held on its register will need to demonstrate the project meets strict criteria, including that it is not reasonably practical to obtain the information other than under these regulations. The HFEA can refuse to grant authorisation, including when it is satisfied that the research project is not necessary or expedient in the interests of the public or improving patient care.

While parents can choose to give consent to disclosure of identifying information about children who have already been born, they cannot give prospective consent about a child that might never exist. This could compromise research relating to children born as a result of treatment services. The Government do not want researchers and clinics to have to chase former patients to ascertain their wishes. We also do not want new parents to have to consider such matters when they have far more pressing concerns. We have therefore extended the authorisation process created by these regulations to apply to data about children recorded on the register at any time on or after 1 August 1991. The authorisation criteria will be exactly the same as for historic data.

The regulations do not apply to all the information held on the register. Information on the donation and use in treatment of donated gametes and embryos is excluded. This information is especially sensitive and it would be unacceptable to release it without the knowledge of those involved. The regulations were the subject of two public consultations, between January and March 2009 and between October and December. While I hope that people would be prepared to assist with important research, individuals are entitled to withhold their identifying information if they wish. The Government will work with the HFEA, patient groups and others to publicise the purpose and effect of the regulations.

I turn to the Human Fertilisation and Embryology (Parental Orders) (Consequential, Transitional and Saving Provisions) Order 2010, which is made under Section 55 of the 2008 Act. The order is made by applying, with modifications, the adoption legalisation specified in the 2008 Act.

My Lords, I thank the Minister for introducing these regulations, which, as she said, cover issues that we debated during the passage of what is now the HFE Act 2008. There was a general agreement then that the particularly restrictive terms of the 1990 Act, which originally prohibited almost all disclosure of identifying information contained in the HFEA database, should be relaxed, subject to appropriate safeguards and conditions, in order to facilitate research. For reasons which I shall explain, I am glad that this conclusion was reached and I welcome the fact that the Government have undertaken two consultation exercises on the issue since the passage of the Act. The regulations before us reflect the feedback from those consultations as far as is possible given that the opinions of consultees will inevitably differ.

The first issue that I want to raise was covered in the first consultation: consent. It is a generally accepted principle that, where identifying information is used for research purposes, the consent of the individuals involved should first be obtained. Respondents to the consultation were given three choices: to maintain current policy; to disclose data only with the consent of the person or persons to whom the information relates; or to establish a process to authorise disclosure where consent cannot be practicably obtained. The third of these options has been adopted in relation to those whose names were placed on the register up to 30 September 2009; in other words, the normal principle of explicit consent for the disclosure of identifying information has been retrospectively set aside. It would appear that it has been set aside for reasons of expediency—I think that we need to talk about that.

It is perfectly fair to argue that burdening IVF clinics with the task of contacting past patients, even if they were in a position to know their whereabouts, which they might not necessarily have been, would have been unreasonable. However, one idea which the department considered was a publicity campaign to encourage people with personal information on the HFEA register to inform the authority if they were willing to allow identifying information to be released. That idea was rejected, I understand, on grounds of cost and uncertainty of outcome. I would question that. How expensive would such a campaign need to be? It is obvious that there would not be a 100 per cent response rate, but what response rate would be likely to provide a sufficient quantum of data to enable viable research to take place? Bearing in mind the sensitivity of the information in question, I cannot help feeling that this option, which after all is the most ethical, should not have been so swiftly rejected. Perhaps the Minister could comment.

I ask that question not least because of paragraph 52 of the impact assessment, which explains that, because some people may object to information being disclosed, the HFEA and patient groups will be asked to ensure that information on the regulations is circulated to stakeholders so that patients can register their objection. It also states that the Government will consider how best to raise public awareness of the regulations so that members of the public can be made aware of their right to withhold identifying information from disclosure. If this is what the Government are contemplating, what practical difference is there between such public awareness exercises and the publicity campaign discussed under option 2?

Following on from this is an important issue covered by Regulation 8(1)(c), which I shall quote. It states:

“Where the Authority grants an authorisation, it must impose the conditions that … the research establishment must not contact or request any other person to contact on the research establishment’s behalf any individual who is identified by the disclosable protected information except in the manner and circumstances specified in the authorisation”.

I cannot emphasise too strongly how important this provision is. We are dealing here with matters which by their very nature are intensely private. Where a child has been conceived by IVF, the parents may think it is nobody else’s business to be aware of that fact. Indeed, it is by no means unimaginable that the parents will see no need to disclose it to the child and may not wish to do so. I personally know of a case where an IVF-conceived child was not told of the circumstances of her conception until she was well into adulthood. For any member of such a family to be contacted out of the blue by a research establishment with requests to supply information of an often confidential kind is not something that one can contemplate without very careful consideration of the manner in which the approach is made. What conditions will the HFEA put in place to ensure that these matters are handled with due sensitivity? The regulations specify that the disclosable protected information must be used only in accordance with the purposes set out in the authorisation. How will it be possible to police that? For how long may an authorisation be renewed at the end of its initial period of authorisation?

On the importance of long-term follow-up research into those born by assisted reproduction, recent meetings of the HFEA Scientific and Clinical Advances Advisory Committee—SCAAC—make sobering reading as regards the harm that may be caused to individuals conceived via IVF as a result of variations in the embryo culture medium. A paper considered by the committee highlights some of the variable factors that could affect the future health of the child. In relation to embryo culture media, it notes that gene expression in the blastocyst is affected by culture conditions and warns that growth factors could block the action of the tumour suppressor gene p53. The medium known as Whitten's medium has been shown to affect the expression of 114 genes, while another medium called KSOM-AA affected the expression of 29 genes. Equally, serum may adversely affect mammalian pre-implantation embryos, causing alterations in metabolism and other abnormal effects. In general, it is stated that IVF increases the risk of genomic imprinting disorders.

In passing, it is astonishing to me that, despite clear indications that culture medium components might adversely affect the safety of children born after IVF, the SCAAC warns that there is no legal requirement to carry out clinical testing of the safety of embryo culture media, nor even any requirement for a manufacturer of an embryo culture medium to disclose the ingredients. There is more. The paper to which I referred warns that mouse embryo culture causes raised systolic blood pressure post-natally, and a Dutch study on children born after IVF found an effect on several cardiometabolic activities, with higher systolic and diastolic blood pressures and higher fasting glucose levels than in a control group of children. There is also concern over IVF procedures such as embryo biopsy, which is an essential part of pre-implantation genetic diagnosis, and the creation of saviour siblings. Recent research on mice born after embryo biopsy demonstrated a risk of neurodegenerative disorders and memory decline in adulthood, apparently due to alteration in gene expression of proteins in the brain associated with neurodegenerative diseases, including proteins associated with Alzheimer's, Parkinson's and Huntington's disease. If the results are applicable to children born after embryo biopsy, the mental health in adulthood of saviour siblings and those born following pre-implantation genetic diagnosis is at risk.

What all this tells us is that we need to do research and, in doing it, we must look at a wider range of parameters than are normally examined in order to detect many of the types of disorder that could be caused, for example, by epigenetic abnormalities or alterations in gene expression. The follow-up research that has been conducted up to now has largely been based on short-term studies. Something of a longer term nature is needed if we are to understand the full medical and developmental implications of IVF procedures.

On the parental orders regulations, I wish to touch on only one issue—that is, the law relating to surrogacy. The Minister will recall from our debates on the HFE Bill two years ago that I drew attention to the differing treatment accorded to children born from surrogacy under English law compared to those born in other jurisdictions.

Under English law, the child is considered to be the offspring of the woman who carries and gives birth to him, and only a parental order or adoption order can change that. In other jurisdictions, such as Canada and California, surrogacy contracts have legal effect, by virtue of which the egg donor and carrying mother and her husband relinquish all rights to the child and the child is registered as the child of the commissioning parents. These two approaches are fundamentally at odds with each other. They mean that if a child is conceived and born abroad as a result of a surrogacy arrangement, registered as the child of the commissioning parents in that jurisdiction and subsequently brought into this country, that child will in effect be parentless and stateless. In the state of origin, he is the child of the commissioning parents, while in our law he is the child of the carrying mother and her husband.

During the passage of the 2008 Act, the Government undertook to conduct a review of the law in this whole area, and I should like to ask the Minister how far this review has got and when it is likely to be completed. Until it is, we cannot be fully sure that the provisions of the 2008 Act are fully human-rights compliant.

My Lords, I, too, thank the noble Baroness, Lady Thornton, for the customarily thorough way in which she introduced these two sets of regulations. Before I turn to the detail, I should like to thank the staff from the department for their extremely helpful explanations. When presented with both sets of regulations at the same time, it was rather difficult to see one’s way clearly through them. As in many aspects of the law in this field, many of the principles with which we are dealing are long established. However, it is the implementation of those principles in a very technical way that makes these statutory instruments appear to be much more complex than they are in many cases.

I shall start with the regulations which apply to disclosure of information for research. The noble Baroness is right that in our very detailed passionate and heated debates on the Human Fertilisation and Embryology Act, or Bill as it then was, there was agreement that, on balance, it would be to the betterment of humanity if there were potential to conduct research using the database held by the Human Fertilisation and Embryology Authority. It was also agreed, without dissent, that information relating to donors and donor-conceived children was of a different order and had to be subject to much more stringent protection. Nevertheless, it was agreed that principally for the purpose of longitudinal research into the effects of embryology and the development of certain conditions, it would be preferable to let researchers have very limited access.

My recollections from the passage of the Act relate to the data held on the register. My understanding is that the register is a register of treatment; it is not a complete register of births that have resulted from treatment. I remember that when we talked at considerable length about issues relating to birth certificates and the rights of donor-conceived people to find out who their biological parents are, the briefings that we received from the HFEA pointed out that, because of the limited nature of the register, it is not possible to say that there is a complete register of all donors. For example, donors may have moved and the HFEA does not track the lives of donors after the point at which their information has been stored. It is therefore important to establish what we are talking about at the base level.

That plays directly into the point that was made about consent by the noble Earl, Lord Howe. We are now talking about information that goes back over a very long time, to 1991. I agree with the noble Earl about a campaign to raise awareness about the change to the use of the register for research into possible medical conditions. We should not assume that people who have been involved in IVF treatment or donation would automatically wish to be part of that, but they might if they knew about it. I, too, wanted to ask why the department had ruled out the mounting of a campaign.

Following on from that, I also wanted to ask about periods of authorisation for research. From Regulation 10, I understand that such authorisation would be for a period of five years. I am not the noble Lord, Lord Winston, but is it not the case that research programmes in this field can be quite lengthy and take a considerable amount of time? Therefore, can periods of authorisation be renewed and is there any limit on that renewal?

I also wanted to talk about the destruction of information. The regulations are, in many ways, rightly prescriptive about what research institutions must do and cannot do with information. They are very prescriptive about the penalties for mishandling information. In Regulation 18, which deals with the destruction of information, I see that there is no penalty for the failure to destroy information. The HFEA might therefore be powerless in such circumstances and that might be an omission.

Finally, I note in Regulation 21 the proposal to create an oversight committee. In an area as technical and sensitive as this that is probably a good thing. I see from the first three paragraphs of that regulation that the role of the oversight committee will be principally about the monitoring and granting of authorisations, the processing of disclosable information and looking at the annual reports of research establishments. Then there is a catch-all paragraph, to,

“consider such other matters relating to these Regulations as the Authority or the Committee may determine”.

Can the Minister indicate the sort of things that that paragraph would be intended to cover and the sorts of things that it would not?

I happen to believe that the HFEA does a difficult job extremely well, but the organisation is frequently subjected to criticism, not all of it fair or informed. Part of the protection that we as Parliament owe the HFEA is to be quite clear about what its remit is and is not.

I welcome the parental orders regulations. As I was reading them, I was thinking about the discussions that the House had not only on the HFE Bill but going back to the Adoption and Children Act 2002. We discussed the importance of parental orders for families in which there is a clear and settled intent to create a family and for whom it is in the best interests of children to have a process that is swifter and lighter-touch than the full adoption process which involves going through a court. We should welcome that. I note that most of the order simply replicates parts of the law on adoption that have already been agreed by both Houses of Parliament and, therefore, should not detain us long.

However, I have two questions for the Minister. In cases of civil partnerships or long-term, but unmarried, heterosexual couples, I presume that these orders will come into force only when they are enacted and therefore apply to children who receive a parental order after the passage of these regulations. Is it therefore right to assume that families who are in this position at the moment would have had to go through a process under the Adoption and Children Act? I ask that to go to the question asked by the noble Earl, Lord Howe. I assume that if families in this country have had children under surrogacy arrangements with surrogates abroad—anywhere, not just America—they would have had to go through an inter-country adoption process and, therefore, the children would be adopted, perhaps though a fast-track route. Can the Minister confirm that I am right and there is not a group of children in limbo waiting for the passage of these orders?

I rise to speak from the Back Benches to press on two points that have already been extremely well covered from the Front Bench by my noble friend Lord Howe. They relate to the options available to the Department of Health. I know that my concerns are shared by the noble Lord, Lord Alton of Liverpool, who cannot be here this afternoon as he is entertaining an important overseas delegation to Parliament.

Given the important shift that is taking place, we all recognise that research into the long-term effects on people born using assisted reproduction techniques is vital. There is growing evidence that there are long-term risks associated with various assisted reproduction procedures; for example, changes in embryo culture can have a remarkable impact on later development. It is therefore vital that information is collected, but it needs to be obtained in an ethical way. I am sure that the Government are concerned about this. The regulations have various safeguards. For example, if someone has expressed a wish not to have information disclosed for research, that wish will not be overridden. However, information could still, in certain circumstances, be disclosed without the person’s knowledge or active consent. Will the Minister give a little more information about the circumstances in which that important disclosure of information might occur?

In relation to the options available, I again echo the comments that have already been made. In respect of option two, which has the advantage of not compromising the issue of consent, but which the department rejected on the basis of cost, could the Minister say what cost-benefit analysis was undertaken by the department to arrive at that conclusion? What assumptions were made to feed into that system?

My Lords, we have had an instructive, constructive and useful discussion about the regulations and the order. I hope I can answer all the questions that have been raised.

All three noble Lords who contributed raised the issue of the public awareness campaign. I should explain that the key issue about the expense of the campaign was that it would be expensive in terms of effectiveness, not because it was costly. If it had been costly but we thought it would be effective, we would have gone ahead with it. After reading through the documentation, the issue for us was to find the most effective way of dealing with the matter other than through a public awareness campaign that could not be targeted at particular groups but would address the whole country. It might involve media adverts, including television and radio. It could cost anything up to several million pounds but the likely outcome could not be certain. In promoting the effect of the regulations, including the option to withhold identifying information from disclosure, we decided that it would be best to have a targeted campaign—which would involve discussions with patient groups, research bodies and other researchers—and to raise awareness in that way rather than through a wide-ranging advertising campaign. There are, of course, many groups involved in these issues.

The noble Lord, Lord Bates, asked about the circumstances in which information would be released, as did other noble Lords. An application for research would normally be successful only where the research bodies applying to the HFEA had demonstrated that the project was both necessary and expedient in the public interest and in the interests of improving patient care. They must be able to demonstrate that the aims of the project cannot be achieved by other means—this is very important—such as the use of anonymised data or partial data sets where consent can be obtained, and that it is not practicable to obtain consent to the disclosure from the person or persons to whom the information relates. The regulations go into some detail and there are many hoops through which researchers must jump before they are allowed to access this information.

The noble Baroness, Lady Barker, the noble Earl and the noble Lord, Lord Bates, raised the issue of penalties for failure. There is no power in the regulations to create offences. None the less, the research establishment has to be granted approval and would be expected to have high standards. It would also be subject to the penalties applicable to any breach of the Data Protection Act which would still cover this information. So not only would the establishment have its research disrupted and permission withdrawn, it would also be subject to the legalities of the Data Protection Act.

The noble Earl and the noble Baroness, Lady Barker, raised the issue of Regulation 8(1)(c) regarding researchers not contacting people on the register and a child not being advised. The HFEA will set out in the authorisation its requirements regarding contacting people as a result of IVF, and it has enormous experience of doing that. We would expect it carefully to regulate this process and to have regard to the concerns identified by the noble Earl. There would have to be a very strong case for there to be direct first-contact by a research team rather than a person known to the patient. This would obviously have to be dealt with with great sensitivity. Such contact would have to be sanctioned by the HFEA to ensure that it was done in a way that has been agreed and was intended. It would be likely only in very specialised circumstances.

The noble Earl raised the matter of the culture media using IVF laboratories not being regulated. I am not sure that the noble Earl put it quite like that, but that was my understanding. Paragraph 10 of Schedule 3(8) to the Human Fertilisation and Embryology Act 1990, as amended, requires the persons responsible at licensed IVF clinics to ensure that all equipment and materials are appropriate for use and do not endanger the safety or quality of gametes and embryos. The Act does not directly regulate the manufacture or import of culture media.

The issue of regulation has been the subject of discussion between the HFEA and the Medicines and Healthcare products Regulatory Agency. In July 2008, the MHRA wrote to the HFEA to say that the European Union’s classification and borderline working group had concluded that culture media was a class 3 medical device, therefore bringing it within the MHRA’s area of interest. As such, the MHRA advised that it accepts the culture media carrying the CE mark as suitable for use in IVF treatment. I will be happy to let the noble Earl have a copy of that letter. It gives an extremely well informed and detailed exposition on the issue and will almost certainly be noted by the people who have an interest in this matter.

The noble Baroness, Lady Barker, asked what information the HFEA register holds. The register records information relating to the provision of treatment services, including IVF, the use of donated gametes or embryos and, where known, the outcome of the treatment cycle. It records the storage and use of donated sperm, eggs and embryos, and the procurement, distribution and use of donated sperm provided by non-medical fertility services for home insemination, such as those which operate through the internet.

The HFEA instructs fertility clinics on the information that they must provide for the register by means of a direction made under Section 24 of the Human Fertilisation and Embryology Act 1990. Outcomes, including births, must be notified to the HFEA, but outcomes may not be known for parents who perhaps return abroad after treatment. To that extent, the register may not be complete.

The issue of periods of renewals was raised by several noble Lords. The period for research would be five years. There are at present no restrictions on the number of renewals but each would require the agreement of the HFEA and would be one of the issues monitored by the committee, as I outlined in my opening remarks.

On the second parental order instrument, the noble Earl, Lord Howe, asked whether the Government intended to review the regulation of surrogacy. The answer is yes. We made a commitment that we would do so during the review of the 1990 Act that led to the 2008 Act. We have not yet, however, committed to a timescale for that review.

The noble Earl asked also about children who may become stateless. It is an important question. The law in the UK does not make provision for the automatic recognition of overseas surrogacy arrangements. However, UK law makes provision for parental orders. It strikes the right balance between the need to ensure the welfare of the child and the rights of the commissioning couple. Commissioning couples, if domiciled in the UK, are subject to UK law. My understanding is that if one had gone through the parental order, as in an adoption, the child would then have UK nationality. Parents who go down this road have to inform themselves in advance of the hurdles that they will have to overcome to achieve a surrogate child through that process.

The noble Baroness, Lady Barker, asked about the adoption of children by same-sex couples. Same-sex and unmarried couples can enter into surrogacy arrangements. However, before the regulations come into force, their child would have to be adopted. We do not think that any children are in limbo as a result of this because the adoption route still exists until the regulations come into force.

I hope that I have covered the points raised during the debate. However, I shall read through my notes and make sure that I write to noble Lords if I have omitted any matter of detail. I thank noble Lords for their comments and questions.

Motion agreed.

That the Grand Committee do report to the House that it has considered the Human Fertilisation and Embryology (Parental Orders) (Consequential, Transitional and Saving Provisions) Order 2010.

Relevant document: 7th Report from the Joint Committee on Statutory Instruments.

Motion agreed.

That the Grand Committee do report to the House that it has considered the Human Fertilisation and Embryology (Disclosure of Information for Research Purposes) Regulations 2010.

Relevant document: 7th Report from the Joint Committee on Statutory Instruments.

Motion agreed.

That the Grand Committee do report to the House that it has considered the Environmental Civil Sanctions (England) Order 2010.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments.

My Lords, in moving this Motion, I shall speak also to the Environmental Civil Sanctions (Miscellaneous Amendments) (England) Regulations 2010. Most people and businesses set out to comply with the law. Clear regulation, raising awareness, and authoritative advice and guidance from regulators remain the key to securing compliance. Enforcement is a small but necessary part of effective regulation. Following the report on regulatory sanctions by Professor Richard Macrory, it is clear that enforcement has relied too much on criminal prosecution and fines. Prosecution is sometimes heavy-handed, but there is often no proportionate alternative. Sometimes enforcement is inadequate because a sanction is necessary but nothing proportionate is available.

The Government wish to give the Environment Agency and Natural England the option to use the civil sanctions allowed by the Regulatory Enforcement and Sanctions Act 2008. The order and regulations, which introduce these civil sanctions in England, are a first crucial step in creating a system of enforcement across environmental regulation in England and Wales. The system will be fairer, more proportionate, and more effective, so it delivers better outcomes. This intermediate tier of civil sanctions may be applied to businesses and others with a good general approach to compliance who have nevertheless failed in their precautions. Of course, in many cases, as now, sanctions are not needed; I should emphasise that regulator advice and guidance will remain the foundation of environmental enforcement.

Civil sanctions would carry less stigma than a conviction. The worst offenders will be prosecuted; a conviction for an environmental offence will then carry the opprobrium that it deserves and be a stronger incentive to compliance in the future. The Government plan to bring forward legislation to give the courts additional sentencing powers in environmental cases to assist them in proportionate sentencing of the worst offenders. This would include a power for the courts generally to be able to order restoration of environmental harm or restitution to adversely affected third parties. The Government plan a further consultation on the details of the proposed powers. With the order and regulations we are taking a big step towards an improved environment-wide enforcement system, first, for the offences listed in the order and regulations; and, in further planned legislation, for breaches of permits in particular.

The order contains rules governing use of the civil sanctions. Parts 1 to 4 contain general provisions, such as for appeals. Schedules 1 to 4 provide for the particular sanctions. Schedule 5 applies selected civil sanctions to particular offences in primary legislation. For technical legal reasons, the regulations are needed to extend the sanctions to particular offences in secondary legislation. This legislation introduces no new regulatory requirements. Additional costs of the new system will fall mainly on the non-compliant, and most on the least compliant. The benefits will be greater: a more level playing-field for compliant businesses and environmental benefits from discouraging offending and more direct restoration. For the first time, a regulator will be able to accept a business’s binding commitment to remedy non-compliance and its ill effects, with benefits to the business’s reputation. These enforcement undertakings will streamline enforcement, put compliance and restoration first and encourage dialogue between the regulator and business.

For the more serious cases that are still suitable for civil sanctions, regulators must be able to impose a proportionate monetary penalty. The variable monetary penalty aims to be the minimum economic deterrent to future non-compliance. It aims to level the playing field for compliant businesses. The approach to calculation is set out in published government guidance. Securing compliance, restoring harm and restitution to affected parties will still take priority over paying the monetary penalty. Responding to business comment, we have kept those variable monetary penalties not already kept by the Regulatory Enforcement and Sanctions Act. The £250,000 upper limit for an offence will continue to drive the most serious offences to the criminal courts.

This legislation also fills important gaps in regulator enforcement powers. It will introduce compliance, restoration and stop notices and fixed monetary penalties where they are needed. Fixed monetary penalties will be appropriate mainly where lesser non-compliance remains, despite regulator advice and guidance. The order also gives the regulators the minimum additional powers to enable effective use of the new sanctions for cases where the expected co-operation is not forthcoming. Regulators are engaging with businesses, large and small, as they consult on their plans for implementing the new system.

The Better Regulation Executive’s independent reviewers have given the regulators positive assessments against the Hampton principles of good regulation. The government guidance also sets the framework for proportionate and consistent regulator use of civil sanctions, for government monitoring, and for review after two years. No civil sanction will be imposed without senior manager oversight. I am satisfied that civil sanctions will be used in accordance with better regulation principles.

Business is given the right to make representations and objections, which the regulator must consider, to a proposed compliance or restoration notice or fixed or variable monetary penalty. Business may appeal against regulator decisions on civil sanctions to the independent and impartial First-tier Tribunal.

The new system will be fairer to businesses with a good general approach to compliance; it will be better at securing restoration of environmental harm and better at levelling the playing field for compliant business. These improvements have received overall support from business organisations as well as others. I beg to move.

I thank the Minister for presenting these two companion statutory instruments. I suppose I should say that I am a farmer and grower. I declare that interest because agriculture features in quite a lot of regulatory matters concerning the environment. However, if I may say so, providing for civil sanctions through a regulator tribunal-based system also provides for a much more flexible approach to environmental regulation and control. To the extent that they decriminalise infractions where appropriate and use civil means of redress, they are very welcome.

I am pleased that we can use the opportunity of approving these draft orders and regulations to clarify the ways in which the Government intend them to work and the thinking that lies behind them. Therefore, if I appear to be a bit pedantic, it is because I should like to give the Minister the opportunity to clarify certain elements.

The miscellaneous amendment regulations allow Natural England and the Environment Agency to apply specified punishments for breaching certain aspects of nine separate regulations laid as far back as 1989 and as recently as 2008. The basic order does the same thing for offences under 13 Acts passed between 1932 and 2003.

Both drafts refer throughout to an application in England, whereas in the Explanatory Memorandum—I refer the Minister particularly to pages 10, 11, 12 and 39—reference is made to England and Wales. The evidence base for the impact assessment refers to the Countryside Council for Wales, and therefore I hope I am right in assuming that the quantification of the impact assessment and the cost-benefit analysis on which these proposals are based is found across both countries. It would be useful to have confirmation of that.

In the Explanatory Memorandum, the Government are at pains to explain that the idea is to reduce the cost of prosecution while improving the level of discipline. Thus fixed penalties will be levied at £100 for an individual or £300 for a corporate body. The Explanatory Memorandum then states:

“The relatively low level reflects the significant reputational impact expected from the publicly recorded use of a fixed monetary penalty”.

My problem is that I cannot find in either draft any reference to the publication of fixed penalties, and I would be grateful if the Minister could enlighten me about the process that will be used to ensure the full reputational impact and the statute under which that process will be invoked. An offence that could be tried in a magistrates’ court or the Crown Court may be subject to a variable penalty of not more than £250,000, above which the regulator would consider prosecution. Does that mean that if the regulator rejects that possibility the offender will get away with £250,000 for an offence that should cost him rather more than that?

The regulator may also impose a financial penalty on anyone who fails to comply with a compliance notice. The penalty will be a percentage—perhaps as high as 100 per cent—of the cost of fulfilling the conditions of the compliance notice. Do the Government have in mind a limit above which prosecution will be the preferred option? Is it a monetary question or does it depend on the degree of flagrant abuse of the regulations? What will happen to the financial penalties levied by the regulator? Who takes possession of them?

The regulator may impose a restoration notice in the case of offences under regulations covering the use of sludge in agricultural use, the control of pollution from oil storage, the water resources regulations 2003, the hazardous waste regulations 2005 and the nitrate pollution prevention regulations. It seems that the first and last relate to farming in the main and that the scale and scope of the pollution resulting from a farmer's mistake is likely to be of a different order of magnitude, almost by definition, than many other pollution incidents. Do the Government have in mind any guidance to ensure that farmers are not unduly penalised simply because, by the time an error is measurable, it is already serious to severe?

In the analysis and evidence at the bottom of page 12 of the Explanatory Memorandum, the letters “N/A” appear eight times. Do they mean the same thing each time and do they mean “not applicable” or “not available”? Perhaps the Minister will explain. For example, they are used for each type of organisation whether micro, small, medium or large under the heading “annual cost per organisation”, yet in response to the question.

“Are any of these organisations exempt?”,

we see “No” for micro and small organisations but N/A for medium and large ones. More importantly, N/A appears in response to:

“Will implementation go beyond minimum EU requirements?”.

It is important that we have an explanation because it would probably be quite clear if we understood the underlying code.

Page 7 of the Explanatory Memorandum states that the legislation applies to small business. Does that mean that it will not apply to big business? If so, how will the two be differentiated? Finally, how many First-tier Tribunals will there be and what will be the maximum distance an appellant will have to travel to have his case heard?

My Lords, I thank the Minister for introducing the statutory instrument and explaining it very fully to us. I, too, welcome the introduction of civil sanctions. As the Minister said in his introduction, they are a useful tool between what can sometimes be the heavy hand of criminal prosecution, with all that goes with that, and the alternative of no prosecution at all.

I am reasonably familiar in other aspects of life with the use of civil sanctions. I speak as a member of a local authority that sometimes resorts to such measures, and I know that they act both as a deterrent and, sometimes, as an incentive. From both points of view, that is useful. The powers given here will be valuable in encouraging and, where necessary, ensuring compliance, not by the worst offenders, for whom criminal prosecution is probably the only way, but by those who, in the main, might wish to comply but, perhaps, do not try hard enough or who sometimes do not understand enough and for whom an appropriate civil sanction, which is not necessarily monetary, can act as the right incentive.

These statutory instruments were debated in another place on Tuesday and many of the questions and concerns were answered there. The noble Lord, Lord Taylor of Holbeach, asked a number of useful, helpful and pertinent questions, and I look forward to the Minister’s reply. I do not need to repeat what was said in another place or what has already been said here.

I have one remaining concern. It was addressed in another place, but not completely. It relates to the power of entry granted under these regulations. I understand the necessity, but Parliament needs to be very cautious when extending powers of entry still further. I shall not rehearse the hundreds, I think now thousands, of instances where power of entry is granted, but it is an area of proper concern over which we need to be cautious. We need to understand exactly what we are granting. In another place, the Minister said that the powers under these orders are similar to those already enjoyed by the Environment Agency. Does “similar to” mean “the same as” or “not quite the same as”? If it means “not quite the same as”, what is the difference between the powers granted here and the powers that the Environment Agency already has?

I know that this does not apply to domestic premises and we hope that in all cases those whose premises are being entered will always co-operate and comply, but it is inevitable that, sometimes, that will not happen. What happens when right of entry is refused and confrontation perhaps ensues? What power is available? Does it require police action or court action, and what sanction is there should that happen?

Those are my main outstanding concerns, given the debate that has taken place in another place and in this place. I look forward to the Minister’s answers and give a general welcome to these regulations.

I thank noble Lords who have spoken for their general welcome of these regulations. I shall try to answer the questions asked by the noble Lord, Lord Taylor, and will then deal with power of entry. The impact assessment covered England and Wales. The vision of the Government and the Welsh Assembly is for an enforcement system that is more proportionate, fairer and more effective across England and Wales. The Welsh Assembly Government are bringing forward similar legislation to allow the Environment Agency to use civil sanctions in Wales. The separate legislation is to allow more flexibility in the handling of the legislative process in Wales and any detailed amendments needed because Welsh regulation is slightly different. However, the impact assessment was for both.

The noble Lord wants to understand the details of how fixed monetary penalties will be published and which part of the legislation provides for that. Regulators will follow the government guidance, which explains that they will be required to publish the details of any enforcement action taken using civil sanctions. The Government consider it good practice for a regulator to maintain a public register on a website of civil sanctioning decisions it has taken as well as of criminal convictions. When the register is developed, it will be important that it points out that criminal convictions are of greater seriousness than civil sanctions and that a VMP is of greater seriousness than other sanctions. The Environment Agency’s current consultation on implementing civil sanctions states that it considers,

“that publishing information on our enforcement activities raises awareness of the need to comply, and acts as a specific deterrent to the individual offender and as a general deterrent to others”.

Article 14 of the draft order sets out the requirements that the regulator must follow when publishing details of any civil sanctions it has imposed.

The noble Lord, Lord Taylor, asked whether, if the regulator decided to serve a VMP rather than to prosecute, an offender could get away with a £250,000 penalty for an offence that should have cost him more. In the most serious cases, regulators will still prosecute rather than apply civil sanctions. The Government hope that the courts will see the fact that they continue to prosecute such offences as a clear signal of the seriousness of the breach. Further, the Government are considering bringing forward further primary legislation to strengthen the hand of the courts in sentencing proportionately in such circumstances, particularly for requiring appropriate restoration. The £250,000 upper limit will not be a limit on the amount of restoration that an offender may need to undertake. The Government will carefully review the existence, level and effect of the £250,000 cap as part of their two-year review. The point raised by the noble Lord is not fully covered, but we intend to review the criminal law to bring the penalty even more into line and to keep going back to restoration and graduated, proportionate penalties.

The noble Lord asked whether the Government had in mind a maximum limit for non-compliance penalties above which prosecution would be the preferred option. The Government do not have in mind any financial threshold above which prosecution would become appropriate. The regulator will make a decision on whether prosecution is appropriate on a range of factors of the kind set out in section 3 of the Government’s guidance, including whether prosecution would be the route most likely to change behaviour. I have looked at the regulation; it is a complex matrix of proportionality and use of prosecution to signal the seriousness of behaviour. It is designed to change behaviour so that compliance is the norm.

I was asked what would happen to the financial penalties levied by the regulator. The Government require all financial penalties recovered by regulators to be passed to the Consolidated Fund. Therefore, there is no financial incentive for regulators to levy penalties. However, regulators may recover their reasonable investigation costs from offenders in civil sanctions just as they currently can when they prosecute in the criminal courts. To do so, they will need to serve an enforcement cost recovery notice and may be required to provide a detailed breakdown of the cost to the recipient of such notices. Further, where they seek to recover their costs, any financial penalty payable is reduced by that amount. Finally, offenders may also pay money to make amends to third parties adversely affected by the offence and/or pay for restoration of the environment. Once again, such amounts reduce the financial penalty.

The noble Lord asked whether there was any government guidance to ensure that farmers are not unduly penalised due to their error already having become serious by the time their error is measured. Regulators imposing a variable monetary penalty will ensure that the penalty is proportionate to the circumstances of the case. However, they will also take into account a farmer’s ability to pay or carry out restoration work in determining the penalty to be paid. In cases of potential or real hardship, the regulator may consider delaying collection of a penalty until the farmer’s ability to pay, and the relationship with any reduction under the cross-compliance scheme, is understood.

The noble Lord wanted to know what the eight “N/A”s mean. I am not sure that I have all eight answers, but I shall do my best. In each case where “N/A” is used in the analysis of the evidence base, it means “not applicable” Here, we are the prisoners of—I know from years on the Merits Committee—the introduction of a pro forma, which calls for the filling in of a box. Sometimes N/A is the right answer. In each case where it appears in the analysis and evidence-base, N/A means “not applicable”. Annual costs per organisation is not applicable for any micro, small, medium or large organisation because these proposals do not introduce annual costs for an organisation in the sense of standing, ongoing costs. Costs depend on an organisation’s non-compliance. As to whether any of these organisations are exempt, the impact assessment template is concerned only with whether there are exemptions for micro and small businesses. Therefore, the words “not applicable” are automatically inserted for medium and large businesses.

The question of whether implementing will go beyond minimum EU requirements is relevant to where a piece of legislation transposes EU law. This legislation is entirely domestic, so the question is not therefore applicable.

The noble Lord asked whether this legislation was being equally applied to small businesses as to big businesses and, if so, how the two were being differentiated. The enforcement provisions will apply to any business, whether small or large. We are back to our pro forma. I understand that this section of the EM has to be written with those opening words. The regulator’s enforcement decisions will have regard to factors such as the seriousness of the non-compliance and the attitude and approach of the business concerned. As I mentioned earlier, the regulator will take the business’s ability to pay into account.

The noble Lord also wanted to know how many first-tier tribunals there will be and what would be the maximum distance. The Tribunals Service will ensure that the first-tier tribunal hearings take place in locations around the country that will be convenient for the parties concerned. This is a new area of activity, but I understand that the Tribunals Service has indicated that it will have that flexibility to move about in order to make it easier for people.

I spent some considerable time asking the team questions about power of entry, so now forgive me for the rather long answer that it has produced for me. The power is proportionate and necessary to allow Natural England to observe whether various civil sanctions are being complied with—for example, measures to restore harm, prevent further harm or to comply with the law. It achieves the necessary balance between sufficient powers to enforce and adequate protection to individuals. The power has been approved by the Home Office. The power is qualified: it may be used only at a reasonable time and no force may be exercised to gain entry. Proof of authorisation shall be produced if required. The power may not be used to enter a part of someone’s premises that is used exclusively for domestic purposes, thus preserving the right to respectful privacy and liberty in the home. Nor does it allow seizure of any information or material, for example.

Furthermore, the extent of the power is substantially similar to the powers conferred upon the authorised officers of the Environment Agency by virtue of Section 108 of the Environment Act 1995. It would not make sense for the Environment Agency to be able to enter premises for this purpose but for Natural England not to have a similar power in relation to the offences enforced by it.

If entry is refused, it is envisaged that further regulatory advice and guidance will ensue. If this proves to be unsuccessful and the regulator is satisfied that non-compliance persists, in certain circumstances it will be open to the regulator to impose a monetary non-compliance penalty. Alternatively, where no variable monetary penalty has been imposed in respect of the conduct giving rise to the offence, the regulator may bring criminal proceedings. It would normally be in the interests of a business to demonstrate to the regulator that it had complied with the civil sanction. If it chooses not to do so, the regulator may consider alternative action in relation to the offence in question or may review how the business is dealt with in the future. It will come out in the guidance. Previous performance of a business can be taken into account in sanctions in subsequent events. The Government will monitor this issue and it will be subject to review two years after introduction.

Finally, I thank noble Lords for their support. What is fascinating about being a government Whip is that you regularly do things that you know absolutely nothing about. I did not know anything about this area a week ago, but I have throughout my professional career been involved with regulation and compliance. This is a really good example of government, by which I mean little “g” government and the people behind me, flogging through areas that need protection—in this case the environment—and looking at how to get compliance. To get that, you have to have regulation and you have to be able to apply it. This is all built around encouraging compliance, putting restoration first and, in a sense, penalties last. This is a great step forward in this sort of regulation.

That the Grand Committee do report to the House that it has considered the Environmental Civil Sanctions (Miscellaneous Amendments) (England) Regulations 2010.

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