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Lords Chamber

Volume 725: debated on Wednesday 16 February 2011

House of Lords

Wednesday, 16 February 2011.

Prayers—read by the Lord Bishop of Derby.

Monetary Policy Committee


Asked by Lord Barnett

To ask Her Majesty’s Government what proposals they have concerning the relationship between the Chancellor of the Exchequer and the Governor of the Bank of England in his capacity as chairman of the Monetary Policy Committee.

My Lords, Her Majesty’s Government have no proposals to change the relationship between the Chancellor of the Exchequer and the Governor of the Bank of England in his capacity as chairman of the Monetary Policy Committee.

I welcome the Answer from the noble Lord, but does it include what the Chancellor told the Treasury Select Committee; namely, that he is going to follow the policy of the previous Chancellor, which would not prevent him reducing or increasing quantitative easing, although he has the powers? Then again, the governor also said in his letter to the Chancellor, published on 14 February, that he believed that inflation would have been below the 2 per cent target if it had not been for three exceptional factors. Does the noble Lord agree with that because the Chancellor’s letter is somewhat unclear to say the least? As to the balance of risk that the governor was writing about, he seemed to be worried about the problems for growth and employment if he increased interest rates. Does the noble Lord agree with that?

My Lords, first, it is for the Bank of England to make any proposals on quantitative easing if and when it wants to, and the Chancellor will then look at them. I am certainly not going to deconstruct and provide a commentary on the exchange of letters yesterday. However, the noble Lord, Lord Barnett, indeed identifies some of the points made by the governor in the letter, where he clearly sets out the downside risks and refers to questions about the “margin of spare capacity”. On the other side, he refers to possible “upside risks”, particularly in relation to inflation expectations. However, I suggest that noble Lords read the letters, rather than have me interpret them.

My Lords, the Minister will be aware of recent remarks by my right honourable friend Vince Cable on the importance and benefits of low interest rates to businesses at this stage of the recovery. Will he comment on that and explain whether it feeds into the decisions made by the Bank of England?

My Lords, I can confirm to my noble friend that sustainable and low interest rates are absolutely what businesses need to enable them to invest and to support the recovery. I will make a further point before the noble Lord, Lord Myners, jumps up. Last week he chided me for not giving the data on relative interest rates. However, the context then was not relevant. It is very relevant to the Question this morning. The latest data from yesterday on our performance on relative interest rates—the 10-year sovereign borrowing rate since the general election—show that the UK continues to outperform the US. We have narrowed our spreads against the 10-year bund by 39 basis points since the general election at a time when the French, for example, have widened their spread by 10 basis points. Therefore, on relative interest costs, which are a key indicator of whether the markets believe the Government are on their economic course, the news continues to be that we have the confidence of the markets.

Will the noble Lord confirm that it is vital never to confuse the price level with the inflation rate? If the price level goes up as the result of a deliberate policy by the Government to raise VAT, there is no reason to interpret that as a rise in inflation. Therefore, it would be entirely idiotic for the MPC to raise interest rates at any time solely because the Government had raised VAT. Does the noble Lord agree?

My Lords, again, I do not want to be drawn into either economic debate with the noble Lord, Lord Peston, or commentary on the governor. The governor indicates that the rise in VAT was one factor behind the rise in inflation, but I should point out that the rise in VAT to which he was referring was the one under the previous Government and not the present rise to 20 per cent. However, I take the noble Lord’s point about the nature of one-off rises such as that.

My Lords, the Minister has now introduced the new protocol of answering my questions one week later, but I suppose that that is better than the previous policy of not answering them at all. Is not the reality that the Government’s fiscal policy is pushing the UK back towards recession—a direction which no other major economy in the world is currently following—and that the only thing supporting demand at the moment is very low interest rates? Business welcomes that, although savers are less enthusiastic. However, we are taking big risks on inflation as a consequence of the policy which the Bank of England is having to adopt in order to counterbalance the fiscal policy of this Government.

Absolutely not, my Lords. The direction of the Government’s fiscal policy and the stability of that policy is one of the fundamental certainties which enable the Monetary Policy Committee of the Bank of England to set a firm course for monetary policy. The worst thing we could do to make the MPC’s task harder would be in any way to create uncertainty in government fiscal policy. Therefore, what my right honourable friend is doing in getting the deficit under control with very clear and early measures enables the MPC to do its work in relation to the inflation target.

Does the Minister agree that, although the Monetary Policy Committee has a single target imposed on it—the 2 per cent inflation target—in practice it has been behaving as though, like the Federal Reserve, it has a multiple target, with responsibility not merely for price stability but for stabilisation or employment? It may be a very good thing that the Bank of England has not been increasing interest rates, as it might have done if it had been following a single price stability target over the past couple of years, but are the Government not concerned at the discrepancy between the formal position and the actual practice on which our monetary policy is currently based?

My Lords, I refute that suggestion completely. The Bank of England Monetary Policy Committee is following to the letter not only the direction of the Chancellor in terms of the target but also what it is obliged to do under Section 11 of the Act, and that is what it continues to do.

France: Bilateral Defence Co-operation


Asked by

To ask Her Majesty’s Government whether they have any proposals to build on the recent treaties with France on bilateral defence co-operation by exploring initiatives for diplomatic and foreign policy co-operation.

My Lords, our relationship with France, further strengthened by the November 2010 UK-France summit, is one of our most important bilateral relationships. Since President Sarkozy visited London for the UK-France summit, we have also welcomed the Prime Minister, the Foreign Minister and the Europe Minister. Bilaterally, we work on a range of foreign policy and European issues, as well as immigration, counterterrorism, climate change, employment and social affairs. France is also an important trade partner. It will host the next UK-France summit later this year.

My Lords, surely the logic of sharing defence assets is that we need a foreign policy agreement on where to deploy those assets. Now, when both countries are experiencing similar financial stresses, should we not look at the collocation of embassies, sharing diplomats and co-ordinating policies in areas such as West Africa? Will the Minister also consider the possibility of encouraging our Commonwealth partners to look at a new dialogue with La Francophonie, which, again, would be in our mutual interest? Where are the new proposals in preparation for the summit to be held later this year?

My Lords, the noble Lord’s line of thinking is extremely positive and constructive. Although the francophonie and France’s interest in its former colonies in Africa are rather different in character from those of the Commonwealth —its origins are quite different—there are clearly some areas of common interest. In fact, I am told that the two secretary-generals of the organisations meet quite regularly and the noble Lord will remember that President Sarkozy addressed the previous Commonwealth Heads of Government Meeting in Trinidad and Tobago last year. I hope that that kind of liaison will develop. It will indeed be on agendas for the next UK-France summit. The sharing of embassies in some convenient areas comes up from time to time, both in an EU and a national context, as does sharing embassies with other Commonwealth countries. As was mentioned, Australia wishes to share some embassies with the UK. Common sense and common organisation, particularly in more remote and difficult posts, point to some sharing of facilities and that makes perfectly good common sense.

What mechanisms would be used to monitor the progress of the constituent parts of the recent defence treaties? Will there be an annual report to Parliament on this area?

I would have to check with my noble friend on the precise nature of the monitoring but this is a very elaborate set of two defence and security treaties which carry affairs a long way forward in a number of areas, not just defence but also in civil nuclear development and in other crucial security areas. I shall check precisely the arrangements and come back to my noble friend.

Although my noble friend makes an excellent point, as of course does the Minister, on defence matters, and although I yield to none in this House in my francophilia, not least because my wife is French, I hope that we shall be very selective in our international collaboration with the Sarkozy Government. A catastrophic record in Maghreb was associated with the discredited departed regimes in Tunisia and Egypt and it would be very damaging to be linked with that.

I am sorry to hear the noble Lord’s comments on the French policy on record at the time. It is not for me to defend or to elaborate on France’s policy. All I can say in the present situation is that we are working in very close co-operation with our French friends. We regard them as close friends, and certainly in relation to Tunis and the other problems in north Africa, we are finding excellent co-operation.

Does the Minister know that today the French ambassador in London is saying farewell after a very successful term of office here? Does he think that that was an important example of diplomatic relations, which we hope will continue?

The Minister is quite right to describe these as elaborate treaties. Perhaps I can press him a little further on the defence treaty, which talks about extending bilateral co-operation on the acquisition of equipment and technology, such as complex weapons systems, submarine technology and satellite communications, and developing stronger defence industrial and technology bases. I applaud all that in theory. Does that mean the end of competition between our respective companies which deal in defence equipment? My experience has been that competition was always very fierce indeed and, if there is this degree of co-operation, it will be interesting to know how that is to be resolved.

As I suspect the noble Baroness fully realises, the answer falls in two parts. In some areas, competition will and must continue in the interests of the Government getting a good deal and not becoming vulnerable to having one supplier and therefore confronted with one price and one deal; but in other areas, which were specified in the two treaties—including developing capabilities and equipment, common support for the A400M and a joint user group to develop the A400M training systems, construction of nuclear hydrodynamics facilities at Valduc and a whole range of detailed technical operations—there is bound to be co-operation. I applaud the noble Baroness’s concern to keep up competition; that is right, but in some areas co-operation will secure major economies and efficiencies, which we should support.

My Lords, given that France is hosting the G20 summit, and given that by the end of this year 1 billion people will be chronically undernourished, are the Government discussing the French proposals to stabilise world commodity prices through an international mechanism?

Yes, we have discussed with a number of our close allies the problem of food and commodity prices now. We must face the fact that this is a global issue and that markets are very powerful agencies which somehow produce their own solutions despite what Governments attempt to do. However, these are matters of great concern to us and, as my noble friend rightly says, of very great concern to millions, if not hundreds of millions, of people who face severe jumps in commodity prices, food prices, energy prices and other prices—all with major political implications for the future.



Asked by

To ask Her Majesty’s Government when they expect to make a decision on the criteria for granting tier 1 post-study work visas, following the recent consultation paper.

My Lords, a consultation on the student immigration system closed on 31 January. The consultation sought the views of respondents concerning the future of the tier 1 post-study work route and the effect of the proposals. The outcome of the consultation will be announced shortly.

My Lords, I thank the Minister for that reply and declare an interest as vice-chairman of the All-Party Group on China and chair of the council of the School of Pharmacy, University of London. Only yesterday, the Minister said that the Government were determined to protect overseas students, so why are business, universities, research charities and student bodies all lined up against the current government proposals drastically to reduce those tier 1 post-study work visas? Not only will we let down our current overseas students, we will reduce the attractiveness of Britain as a study destination. Is that any way to foster good links with important countries such as China and India?

My Lords, the noble Lord asked about the situation with academic institutions. The answer is that they are not yet convinced of our good intentions. The UK’s education system is world-renowned. We remain the second most popular destination of choice, second only to the United States; and we intend to maintain that position. Post-study work is an important component of that.

My Lords, the noble Earl says that universities are not yet convinced. Surely the reason is that universities have done the analysis and looked at the consultation, and it is abundantly clear to them that under the Government’s proposals, many of them will be severely harmed financially. Today, the noble Earl’s department announced a climbdown on the immigration cap. When can we look forward to a climbdown on the student immigration consultation?

My Lords, we will not climb down on our intention to avoid the abuse of the student route. We want to maintain the UK as a world-class academic destination, but we are not prepared to tolerate abuses of the system, which, as the noble Lord knows very well, take place.

Yesterday, in response to a Question on the student immigration system, the Minister used the term,

“the brightest and the best”—[Official Report, 15/2/11; col. 575.]

in relation to those we want to attract and it is a term used in the consultation paper. Does he agree that there is not a single spectrum capable of objective application and that people have different views of the attributes that make for the brightest and the best? Does he agree that the language as well as the concept is not uncontentious?

My Lords, I am sure the noble Baroness is right, but it is for the academic institutions to select their students.

Does the Minister accept that, like him, we all want to maintain this country in second position, but that we will do so only if the policies are right? They are not right because they are not working for the universities, which are also suffering additional costs. We are well on course to reduce the impact of British universities around the world. We really need to rethink this policy.

My Lords, I am quite happy to take noble Lords’ concerns back to my honourable friend the Minister for Immigration, but noble Lords have not explained to me where the difficulties lie, and we have not announced the results of the consultation.

I declare an interest as yet another chancellor of a university. The Minister explained that the Government have very good intentions in this. It is quite clear from all those in universities to whom I have spoken, and from the concerns of those involved in universities, that they do not understand that from what they have seen of these proposals. I ask the Minister to get them together and explain these good intentions so that we can clarify whether they are or not. At the moment, those involved are not at all persuaded, and I find the proposals difficult to understand as well.

The noble Lord makes a useful point. We clearly need to do more work to explain the situation to the academic institutions.

I am yet another university chancellor declaring an interest. I am chancellor of the University of Essex which has more than 40 per cent of its students from abroad. Have the Government really taken sufficiently into account the special financial standing of overseas students who disproportionately contribute financially to the universities to which they come? Are we not scoring an own goal in constructing a new regime that will deter that benefit?

My Lords, if we deter foreign students from attending UK universities and bona fide courses, we will have failed. We are concerned about bogus courses—for instance, bookkeeping courses where overseas students are doing course after course when in reality they are just working in the UK.

Will the Minister pay special attention to the impact of these proposals on small specialist institutions? I am thinking particularly about music conservatoires where not only is this issue likely to cause difficulty for the reasons indicated by the noble Lord, Lord Phillips of Sudbury, but because they are already facing particular problems in respect of tuition fees due to the uncertainty about specialist funding?

My Lords, the noble Baroness makes an interesting point, and I will ensure in discussions with the Immigration Minister that her points are taken into consideration.

Does the Minister recognise that for some courses, such as pharmacology and medicine, post-study work visas for experience are absolutely necessary? Does he think that such courses require a special arrangement?

My Lords, I fully accept that post-study work is essential to courses such as pharmacology. Actually, our proposals are more generous in that the post-study work has to be at graduate level, but does not need to be in the discipline read for the first degree.

Egypt: Mubarak Family Assets


Tabled by

To ask Her Majesty’s Government what steps they have taken to freeze the financial assets of the Mubarak family held in the United Kingdom.

My Lords, with the permission of the House and at the request of my noble friend Lady Williams, who is attending a funeral, I beg leave to ask the Question standing in her name on the Order Paper.

My Lords, for well established operational reasons, the Government cannot comment on individual asset-freezing cases. The Government have received a request from the Egyptian Government to freeze the assets of several former Egyptian officials. We will of course co-operate with this request, working with EU and international partners as we have done in the case of Tunisia. If there is any evidence of illegality or misuse of state assets, we will take firm and prompt action.

My Lords, I accept the point about individual cases, but will the Minister say how long he would expect SOCA normally to take to assess and approve a request of this kind? In particular, will the firm and prompt action that the Foreign Secretary has promised in this case be firmer and prompter than in the disgraceful case of President Daniel arap Moi of Kenya, who looted hundreds of millions from his people, and indeed of British taxpayers’ aid, left a lot of it in London banks, and eight years on has still not had to pay back a penny?

My Lords, there are a number of potential courses of action, but the principal one now is working with our EU partners, following a similar route to the one that was adopted in relation to Tunisia. My right honourable friend the Chancellor discussed the issue with his colleagues in the context of the ECOFIN meetings earlier this week. EU diplomats are discussing the issue this week and it will be on the agenda of the Foreign Affairs Council meeting on Monday 21 February. It could decide to request the Commission to draw up a regulation similar to the one that was drawn up on Tunisia, which would be enforceable in all EU member states.

The Minister referred to evidence of misuse of assets. Has any evidence of that nature been drawn to the Government’s attention?

My Lords, it would be wholly wrong to discuss individual cases. Indeed, it is a matter for the police and the Serious Organised Crime Agency, because in parallel to what I have described as the EU route is the principal relevant UK legislation, the Proceeds of Crime Act 2002. Under that Act, it is for the police and SOCA to initiate as they see fit, and not for the Government to direct, any action on criminal activity that relates to proceeds of crime or money laundering.

My Lords, given the many assertions that the Mubarak family and their acolytes are the ultimate beneficiaries of substantial funds that are now held by British financial institutions, does my noble friend agree that it might be timely to remind those financial institutions and their compliance officers of their obligations to report suspected money laundering so that those institutions might fully exercise their part in ensuring that any criminal funds are found and released in the appropriate way?

I am grateful to my noble friend. I have explained two parts of the construct: the EU angle and the Proceeds of Crime Act. Of course, it is highly relevant that banks are obliged under their normal reporting rules to file relevant reports if they see any suspicious activities. That relates particularly to any engagement and due diligence that is necessary in relation to politically exposed persons. This is a good opportunity, prompted by my noble friend, to remind the banks of their obligations under those ongoing rules, which I know the banks take extremely seriously.

My Lords, the House will have gained a great deal of reassurance from the Minister’s replies, particularly his first one, on this important topic. We all appreciate that additional requests could come in as the situation in Egypt evolves. Is the noble Lord able to give the House the full reassurance that the Government will be able to meet any request that should come in, given the degree of information that we have under the money laundering legislation?

My Lords, I am grateful to the noble Lord for recognising that the Government are actively on the case. Of course, in relation to requests that come in, it is then up to the appropriate investigating authorities to do whatever is necessary to gather the evidence. Our agencies are well able to do this, although we should recognise that there are always enormous challenges in these cases in tracing assets if that is what is required.

My Lords, will the welcome action that the Minister describes be extended to cover our home and overseas dependent territories?

It is important that the overseas territories recognise, as they do, and have a desire to be fully compliant with, international best practice in these areas. We encourage them to take any action in parallel with that taken domestically.

Arrangement of Business


My Lords, my noble friend Lady Neville-Jones will today repeat a Statement on the case of F and Thompson. It has been agreed that the Statement will be repeated after the speech of the noble Lord, Lord Low of Dalston, during the course of the Second Reading of the Postal Services Bill.

Control of Donations and Regulation of Loans etc. (Extension of the Prescribed Period) (Northern Ireland) Order 2011

Motion to Approve

Moved By

That the draft Order laid before the House on 17 January be approved.

Relevant Documents: 13th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 7 February

Motion agreed.

Parliamentary Voting System and Constituencies Bill

Consideration of Commons Reasons and Amendments

Motion A

Moved by

That this House do not insist on its Amendments 1 and 8 to which the Commons have disagreed for their Reasons 1A and 8A:

Because the outcome of the referendum should be determined by those who vote in it and should not depend on how many do not vote.

My Lords, we have now come to the consideration of the Commons response to your Lordships’ amendments. Perhaps two or three weeks ago, some of us wondered whether, or at least when, we would see this day. However, we considered the Bill in some detail, which we then sent to the other place. This House rightly took a view on important issues in the Bill and made amendments to the Bill, as the House saw fit, which asked the Government and the other place to think again on a number of issues.

The other place considered—it surprised me to see the number—104 amendments from this House. Many of those were of a technical nature, but even some of the technical amendments proposed by the Government were responding to points that had been made in both Houses on, for example, absent voting in the referendum, co-ordinating work, encouraging participation in the poll and adding clarity to some of the boundary provisions. However, a number of those amendments were significant concessions. Last night in the other place, the Government wholly accepted the principle of this House’s points by recognising as an exception the Isle of Wight.

I remember the vote very well. This House voted most emphatically, and the Government have listened.

We also listened on the matter of the date of the referendum and incorporated into the Bill the other famous amendment of the noble Lord, Lord Rooker. On public hearings, we agreed with the spirit of the points made and changed the Bill.

The other place having considered our amendments, two issues remain outstanding. The first is a decision by the other place, in relation to Amendment 1 and subsequent Amendment 8 that were successfully moved in this place—the former on Report and the latter at Third Reading—by the noble Lord, Lord Rooker. As the House will recall, the purpose of those amendments was to make the referendum result not binding, or indicative, should the turnout fall below 40 per cent. The Government resisted the noble Lord’s amendment on principle and because of the practical difficulties that it posed, to which I shall return in a moment. Following that debate on Report, the amendment was carried by 219 votes to 218. At Third Reading, the noble Lord, Lord Rooker, tabled Amendment 8, which sought to remedy some of the defects in his earlier amendment. As I made clear in my response then, the Government appreciated the making-good spirit behind the noble Lord’s amendment, which the Government accepted pending consideration of the whole issue in the other place.

That consideration took place last night. Our colleagues in the other place voted to disagree with the noble Lord’s amendment by 317 votes to 247—a majority of 70—which, I hasten to add, was a majority that comprised not only the coalition parties but Members from the SNP, Plaid Cymru, the SDLP and the Green Party. This House must now decide whether to insist on the amendments that it passed or to accept the message from colleagues in the elected Chamber.

Before we do so, let me return to the key arguments. I acknowledge that we will hear, as we did on Report, some strong and persuasive arguments from those who favour thresholds. I understand why many in the House found those arguments compelling, but I believe that, in the context of this Bill, they are misplaced and I shall do my best to explain why. I understand that, when considering this issue previously, many of your Lordships felt that the proposal of the noble Lord, Lord Rooker, was reasonable because, unlike most turnout thresholds, his proposal would not definitively have prevented the referendum from being implemented if the threshold was not met. Indeed, the noble Lord suggested that his proposal did not even amount to a threshold.

However, I cannot believe that this is quite right. The amendments would make the referendum result indicative, should the turnout fall below 40 per cent, rather than rule out implementation altogether—I hope that that is a fair assessment of it. However, that seems to me to set a threshold for interpretation of the result. In every real sense, it is a threshold. As the Minister in the other place said yesterday, it would mean that when people go to the polls on 5 May, they could not say that they would get what they voted for if the majority favoured changing the system. By definition, there would have to be further consideration of the matter. We would be saying that people might get what they vote for, provided that Parliament does not overrule or disregard the vote. That is a somewhat dispiriting message to give to the public.

One of our objectives in this and other constitutional reform legislation is to bring back into the political process members of the public who have lost faith. People have become disengaged not least because they feel that the process lacks the ability to deliver what they want. I want noble Lords to consider that, if we imposed a threshold which left in any sort of doubt the effect of people’s votes cast, people might well lose faith because they would not know what the outcome would be if the people delivered a majority yes vote.

Will the Minister cast his mind back to the 1975 vote on joining the European Economic Community? That was not a mandatory but an indicative vote. There was no protest then of the nature that he describes, so the argument does not follow.

My Lords, that vote was not on a threshold. In the one case where there was a threshold, in Scotland in 1979—which I accept involved a different kind of threshold and consequences that were different, but it was nevertheless a threshold—those who of us voted yes felt, for at least the ensuing 18 years until there was a yes vote again in 1997, that we had been cheated. I do not think we treat the electorate well by providing for a situation where they may vote yes but that yes vote may not be translated into action.

Is the noble and learned Lord aware that the Government are very keen to have thresholds for trade union recognition votes?

My Lords, I am not sure whether the noble Lord is advocating that kind of threshold.

As I have indicated, one of the most convincing reasons for not having voter turnout thresholds is that, in a referendum which poses a yes/no question, the turnout threshold effectively makes every abstention a no vote. Under the amendments of the noble Lord, Lord Rooker, there might still be this effect because abstentions could mean that a majority yes vote might not be upheld. People might abstain from voting in a referendum for any number of reasons, including apathy and ambivalence. Given that the electorate as defined would also include the dead, by definition such people would not be able to vote. [Laughter.] Noble Lords may laugh, but that is the case. People with double registration, who would be allowed to vote only once, would also be included in the definition of the electorate. Under the amendments of the noble Lord, Lord Rooker, abstentions could mean that a yes vote may not be upheld.

The turnout threshold could incentivise people who favour a no vote to stay at home rather than to vote. The honourable Member Mr Mark Durkan of the SDLP made an interesting speech in the other place last night. He made the case that, in some of the referendums held in the Republic of Ireland, one of the campaign slogans was, “If you do not know, vote no”. He said that if this threshold amendment was to be passed, the message would be, “If you do not know, stay at home”. One of the many admirable things about our political culture in this country is that parties unite to encourage people to vote. Indeed, when my noble friend Lord Phillips of Sudbury proposed an amendment that the various authorities—the Electoral Commission, the counting officers and registration officers—should encourage participation, it was accepted on all sides of the Chamber. The noble and learned Lord, Lord Falconer of Thoroton, subscribed—and no doubt he continues to subscribe—to the principle and the objective that people should be encouraged to turn out to vote. The effect of the amendment could be to encourage people to stay at home or not to bother. “Stay at home on 5 May” is not, I hope, a message that any noble Lord wishes to hear at the hustings in the referendum.

My Lords, this is the Lords consideration of Commons amendments. There will be time for noble Lords to make their points in the debate. The noble and learned Lord, Lord Wallace, should be allowed to finish his speech.

My Lords, referendums are used only sparingly in this country but they provide an opportunity for people to have their say on issues of significance. We accept that a change of the voting system is an issue of significance. However, holding a referendum sets a higher hurdle for this constitutional change than is often the case in a number of other constitutional changes. To introduce the even higher hurdle of a threshold would dilute the democratic will of the people and would undermine the simplicity and strength of the referendum result. Insisting on the amendments would not only compromise this principle but would render the legal and practical positions far from straightforward.

I do not want to dwell on the technical difficulties of giving effect to the noble Lord’s proposal. Some of those difficulties were aired on Report and at Third Reading, but others were not, including in particular the question of what kind of process would follow a non-binding yes vote. I do not imply criticism of the noble Lord, Lord Rooker, but, although his original amendment appeared simple and straightforward, the detail is far more complex. When we considered its key provisions for the first time, the amendment was agreed to by the slimmest of margins. The other place has now had two opportunities to consider the issue of a threshold and has decisively rejected it on both occasions.

As I have said, the arguments in favour of a threshold are respectable, but they are wrong—not least because it would undermine the principle that, if the majority of the people vote yes, that is what should be delivered; it should not be “yes but, if” and subject to further political wheeling and dealing or Motions in either House. If the people vote yes on 5 May, a yes vote should be delivered. I beg to move.

Amendment A1 to Motion A

Moved by

As an amendment to Motion A, leave out from “House” to end and insert “do insist on its Amendments 1 and 8”.

My Lords, I do not propose to rehearse the arguments again, although I thank the Minister most sincerely, because that is the first time that anybody has ever officially explained what my amendments to the Bill do. In the Political and Constitutional Reform Select Committee in the other place, nobody challenged the point. What the Minister has said also contradicts this morning’s Times leader, which is completely inaccurate. Frankly, that contradicts the reasons that we have been sent from the Commons. The Commons say:

“That the outcome of the referendum should be determined by those who vote in it and should not depend on how many do not vote”.

That is simply not true as a reason. I have said all along that if the turnout was less than 40 per cent, the House could decide to implement AV, and I would not argue with that.

I am seeking support for the request that the Commons have another short look at the issue. Yesterday, the Commons turned up for half a day’s work on this Bill, to add to the seven days they have already done on it—somewhat less than this House has done. The debate on my amendment to the Bill lasted 45 minutes, most of which was taken up by the Minister who was almost seeking to talk it out—

One can look at Hansard—the estimated time is about 14 minutes of debate. That was the first time the Commons have debated this issue. This is not the issue that they debated last November, of a “killer, fatal threshold”, although those are words I would refrain from using as that is not what it is.

The Minister’s comments about the electoral register, notwithstanding the debates that we have had, show that we are in a complete and utter mess as a democratic country if we cannot say that we have a national register that measures the electorate for a particular ballot. That is one criticism of my amendment to the Bill, because we do not know what the electorate is. The electoral register includes foreigners, who may vote in some elections but not others, the dead and those who have moved home or who own a second home. The fact that we have no national electoral register prevents any serious discussion about the mechanism of our democracy. That has been thrown into a starker light than it ever was before. However, I do not want to go down that road, as I want to be quite brief.

I submit that the issue of substance lies not in the figure of 40 per cent—that could have been any other figure that was thought to be reasonable, whatever people might have said—but in whether the referendum should be binding, without any constraint whatever. We have never done this before in this country, and a precedent is being set. That is the point that I am seeking to make with my amendment to the Bill—not to argue against the result of the AV referendum one way or the other. The serious problem is that we are creating a major precedent in our constitutional arrangements, which the other place has not addressed. That is why I ask, even at this late stage, for the Bill to be sent back so that the other place can address this issue to the degree that it should.

I am not against reform of our constitutional arrangements, but such reform is likely to be sustainable if there is a degree of consensus. With proper debate—White Papers, Green Papers, Joint Committees—we get a consensus about these things and we test the ideas. That has not been done in the case of the proposed binding referendum, the legislation for which would be in place to be activated, whatever the result and whatever the turnout. However, that consensus has not been achieved, although I know there has been cross-party voting, including last night—the Minister declined to mention that several Tory MPs voted for my amendment to the Bill, but I will not make a major point about that.

My point is that, as I face the Chamber, the two oldest political parties in the country are joining together to rewrite our constitution on a daily, as-you-go-by basis. In other words, we do not know what is happening next. This cannot be the right way to operate; it cannot be the right way in which to bring in a major constitutional change of the first ever binding referendum in the UK. There is no big picture by which we may judge this part of the constitutional changes—we know that there are others on the conveyor belt—and that is a major difficulty.

My amendments to the Bill were made in the spirit of compromise. Frankly, they say that the referendum shall be binding if more than 40 per cent turn up, and that is a compromise on my part. I do not think that a binding referendum ought to operate in a parliamentary democracy. The Minister said yesterday, in the context of the Isle of Wight issue, that it is not the opinion of this House that counts, but the strength of the opinion of this House that counts. I accept that, on the Minister’s test, the majority of one may be a bit shaky, but I have to say that that was on a 40 per cent-plus turnout of this House. While the level of the majority may not meet the Minister’s test, it certainly meets the test that we are actually voting for. I seek to move to strengthen the opinion of this House so that that can be taken on board.

There is plenty of time, but I know that a lot of time will not be spent on it. When history comes to be written and when this issue operates out there among the public, the question may be asked, subject to the result, “What on earth was Parliament doing?”. I want to be able to say that we used all the time available to test this issue to get them to think again. Today is an opportunity to do that. I beg to move.

My Lords, listening to the noble Lord, Lord Rooker, I am reminded irresistibly of the last occasion when we had before us a major constitutional Bill. I refer, of course, to the stages leading up to the passage of the Constitutional Reform Act 2005. There were then two main issues on ping-pong, just as—leaving aside the Isle of Wight issue—there are two main issues today. The first of the two main issues in 2005 was whether the Lord Chancellor should continue to be a Member of this House; the second was whether the Lord Chancellor should be required to be a lawyer. It was a Lords Bill, which of course this Bill is not. The first time round, the Government lost on those two issues by a substantial margin. The majority against the Government was 215 to 199. When the Bill came back from the Commons, the Lord Chancellor speaking on behalf of the Government said:

“Of course our power is to make the other place think again. They have thought again… Our job is to make the other place think again. Once we are satisfied that they have done so, then we should pay proper regard to their views”.—[Official Report, 21/3/05; col. 38.]

The question that I ask the noble and learned Lord, Lord Falconer, is whether he still abides by the principle that he stated so clearly on that occasion. They were the very last words that he uttered after a very long, drawn-out affair, which he will remember as well as I do, but they were the words that carried the day on that occasion. The Government won by 203 votes to 191.

The question I then ask is whether that principle should not be applied today. It seems to me that the case for applying that principle today is far stronger than it was when the noble and learned Lord, Lord Falconer, stated it, for on that occasion the Bill affected this House. It affected it because it would have abolished the office of Lord Chancellor—had that proved to be possible, which it did not—and ejected from this House the Law Lords, where they had been for 150 years or more. Nevertheless, on that occasion this House yielded to the other place. On this occasion, by contrast, the Bill seems to relate almost exclusively to the other place, not to us. Surely, if ever there was a Bill on which we ought to yield to the elected House, seeing as it relates to election to that House, it is this one. When the time comes, I shall therefore vote with the Government.

My Lords, on this occasion I am unable to support my noble and noble and learned friends and I find myself, after an intermission of something like 35 years, when we were in another place, in alliance with the noble Lord, Lord Rooker. I agree entirely with everything that he had to say, which means that I shall not need to detain this House long. I realise that the House has been debating this Bill for a very long time—far too long—so I shall do my best to be brief.

I do not agree with the noble and learned Lord who has just spoken, for a number of reasons. We are perfectly entitled to ask the House of Commons to think again and look at this further. After all, it had a threshold amendment at an earlier stage in its proceedings and the majority against the threshold shrank from well over 500 to 70, so things are moving in the right direction. It may be that with a little more momentum there the right result will be obtained.

There is another point which I have to tell the noble and learned Lord, Lord Lloyd. He seemed to say that this is not a matter for this House. We are talking, certainly on the AV issue, about what my right honourable friend the Deputy Prime Minister has said is a potential constitutional change of the first importance. If this House does not have a role as the watchdog of the constitution, it has no role at all. I cannot possibly accept the argument made by the noble and learned Lord, Lord Lloyd.

I was also disappointed if not, if I may say so, slightly shocked by the poverty of the argument presented by my noble and learned friend the Minister, which boiled down to two issues. First, if I understood him aright, it seemed to me that he was concerned that the consequence of the amendment moved by the noble Lord, Lord Rooker, might be, “If you don’t know, stay at home”. I think that was what he said. He seemed to think that was terrible but if you do not know, what should you do? You cannot go and vote, “don’t know”; there is not an option on the referendum ballot, as far as I am aware. We have not exactly been told that but if there is a “don’t know” option, it is a different matter. Perhaps my noble and learned friend can tell us but I do not think there is. So, is it: “If you don’t know, toss a coin”? I listened attentively to my noble and learned friend’s speech because I was hoping to find something in it but I could not.

Secondly, the only other argument that my noble and learned friend used was that the very idea of a threshold was improper and an insult to democracy. In pretty much every other country in the world, notably the United States, when there is a major constitutional change there are special provisions. You cannot just get anything through on a majority of one, however low the turnout and whatever the conditions. Special provisions are always put in for major constitutional changes to set a higher hurdle, as there should be when the constitution is being fundamentally changed. Is the Minister saying that the United States is somehow not a proper democracy—that its arrangements are somehow improper and insulting? I will not enumerate all the other countries; my noble friend Lord Lamont did so in an excellent intervention in Committee, citing all the examples.

I make two final points. First, the Government implicitly accept that there needs to be a high turnout. That is why they decided to hold the referendum on the same day as the local elections. We know that it was not to save a few million pounds; it is because they believe that it will ensure a higher turnout. They are right and that is proper. This amendment helps the Government. It is in the same spirit as what the Government are doing by trying to ensure that there is a high turnout.

Secondly and finally, I say to those of my noble friends who are uncertain as to whether the amendment goes against the coalition agreement: the constitutional status of the coalition agreement is somewhat obscure. Nevertheless, one should always play safe. I have studied the coalition agreement very carefully and spoken to some of my right honourable friends in the other place. It is clear that the amendment of the noble Lord, Lord Rooker, in no way contravenes the coalition agreement. Therefore, I hope that this House will have the backbone to tell the other place that this is something of major constitutional importance; and that this House, as the watchdog of the constitution, would like the other place to look at this again.

My Lords, I want to ask the Minister a very basic question, to which not only I but possibly other Peers do not know the answer: are we allowed to vote in the AV referendum?

My Lords, I have not previously intervened in the debates on this Bill, although I have voted several times—in, I feel bound to say, both directions. I begin by making a procedural point. One of the most damaging things done by the previous Labour Government was to change the situation with regard to guillotining Bills. The old procedure was always that if the Government felt that there was undue delay or something was urgent, there would be a guillotine Motion debate for half a day and a vote at the end of it. This was replaced by programming, which was carried out throughout the previous Labour Government. Regrettably, it is continuing under the coalition, with the result that we will no doubt continue to have Bills arrive in this place with some parts having been very quickly considered. I very much hope that the Government will abandon programming from now on.

The reality is that the programming on this Bill has meant that debate in the other place has been severely curtailed, not least in respect of the amendments made by this House. The amendments that we are discussing today were given four hours of debate, and on this important constitutional amendment the debate lasted for 45 minutes or rather less. It is difficult to see how the other place can consider our amendments and think again in the course of a debate of that length. The fact that the other place has sent the measure back here needs to be considered in that context.

I turn to the substance of the amendment of the noble Lord, Lord Rooker, which I enthusiastically support. My view throughout my time in the House of Commons—this remains my view—is that Members of the Commons are there as representatives, not delegates. As I said to my former constituents many times, that means that I will not vote as I would vote if I knew how a majority of my constituents would vote. I will consider their views and take them into account and then I will vote having taken all that into account. A referendum strikes fundamentally at that principle. Therefore, I have always been opposed to referendums but, as the noble Lord, Lord Rooker, points out, they have always been advisory. Therefore, I am totally opposed to the idea not of an indicative referendum but of a mandatory referendum, which is what we have been considering.

I strongly supported the noble Lord, Lord Rooker, and voted in favour of his amendment in which he made the basic point that the referendum should not be mandatory. Alas, that amendment was not carried. However, as he rightly points out, the amendment he is now putting forward constitutes a compromise. Although I am totally against a mandatory referendum altogether, I certainly enthusiastically support the noble Lord’s amendment. I very much hope that your Lordships will return it to another place with a large majority. Once one has considered these issues, it seems to me that the case for having a threshold is very strong indeed.

In the very short debate that took place in another place, Mr Winnick intervened in the Minister’s speech. He asked:

“At what point below 40%—10%, 15%, or 20%—would the Government conclude that the result did not carry any credibility whatever?”.—[Official Report, Commons, 15/2/11; col. 902.]

That is the situation. We have no idea what the turnout may be, but it may be very low indeed. We may have a very small majority on a very low turnout. We will then find that the law is changed automatically on a major constitutional point without any reference back to the House of Commons whatever. I believe that that is completely and totally wrong. I shall support the noble Lord in the Division Lobbies.

My Lords, initially, I was inclined to support the amendment of the noble Lord, Lord Rooker. However, as time has gone by, I have to confess that my view has changed. I say at once that the arguments are evenly balanced—I think that many noble Lords agree with that. The noble and learned Lord, Lord Lloyd of Berwick, could have added to the strength of his already strong case by referring to the fact that the alternative vote referendum was a major plank of the manifestos of both the Liberal Democrat and Labour Parties at the recent general election.

I come back to the issue of a deterrent to voting at the forthcoming referendum, assuming that we get this Bill through. I disagree with the noble Lord, Lord Lawson; my understanding is that if we accept the amendment of the noble Lord, Lord Rooker, the probability, rather than the possibility, is that it could inadvertently act as a deterrent and a disincentive to vote. It is true to say that at many of the forthcoming local elections there will not be a 40 per cent turnout. There is no suggestion that local government comes to a halt if 40 per cent of the electorate do not turn out to vote for anybody. Indeed, the noble Lord, Lord Rooker, said that more than 40 per cent of this House voted for his amendment the first time round. But how many votes in this House reach the 40 per cent figure? What would happen if his amendment were passed and the referendum turnout was 39 per cent, with two-thirds of that 39 per cent being in favour of AV? What would then happen if the measure were to come back to this place? Noble Lords may say they can improve it, but you may not get even a 40 per cent turnout in this House.

What do the public think about a situation where we say, “We sort of trust you. This is, sort of, the decision which the public should make. But in the end, if 40 per cent of you don’t turn out, we will decide”.? There will not be a lot of understanding of that by the public, especially given that there is no more partisan issue imaginable than that of the voting system.

Absolutely. I am perfectly willing to accept the decision of the British people, whatever that is and whatever the turnout is. I really do not understand how you can, if you like, push the partisanship completely out of account by saying that if there is not a 40 per cent turnout, we will decide. At this forthcoming referendum, the majority of the Conservative Party will be against AV; and although it was in its referendum, I sense that the Labour Party will be against it. Partisanship will rule.

The noble Lord spoke about the referendum of the Labour Party, but I think he meant the manifesto. Perhaps I may correct him; he described AV as being a major plank of the Liberal Democrat manifesto. In fact it was not. AV was described by the leader of the noble Lord’s party as a “miserable little compromise”.

No; no more. That is quite enough. For those reasons, I will vote against the amendment of the noble Lord, Lord Rooker.

My Lords, the noble and learned Lord, Lord Lloyd of Berwick, speaks from the very heart of reason and common sense when he says that the real role of this House, in a situation such as this, is to invite the House of Commons to think again. That, however, does not mean that that should happen only once. In the circumstances of this case, as has been so clearly shown by the noble Lord, Lord Lawson, the House of Commons has thought twice about the matter and come to totally different conclusions—although in both cases it happened to reject the proposition that we are discussing. In the first instance, the other place voted by 540 votes against and 31 votes for a threshold in the referendum. Last night, the vote against was carried by about 65 per cent to 70 per cent. The curve is clearly pointing in one direction. But be that as it may, one cannot say that the other place is expressing a consistent and monolithic view on the matter. That does not in any way defeat what the noble and learned Lord, Lord Lloyd, is saying, but to some extent it qualifies it in the special circumstances of this case.

One can summarise the issue in this way. We are dealing here, I think, with a balance of risks. The noble and learned Lord, Lord Wallace, is perfectly correct to say that when you invite the public to partake directly in a decision such as this, there is a risk that Parliament could be seen—in some way or other, without intending it—to be spurning that decision. That is a real risk. No one spoke very much about that risk in 1975 when the referendum was indicative or consultative. I have read the Act and there is clearly no suggestion that that referendum would have been mandatory in any way at all.

I urge noble Lords to consider another risk. A derisory turnout would deprive this vote of any sovereignty or realism as an arbitrement of the people. That is a massive risk. It is very unlikely to happen. It does not matter a great deal which of these proposals one chooses; I tabled one myself which might not have been quite as meritorious as the one now before the House. They are insurances against a failure that is unlikely to happen, but which could happen. A person insures his house against fire not because he knows that it is going to be destroyed—unless he has criminal intentions—or because he believes that it is likely to be destroyed. He does so because he considers that there is a slight chance that it could be destroyed. The more one thinks about something, the less likely one is to be prepared to take even the slightest risk. I am sure that that is our attitude to the families we love. Here the risk is small, but it can be covered by a small, modest and reasonable premium.

My Lords, I voted for the amendment of the noble Lord, Lord Rooker, the first time, and I intend to vote for it again today. It is true that there was a significant majority in the Commons yesterday, but the result disguised the fact that 20 Conservatives voted for the amendment and 25 abstained. The large majority was accounted for to a considerable extent by the nationalists voting in support of the Government.

I was shocked by the brevity and paucity of the debate. Very few Back-Benchers were able to get in. One point that was made—as it was in this House—was that we have not had thresholds in referendums before, with the exception of the first referendum on Scottish devolution. Of course, we have had very few referendums in this country. Although the first was as long ago as the first referendum on Scottish devolution, they are still something of an innovation. I was struck by the argument made by one Conservative Back-Bencher yesterday that perhaps there should always be a threshold in constitutional referendums, as there is in so many countries of the world. My noble friend Lord Strathclyde mentioned that France does not have this threshold, but it is about the only country in Europe that does not. All other major countries do and, as my noble friend Lord Lawson said, the United States has a different sort of threshold via representatives and state legislatures.

The Minister in the Commons—and my noble and learned friend today—said that a threshold would give people an incentive to vote no. First, that cannot be asserted with absolute clarity. One can argue it both ways. A threshold gives a very positive incentive for people to vote yes if they are worried about the turnout. Secondly, somebody who is really against the proposition would have to worry that the threshold might be met; he would have to know what the turnout would have to be if he was really certain about the situation.

Leaving that aside, it is not unjustified or unfair that if there is great apathy, the proposition should fall. That seems common sense and reasonable. The proposition has been put a number of times that there might be a 38:1 vote that falls just short of the 40 per cent threshold. In Germany, there was a referendum with a majority of 10:1, but because the turnout was only 10 per cent the proposition was rejected—and quite right, too. Constitutional change affects us all; it lays down the rules of the game by which politics is conducted and by which we representatives live; and it should be made only when it is clearly the wish of the people that it should happen. There are great dangers in making major constitutional changes which have uncertain consequences. People who are in favour of AV argue that its effects would be this or that, but the truth is that what would happen is highly unpredictable. I do not believe that we should take this leap into the dark unless there is a proven desire for change supported by the British people giving it their full-hearted consent.

My Lords, I am not sure whether the noble and learned Lord, Lord Falconer, intends to speak on this. I hope that he does because it would be very important for your Lordships’ House to hear precisely what the attitude of Her Majesty’s Opposition is. He and I have enjoyed each other’s company over many long hours throughout the passage of this Bill. I am not going to give him my views but I should like him to comment on the views of his colleagues. In the other place, Mr Christopher Bryant said:

“I do not agree with the hon. Gentleman about thresholds in referendums because, broadly, they are not a good idea”.—[Official Report, Commons, 2/11/10; col. 846.]

There is nothing there about indicative referendums or definitive referendums but all referendums or referenda. I am disappointed not to see the noble Lord, Lord Lipsey, in his place, because all of us who attended the long hours of Committee and Report very much respect the work that he has done on the Bill. He said just last week on Report,

“I do not support a threshold”,

and, again, there is no definition of what the threshold might be. He went on to say:

“Thresholds are arbitrary, they introduce bias, they distort debate and they have absurd consequences”.—[Official Report, 7/2/11; col. 106.]

Amen to every single one of those. He then argued his point in detail. I very much hope that if the noble and learned Lord, Lord Falconer of Thoroton, is going to respond to this debate, he will explain why he completely disagrees with his noble friend Lord Lipsey, who, as I think he will agree, has studied this Bill more than any of us.

My Lords, I do not wish to detain the House but I agree with every word that the noble Lord, Lord Rooker, said. I do not think that in all the years we have engaged in exchanges I have ever been able to say that before, but I certainly agree with him now. He offers a warning to this House. I am not sure whether noble Lords will have had a chance to read the debate in the House of Commons. The Minister’s speech was extraordinary because it did not address the substance of the amendment before him. It addressed the idea of having a drop-dead threshold. In fact, he made exactly the same speech as Mr Bill Cash made on his own amendment, which would have introduced a 40 per cent cut-off point. If it did not reach 40 per cent, that would be the end of it.

With reference to the noble and learned Lord, Lord Lloyd of Berwick, I am very conscious that I am not elected and therefore I do not want to challenge the elected House, the House of Commons. However, this amendment has the effect of leaving it to the House of Commons to decide, and therefore it is very difficult to say that this House should not cajole the other House into putting itself in the driving seat on a major constitutional change.

I find it very difficult to understand why my coalition colleagues have not accepted this amendment. I shall not embarrass them by naming them but they have suggested to me that this is because of the coalition agreement. My noble friends Lord Lawson and Lord Lamont have dealt with that point. This amendment does not in any way threaten the coalition agreement, and I think we have had confirmation from the Front Bench that an amendment of this kind is not contrary to the coalition agreement. When I raised this matter with senior colleagues, they said, “Yes, it’s not in the agreement but it’s what we have agreed with the Liberals”. If we are to have agreements, they have to be transparent, and if our parliamentary democracy is to function, people need to know what agreements have been made behind closed doors and they need to look at the arguments.

I asked another senior Liberal strategist—again, I shall not name them in order to avoid embarrassing them—what they thought the turnout might be in London, where there are no elections. All the pressure on the Bill has been focused on having the referendum at the same time as the Scottish parliamentary elections and the local government elections, and I think that that is a bit dodgy. It is an attempt to try to get a higher turnout. That suggests to me that people are worried about the turnout. As my noble friend Lord Lawson said, if you do not know what you think about something complicated, the wise advice is not to participate in it—not to express a view. We are 10 weeks away from this referendum. Have we seen any of the arguments? Do we believe that the electorate have had a chance to consider all the arguments, or that that is likely to happen with Easter intervening?

I return to the view that was expressed by this senior Liberal strategist. He said, “Do you know what the turnout in London might be? It could be 15 to 20 per cent”. That could result—on a turnout of 15 to 20 per cent—in a major constitutional change being made without any consideration of its impact by the House of Commons. Perhaps turnout will be higher in Scotland. I am fed up with people complaining to me about how Scotland gets this benefit and that benefit and that the Scots have too much influence. However, it does not seem very sensible to me to have a referendum where you might have a differential turnout. The noble Lord, Lord Phillips, says, “Of course we all encourage people to turn out”. Why do we encourage people to turn out in elections? We do so because we understand that consent is crucial to the political process. I do not believe that a turnout of 15 to 20 per cent—although the strategist might be wrong—will carry consent.

If my noble friend Lord Phillips of Sudbury is talking about restoring trust in the electorate and how the electorate might feel that it was absolutely ridiculous if the turnout were low and the matter had to go back to the House of Commons, I would say to him that this is the same electorate that saw a general election campaign in which, as the noble Lord opposite pointed out, the Liberals as well as the Conservatives campaigned against AV. So if you are not into electoral systems and the minutiae of politics, and I think that most people are not, you might find it a bit bewildering that, within months of a general election, you are being asked to vote in the opposite way from what was suggested by the two coalition parties, and that you are being asked to decide on it in a matter of weeks.

This is a very important and perfectly sensible amendment and I am utterly bewildered as to why it has not been accepted. Actually I know why, because I talk to my friends in the House of Commons. There was a time when there were no guillotines on constitutional Bills, but this Bill—my goodness me—has been timetabled very vigorously. There was also a time when we did not have two or three-line Whips on constitutional business. However, as my noble friend pointed out, among those who voted in the other place, there were 25 abstentions and 20 Conservative MPs voting against. Many of those who went through the Lobby “out of loyalty” did so because they were being whipped. They are now ringing us up and saying, “For goodness’ sake, save us in the House of Lords”. It is a pretty pass when the democratically elected Chamber has to rely on this Chamber. I think that that is the answer to the noble and learned Lord, Lord Lloyd of Berwick. I shall therefore vote for the amendment. I do so with a heavy heart, because I think that the other place should take more account of the arguments and that the Executive should be more accountable. That is the major problem that we have in our country.

My Lords, I have watched the Bill’s progress over the past few weeks with increasing concern because of the way in which matters affecting the constitution of the United Kingdom are being dealt with by the present coalition Government. We read criticism of the Opposition, and quite rightly so, and of their lengthy and sometimes very boring speeches in this House. But I can understand why they did that—because when we look at the Conservative Benches, we find bony-faced silence on their faces, and when we look at the Liberal Benches, we find faces of total embarrassment.

This is a major constitutional issue and it should not be dealt with in the way in which it is being dealt with by the Government at the moment. Why is it happening? It is because they have this coalition agreement. We now have the first example of that coalition agreement. It means that Parliament does not give proper consideration to the issues before it. There is criticism of the other place for not giving enough time to this debate. A lot of time was given to the subject in our House, but there was very little participation by the government Benches—the coalition Benches. There was not proper debate in this House either.

I am increasingly concerned at the way in which this subject is being dealt with. I understand that the leader of the Liberal Democrats, Mr Nick Clegg, like a schoolmaster, summoned a selected number of individuals from the Cross Benches within the past few days to tell them what he thinks of them. That is absolutely disgraceful. For those reasons I would be very unhappy in supporting the Government, so I shall support the amendment.

My Lords, I know that we are getting towards the end of this debate but I want to make just one short point. I understand the argument for this threshold—it is the fear that there might be a yes vote on a very low turnout, and the wish to have this protection against it—but if that did happen, we would be repeating what happened with the Scottish referendum in the 1970s.

There is another point that is being missed: the idea, which the Minister repeated in the other place, that this threshold would be the same as the one in the Scottish referendum. In the Scottish referendum there was a threshold not on turnout but on the result, which is why it caused such resentment. A 40 per cent threshold on that would of course be unacceptable. So the comparison is a bogus one.

I will make the point none the less, and I am glad that the noble Lord, Lord Forsyth, has given me assistance in making it. I take the point with regard to voting rather than turnout, but we are getting into the same territory; and, as the noble Lord, Lord Forsyth, said, it caused great resentment. Will noble Lords please consider whether this device, if it works as intended, will not also cause great resentment? I have strong views on AV and look forward to the campaign against it. I wish that we could get on with that instead of wasting our time on this matter.

Many of us, I believe, voted for the Government out of loyalty to the Government, and not for the matter on which we were voting in the last round. I have listened to all the arguments today and I am thoroughly convinced by the amendment of the noble Lord, Lord Rooker, and by the speakers who have spoken. I fully intend, for the first time, to vote against my Government.

My Lords, we have had an absolutely scintillating debate on this issue. The issue for the House today is whether we should ask the other place to think again. I believe that that is an interaction of two issues: first, the extent to which we think it has been given adequate consideration already; and secondly, the importance of the issue. As for whether it has been given adequate consideration already, this proposal first emerged as a matter of debate a week ago last Monday, when the noble Lord moved his amendment and it was passed. It went to the other place yesterday. It was one of 104 amendments, of which more than 95 were not debated at all. This amendment was debated for 46 minutes. Of those 46 minutes, more than 30 were taken up by Mr Mark Harper speaking on the issue. I say in parenthesis that there may be times when Mr Mark Harper should emulate his near namesake Harpo Marx rather than Mr Mark Harper himself.

So Mr Mark Harper discussed it for more than 30 minutes, but in the course of his statements he misstated the effect of the amendment on a number of occasions. In relation to a vote in favour with a turnout of under 40 per cent, he said:

“So, even if the public had expressed a clear preference, it would not count”.—[Official Report, Commons, 15/2/11; col. 899.]

That was wrong. The same mistake was made this morning in the Times, which stated in its leader:

“In an attempt to derail the referendum on the alternative vote … system, Labour peers, led by Lord Rooker … and with the connivance of some Conservatives, have defeated the Government on an amendment stipulating that the result of the referendum should only be permitted if at least 40 per cent of the electorate turn out to vote”.

Again, that is wrong.

The position is that if less than 40 per cent of those entitled to turn out do so, it becomes an advisory referendum in exactly the same way. That deals with the critical issue: if there is a derisory turnout in favour of the alternative vote system, is it right that this country should then change its voting system, a voting system for which there would not be a majority in either House of Parliament? The legitimacy of a change of that importance must depend on getting more support for it than a normal change in the law, rather than less.

In my respectful submission to this House, it is pretty plain that this issue has not been properly considered either publicly or in the other place. It is pretty plain that it is a very important issue. It is pretty plain—and I pray in aid the very last speech we heard —that the argument in this House has been comprehensively won by those who support my noble friend Lord Rooker. In those circumstances, we on this side of the House will vote in favour of my noble friend's amendment.

My Lords, yet again, we have had a useful debate, with some powerful arguments made. I anticipated at the beginning of the debate that strong points would be made, but, nevertheless, we cannot depart from the central point. We are being invited to include in the referendum process a mechanism whereby, if a majority of the people vote yes, it will not necessarily deliver a yes outcome. I take the point made by my noble friend Lord Trimble. Although my noble friend Lord Forsyth was right to say that the 40 per cent rule in the Scottish referendum in 1979 is not the same as that proposed by the noble Lord, Lord Rooker, nevertheless, the point made by my noble friend Lord Trimble still holds. If people turn out and there is a yes vote, serious resentment would then be felt if somehow that was overturned by this House or the other House. At a time when we are trying to restore trust in the political process, to set aside the majority view of the people would be very serious.

The noble Lord, Lord Rooker, said that his amendment would not affect the outcome. I cannot accept that. It would not affect the result, but it could affect the outcome. Clearly, without his amendment, if there is a yes vote, the outcome is that the order would be laid to implement the system of an alternative vote for the next general election. His amendment could result in a different outcome, because if there was less than a 40 per cent turnout, it would not follow that an alternative vote would be used at the next election. Let us not shy away from the fact that his amendment would affect the outcome of the referendum in that important sense.

I take the point made by my noble friend Lord Lawson, who said that I had argued that it was a “stay at home” amendment. The “no” campaign could very well encourage people to stay at home to reduce the turnout. Because 84 per cent of the country will already be entitled to go to the polls on that day for the Scottish Parliament, the National Assembly in Wales, the Northern Ireland Assembly and local government elections in Northern Ireland and all parts of England bar London, if people want to vote no, we want them to turn out to vote no. We should not be giving people an encouragement to think that if they stay at home, they have the equivalent of a no vote, in as much as the yes vote may not bear fruit.

The Bill offers simplicity, clarity and certainty. It honours the promise to the electorate that they will decide how they return their representatives to the other place. They will do that as the result of a referendum without artificial barriers, without further complex, as yet undetermined, procedures and without political wrangling. It means that when they go to the polls on 5 May and want to vote yes, the outcome will not be “yes, maybe” or “yes if”. If they go to the polls to vote yes, it will count. Whatever the issues on the day are, their vote should be heard, listened to and given effect.

My Lords, I am incredibly grateful for the support for the amendment to ask the other place to think again. We have just spent a bit longer on it—seven minutes longer—than they spent on the whole of it last night, including the vote. I have made my point. I beg to test the opinion of the House.

Motion B

Moved by

That this House do not insist on its Amendments 16 and 19 to which the Commons have disagreed for their Reasons 16A and 19A:

Because the amendments would produce too much variation in the electorate of constituencies and would result in a system that was unduly difficult to operate.

My Lords, these amendments relate to amendments that were moved by the noble Lord, Lord Pannick, on Report. The House will be aware that the Members of the other place disagreed with them. The purpose of the amendments is to allow the Boundary Commissions to propose constituencies at plus or minus 7.5 per cent of the electoral quota where they consider that there are exceptionally compelling geographical circumstances or local ties. The Government remain of the view that these amendments should not form part of the Bill. A clear and unequivocal view was expressed in the other place on the matter, which is fundamentally about arrangements for elections to that House. The argument advanced by the noble and learned Lord, Lord Lloyd of Berwick, in the previous debate has an equally persuasive force in this debate, too.

The issue of variation from absolute parity dominated many of our debates throughout our deliberations and in quite a lot of other discussions. I believe that the House has performed an important role in focusing on the issue and indeed in trying to find some way that might command support on all sides of the House. The House made an exception in the case of the Isle of Wight and the Government have accepted that. However, it is important to make a distinction between the exceptions to the parity rule in the Bill that Parliament has decided should be exceptions—the Orkney and Shetland seat, the Western Isles seat and now the Isle and Wight seat—and the exceptions from the parity rule that would be determined by the Boundary Commissions.

It might be helpful if I set out the Government’s objection to the amendment. The Government’s proposal, as I have indicated, is for a 5 per cent range on either side of the UK electoral quota. That, of course, means a band of 10 per cent. We believe that that band has a clear rationale. It is the closest that we can get to achieving equality; I think that everyone recognises that absolute equality and no flexibility whatever would not be a proper way of proceeding. We believe that a 5 per cent range on either side is a way in which we can achieve equality in the weight of the vote and an equal say for voters in the outcome of a general election and at the same time allow the Boundary Commissions, particularly the Boundary Commission for England, to continue their practice of using wards as the building blocks of constituencies.

Let us remind ourselves that wards are drawn up with local factors in mind. We have had many debates about their importance in this regard and it would be unfortunate not to mention in this final set of debates Professor Ron Johnston, who has been quoted considerably. We will give him another airing. In his contribution in his first evidence session before the Political and Constitutional Reform Committee, he noted that much local political activity and engagement is based on the ward structure. The secretary to the Boundary Commission for England, in his evidence to that same committee, said that under the rules in the Bill it would be possible to allocate constituencies using wards in the majority of cases. While an absolute prohibition on splitting wards would not be appropriate, not least because in some cities the wards are so large that it might make more sense for local communities to be divided, we accepted arguments made in this House that the commissions should be explicitly empowered to take wards into account. Indeed, we tabled an amendment to that effect.

As I indicated, wards offer a clear rationale for striking a balance between the competing principles of one elector, one vote and local flexibility at 5 per cent of the quota. The figure of 7.5 per cent lacks that objective rationale and would increase the variation that was permitted, compromising more the principle of equally weighted votes in doing so. In particular, it is worth remembering that a 7.5 per cent variation on either side would not resolve the issue of the exceptional constituencies that has been raised in a number of our debates. It would not preserve the Argyll and Bute constituency and it would not guarantee the Tamar as a border, the borders of historic counties or the Isle of Wight comprising whole constituencies.

In debates, your Lordships concluded that there was a special case for treating the Isle of Wight as an island constituency. At the time, the Government expressed a different view, but we have now recognised the strength of cross-party support and have brought forward provisions to treat the island in a manner that is consistent with other island exceptions in the Bill. Therefore, Parliament, as I have indicated, has concluded that the Isle of Wight is a special case. We believe that that is the right approach.

The alternative approach before us would place the decision in the hands of the Boundary Commissions and open the door to further variations in a way that could cause practical difficulties for the review. We do not agree that the use of discretion will be as unusual as perhaps some of those who support the amendment think it might be. The noble Lord, Lord Pannick, sought to reassure us on this point on Report and has drafted the amendment with the benefit of his considerable expertise and in such a way as to protect commissions from successful judicial review. However, that is not the same thing as limiting the use of the discretion, as those who have practical experience of the way in which reviews operate and of the role played by political parties would testify.

The flaws in the 1986 legislation and the merits of the rules in the Bill as drafted were set out clearly in the British Academy report on the Bill. Those experts, who have the benefit of many years of practical experience in these matters, said that,

“the rules set out in the Bill are a very substantial improvement on those currently implemented by the Boundary Commissions (they have a clear hierarchy and are not contradictory)”.

Our concern is that, at a stroke, the clarity and fairness of the rules would be undone by this amendment, since theoretically there could be 600 claims for exceptional local ties. Even if there were not 600 claims, one could still anticipate a considerable number. In at least one part of the debate yesterday in the other place, one could already hear some of the arguments that were beginning to be worked up.

Local ties are genuinely important to communities. That is why, within the 10 per cent range that is provided for in the Bill, the Boundary Commissions can take them into account, as they always have. However, we all know, and the evidence is clear, that these are the means by which parties disguise arguments in their electoral interests. As we know from Professor Ron Johnston’s evidence to the Political and Constitutional Reform Committee in October last year, these inquiries were “dominated by political parties” and,

“very largely an exercise in allowing the political parties to seek influence over the Commission’s recommendations”.

There is also the risk of complex and often unknown knock-on effects; I think I described some of them when we debated this on Report. The knock-on effect of flexibility is applied, and not necessarily to the immediately neighbouring constituency. Again, I reference Professor Johnston, who has many years of experience in this. When studying the practical impact of the rules in the 1986 Act, he noted that it would be a problem, especially if the Boundary Commission proposed constituencies for an area within the 5 per cent constraint and then someone came up with an extremely compelling argument for 7.5 per cent, and that the knock-on consequences could ripple right through a region, indeed right through a country. He said that the Boundary Commission would then have to re-jig all the constituencies in that region, which would undoubtedly delay the process. Would they make the deadline?

To those who argue that the same argument applies to a 5 per cent band of tolerance as it does to 7.5 per cent, I would say that that is true up to a point, but the Government propose from the outset that all areas will be treated the same and that the options for boundaries in a specific locality will therefore be available to all those involved. If a change is made, particularly at later stages, under our rules it would still fall within the original 95 to 105 per cent range, but that would not be the case if a knock-on effect arose from a tolerance of up to 7.5 per cent in exceptional circumstances, because by doing that the envelope would be made smaller in some respects and the other constituencies would have to fit into that smaller envelope.

There is also an important distinction of principle to be made. The amendment asks the commissions to create a special band of electors who are outside the rules that apply to everyone else and whose votes might therefore carry more or less weight than elsewhere. That stands in contrast, as I have indicated, to the approach that has been put forward by the Government, which ensures that the overwhelming majority of UK parliamentary constituencies are treated on an equal footing, except those exceptions that Parliament has decided—the ones originally in the Bill and the one proposed by this House on the Isle of Wight, which has been accepted by the Government and voted for in the other place.

In conclusion, I believe that our House has had the opportunity to consider the amendment put forward by the noble Lord, Lord Pannick. It has been an important issue. The noble Lord, Lord Pannick, I think, would acknowledge that quite a lot of effort was made to see whether we could find a way forward. In that respect, a considerable amount of work was done—not only during the passage of the Bill through your Lordships’ House—in response to your Lordships’ clear views. The other place has also now had the opportunity to consider this amendment. A clear view has been expressed in the other place. Members of the other place have considered this and there were majorities of 67 and 71 respectively rejecting these amendments. The other place has expressed a clear view on these matters, which relate to its function and its membership. Your Lordships’ House asked it to think again. It has done so. I therefore urge caution before we ask it to consider the issue once more. I beg to move.

Amendment B1 to Motion B

Moved by

As an amendment to Motion B, leave out from “House” to end and insert “do insist on its Amendments 16 and 19”.

My Lords, I apprehend that the House will not want me to rehearse the merits of the substantive amendment to Clause 11 and respond to the criticisms of it. Your Lordships heard that debate last week. It was a very full debate and the House voted by a healthy majority to accept the amendments.

I listened to the debate yesterday afternoon in the other place. All the points that were made by the Minister, Mr Mark Harper, and the points that were made again today by the noble and learned Lord were ones that I sought to address and answer in the debate last week. I will not repeat any of that. Nothing new was put forward yesterday or this afternoon.

I should also mention—it was a point made by the noble Lord, Lord Higgins, in the debate earlier today—that on the Commons consideration of the Lords amendment yesterday the time for debate on this issue was limited to one hour. Of that one hour, the Minister, Mr Mark Harper, spoke for almost 40 minutes. Admittedly, there were interruptions during that time, but that is what happened. The actual debate from other Members of the other place—on what we all agree is an important constitutional issue and on which this House has expressed a very clear view—lasted 20 minutes. I take the view—other noble Lords will take their own views—that this is highly relevant to the question of whether or not this House ought to ask the other place to look again, and to look again seriously, at this issue.

Before I turn to the two points that I want to make, I suggest to the noble Lord, Lord Kilclooney—I am sorry that he is not in his place—that he might, on reflection, consider that he was a little unfair to the Deputy Prime Minister in the debate this morning. I was one of the Cross-Benchers invited to meet Mr Clegg to discuss the substance of my amendment. I very much welcomed that and the opportunity that I have had throughout our consideration of this Bill to discuss these matters with the noble and learned Lord and with the Bill team. I thank them for the exchanges that we have had. I understood the invitation from Mr Clegg to be a recognition—and a very proper recognition—that on the Cross Benches we put forward amendments when we think it appropriate. Each one of us considers them on their individual merits; each one of us, without being whipped, votes as we think is appropriate on that particular matter. I put on record our gratitude—I am sure that I am not the only Cross-Bencher who thinks in this way—to the Deputy Prime Minister for taking the time and trouble to meet with us. It is not appropriate for him to be criticised for doing that.

There are two substantial points that I want to make on why this House should ask the other place to think again. The first is that this amendment arises in the context of a constitutional Bill. That was the point made in the debate this morning by the noble Lord, Lord Lawson. The clause that we are now considering regulates the arrangements that govern the composition of the other place. This is a vital constitutional question. On such a question, this House, with its accumulated wisdom and experience, has a special responsibility to address the merits of legislative proposals. Indeed, it might be said that this House enjoys an advantage over the other place in that we have a broader perspective, which the other place inevitably lacks in relation to its own composition. This is not, I emphasise, any criticism whatever of the Members of the other place. It is to suggest to your Lordships that the rules governing the composition of the other place are of such constitutional importance that they cannot be left solely to the judgment of the other place, in the sense that, as soon as the other place disagrees with us, we in this House immediately retreat.

The other point is that there is a particular reason why this House should be unwilling to give way on this constitutional issue when this House was not persuaded last week of the Government’s argument on its merits. This Bill was heavily criticised by your Lordships’ Constitution Committee—an all-party committee—for the absence of pre-legislative scrutiny and for the lack of public consultation on issues of fundamental constitutional importance. It was perhaps the strongest criticism of a Bill seen in recent years from a Select Committee.

One of the topics that concerned your Lordships’ Constitution Committee—I should declare that I am a member of that committee—was the electoral quota. Paragraph 47 of the Constitution Committee’s report said:

“Pre-legislative scrutiny and public consultation would have enabled a better assessment of whether the new rules as to equalisation are overly rigid”.

I understand and respect the view of the Government that, in the first year of a new Parliament, it is inevitable that measures will be brought forward without there having been an opportunity for pre-legislative scrutiny and for detailed, or any, public consultation. But if the Government choose to bring forward a Bill of constitutional importance without such prior scrutiny and without such consultation, the Government cannot complain if the scrutiny that is then conducted in this House leads to improvements in the Bill that this House is reluctant to abandon as soon as the other place expresses disagreement with it.

I should also mention that last Wednesday, 9 February, the chairman of your Lordships’ Constitution Committee —the noble Baroness, Lady Jay of Paddington, whom I am pleased to see in her place—wrote to the Minister in the other place, Mr Mark Harper. She pointed out that three months after the publication of the Constitution Committee’s report—it was published on 10 November 2010—the Government had yet to respond to it, despite a government commitment to produce responses to Select Committee reports within two months. She stated in her letter: “This is not acceptable”. The Government did publish its response to the report on Monday 14 February, two days ago—far too late in consideration of the Bill to be of any value.

I have also seen a letter dated 14 February—Monday—from Mr Graham Allen, the chair of the Political and Constitutional Reform Committee in the other place. His letter is again to Mr Mark Harper, the Minister, and points out that his committee published its report on the Bill—again, a highly critical report—on 7 October 2010. His committee is still waiting—or at least it was on Monday—for a government response, four months later, when Parliament is about to conclude its assessment of a Bill of constitutional significance. Mr Allen observed that one might draw the conclusion that the Government had simply not complied with their duties to Parliament.

I respectfully suggest that all that is quite extraordinary and highly relevant to whether, on a Bill and an issue of constitutional significance, this House ought respectfully and politely—but insistently—to say to the other place, “You really need to look again, properly and in detail, at the views of this House”. I beg to move.

My Lords, I put my name to the relevant amendment on Report. As I did not have the opportunity to speak then, I shall say why I think that it would be important for the other place to consider it again. The amendment is extremely helpful to the coalition—it has not interpreted it that way—for the simple reason that Boundary Commissions are being asked to take on a complex task. There are some clear rules, but it is difficult and we do not know what position they may find themselves in. Other amendments before your Lordships’ House proposed that the regular band within which constituencies might vary should be widened. I did not support any of those. I agree with the Government that it is important for democratic reasons that, in so far as constituencies can be made equal, they should be made equal. However, in reality, Boundary Commissions may face an intractable task.

There are situations in which sub-division is not as simple as we might think in considering the application of rules. As is said in primary schools, sometimes three into two won’t go. For that reason and to enable the Boundary Commissions to carry out their task well —not for them to make a mass of exceptions; with good luck, they will make no exceptions—we should respectfully ask the other place to consider the amendment again.

I begin by saying how much I admire the ability of the noble Lord, Lord Pannick, to make another most interesting and persuasive speech without repeating the speech in any great detail that he made on the previous occasion. I respect that. He said that the amendment that we discussed on Report was carried by a healthy majority; I point out that it was a quarter of the majority carried after the debate that we have just had, so I do not know what we would describe that as.

It is important to remember where we are. I would like to think that the whole of this noble House was agreed on two points: that seats should be as equal as possible, and that a more equal distribution should be in place by 2015. Some people on the opposition Benches—certainly not the noble Lord, Lord Pannick, and his colleagues—may be keen not to see more equal distribution by 2015; they must speak for themselves. However, it is certainly the objective.

I do not think that the noble Lord, Lord Pannick, challenged this point when I made it previously: his amendment allows for less equality than presently proposed by the Government. Maybe some noble Lords, including those on the Benches opposite, were not quite aware of what the Government had proposed. I do not agree with where the Government started from. They proposed 10 per cent; I had some heckling when I mentioned that last time, because people did not realise—they thought that it was 5 per cent, but of course it is 5 per cent either way, a 10 per cent spread. The amendment proposes 15 per cent. I think that 10 per cent is too high. I recognise that the Government realised that there had to be a compromise when they drew up the Bill—that some allowance had to be made for latitude by the Boundary Commission in its work. The amendment is a compromise on a compromise, because moving to a 15 per cent spread means a difference of perhaps 12,000 people between different constituencies. That is too great. That is my first point.

My second is on the other thing done by the amendments on which the noble Lord, Lord Pannick, is inviting the House to insist. He effectively conceded that 15 per cent was a big variation, so he covered himself by inserting the fact that it should be used only in exceptional circumstances. As was recognised by certain noble and learned Lords, exceptional circumstances then allow further consideration and opportunity for challenge and further chance of judicial review. That is why the amendment fails my second test by making it more likely to mean that we do not get a new and fairer electoral arrangement by 2015.

In the light of today’s previous debate, we might have expected what the noble Lord, Lord Pannick, then said when he set this up as a great constitutional issue. I do not want to discuss the previous debate—I did not speak in that—and I understand entirely why the arguments might be made in this case. However, surely the purpose of our electoral system—which we all support—is that there should be equal value in equal votes, so far as possible. I do not consider that a great constitutional change which needs great pre-legislative scrutiny. Of course he talked about pre-legislative scrutiny and further public consultation—perhaps public hearings—in advance of any proposals from the Government. That would certainly scupper any chance of the electorate being able to vote at the next election, if it is in 2015, with a new and more equal distribution of votes.

The noble Lord flattered this House very adeptly—we all enjoy a bit of flattery—by saying that it has a considerable reservoir of knowledge, and that many of us have stood in many different elections and experienced boundary changes and changes in constituencies. That is absolutely right. However, I thought that he was getting perilously close to saying that, on this issue, this House was entitled in some way to be superior to the other place.

He did not go that far, but there was an implication of it in what he said. I listened from elsewhere, with the advantage of television, to the speech on the previous amendment of the noble and learned Lord, Lord Lloyd, who said that it was right that this House should ask the other place to think again. The noble Baroness, Lady O’Neill, made the same point. However, on whether votes should have an equal value as far as possible in each constituency and on ensuring that the next election takes place on fairer boundaries, this House has already asked the other place to think again. The other place has replied that it does not wish us to insist on our amendment. Our ability to challenge the other House is a very important power; it has to be used responsibly; it has to be used with great care. I respectfully suggest to the House that this amendment, very ingeniously and properly moved by the noble Lord, Lord Pannick, is not the sort of issue on which we ought now to challenge the other place for a second time.

My Lords, I voted against the amendment of the noble Lord, Lord Pannick, on Report. It seemed to me then, and it does so now, that a Bill which aims at equality as its underlying principle but which allows a margin of 5 per cent either way is both clear and logical. To allow a further margin of 2.5 per cent in very exceptional circumstances is neither clear nor logical nor, I suspect, necessary for the purpose of creating viable or workable constitutions. The noble Lord may have in mind specific instances of where it would make all the difference, but if there are such specific instances, they should have been dealt with as such in the Bill, as have been the Isle of Wight and Orkney and Shetland.

I asked myself throughout the original speech of the noble Lord, Lord Pannick, and what he has said today, the following question. Let us suppose that the Bill had originally allowed a 7.5 per cent margin either way of equality. Would the noble Lord then have tabled an amendment saying, “Oh, no, we had better allow an extra 2.5 per cent just in case”.? I do not believe that he would have argued that and, if that is the case, I cannot see how he is entitled to make the point that he makes in relation to 5 per cent.

I do not propose to pursue that argument—I may do so later with my learned friend and I have no doubt that he would beat me to it—because there is the more important question here, which I tried to develop during debate on the previous amendment. The noble Lord, Lord Pannick, has been severe in his criticism of the Government’s conduct throughout the passage of the Bill, and in many respects he may be right. However, to use those immortal words, we are now where we are, and I am unable to see how the noble Lord’s amendment, even if it were ultimately accepted by us, will cure the criticisms which he has made of the Government.

Of course it was our duty to examine the Bill with great care, all the more so as it is a constitutional Bill. The noble Lord, Lord Lawson, referred to this House in the previous debate as the protector of the constitution. That may be so, but we are not the sole protectors of the constitution; so is the House of Commons. The constitutional point raised by this amendment seems, as the noble Lord said, not to be of very great importance, although it is obviously of some importance. We have given the other House the chance to reconsider this point; it has done so; it has decided against the amendment of the noble Lord, Lord Pannick; and we should now accept its view.

My Lords, before coming to the House today—and I hesitated before intending to speak—I felt that I should go back and look at the figures for the electorate of the whole of the UK and try to do some modelling on the sums. My conclusions have been based on fairly simple maths. It may be that we are where we are, but it is clear that we have lost 25 per cent of MPs from Wales and that Wales, Scotland, Northern Ireland and England will have their own areas. There have been arguments about Cornwall and rural constituencies in particular. I wanted to look at whether there might be unintended consequences of the legislation. In other words, are we really legislating for what we want to do, or do we run a risk of an unintended consequence? My noble friend Lady O’Neill put it succinctly. The point of the amendment is to allow a margin, in exceptional circumstances, so that the Boundary Commission is not locked into a difficult situation by the legislation if it comes across circumstances where the population has moved or the size of the electorate has changed and where it is suddenly faced with a constituency which does not fit within the relatively narrowly margin of 5 per cent. The principle of equality was in some ways abandoned over the Isle of Wight. That was a decision of both Houses. It was agreed that exceptional circumstances applied there. This amendment is about exceptionality. It would put a safety margin in the Bill. It would not undermine the Bill’s overall principles of a more equal distribution of votes and a reduction in the other House’s size.

It was the relative brevity of the debate in the other place that prompted me to pull out and go through the figures last night and early this morning. I have come to the conclusion that we should supply the Boundary Commission with a safety margin for it to provide workable constituencies so that the people of this country are well represented in the other place. Therefore, I support the amendment.

My Lords, as one who also attached his name to the amendment of the noble Lord, Lord Pannick, I support him in inviting the House of Commons to think again. The amendment does not fundamentally undermine the principle of equality of constituencies. It does not undermine the 5 per cent margin in any serious way. As the noble Baroness, Lady Finlay, just said, it provides a safety margin should cases arise that we do not now foresee of the kind which have caused the coalition Government to make exceptions for Orkney and Shetland, the Western Isles and now for the Isle of Wight. We cannot exclude the possibility that such circumstances will arise. The extra discretion which the amendment would allow may never need to be used, but it should be in the Bill as a safety valve because I do not think that we would want the two Houses to come back to the matter in a single case. I therefore hope that the House will support the noble Lord, Lord Pannick, and invite the House of Commons to think again.

My Lords, I appreciate the efforts of the noble Lord, Lord Pannick, in connection with the amendment. The result has been an amendment which has been drafted as precisely as possible. On the other hand, it has practical consequences to which I shall come in a moment. I support what the noble Lord said in relation to the responses—or the lack of responses—of the Government to the two Select Committees to which he referred. This is deplorable and it is right that this House should express that view. I hope the Minister will take back from the House the opinion that that conduct should not be repeated and that, in future, we expect the Government to respond within the time that, after all, they have set for responding to Select Committees so that reports and the Government’s response can be considered within an appropriate time. I also agree that pre-legislative scrutiny and public consultation can be of considerable assistance.

I understand, and the noble Lord, Lord Pannick, has made it clear that he understands, that at the beginning of this Parliament we hoped to get something in place in time for the next election—the suggestion is that that will be five years from the original election, although some people think it may be quicker—and the Boundary Commission has said that the task it has been set in the Bill is within its capability, although it is a tight schedule. However, the circumscribed discretion which the noble Lord, Lord Pannick, has drafted and which was approved by this House on Report, contains a quite considerable possibility for argument. Suggestions have been made about what these arguments might be, but I consider that the margin given in the discretion is very much subject to argument. The result of that will be—as the noble and learned Lord, Lord Scott of Foscote, said on Report and which I support—that the chances of judicial review in relation to this kind of discretion are much greater than they are in respect of the 5 per cent. This is because there is argument available about the precise meaning of the limitations contained in the discretion.

I know that these limitations are as precise as we can make them, but no one who has had any experience of judicial review would rule out the possibility of ingenious constructions being mooted and seriously considered by judges on judicial review. If the amendment were to remain in the Bill, there would be a greater risk than before that the Boundary Commission will not be able to complete its work within the period before the next election. Although I was not here on the previous occasion when the amendment was voted on, I was very much taken with the efforts of the noble Lord, Lord Pannick, as he knows. However, having considered the matter as carefully as I can, I have come to the conclusion that one of the consequences of the amendment may well be that the Boundary Commission would not be able to complete its task before the next election. For that reason, we would be wise to accept the decision of the House of Commons.

I admit that the system in the House of Commons requires a guillotine. Fortunately, our self-restraint is such that we do not require such a device or a timetable of the kind used in the other place, which, as has been said, was instituted some time back. However, it has been continued and, although it is not for me to tell the House of Commons how to go about its business—I have enough to do to conduct my own—it might be for the advantage of Parliament generally if a reconsideration of these timetable arrangements was introduced. At least the amendment of the noble Lord, Lord Pannick, received longer consideration than the previous amendment of the noble Lord, Lord Rooker, so we should be thankful for that.

I am not in favour of sending this amendment back to the House of Commons for a second time.

My Lords, perhaps I may ask the Minister to address one point which is material to the issue. He said that the 10 per cent margin—5 per cent each way—would make it unnecessary to break up any ward in an existing constituency. If that is the case, the risk that one would need greater flexibility than the 5 per cent is either non-existent or very materially reduced. Can he clarify that point? It is relevant to whether we need the extra flexibility provided by the amendment of the noble Lord, Lord Pannick.

My Lords, the Government have asked the Boundary Commission to fit 597 out of 600 seats within a 5 per cent margin either way. I have tried to argue before that, in terms of statistical distributions, this will be an immensely difficult task because a standard deviation of 1.7 per cent is too small.

If the Boundary Commission were allowed to fix 95 per cent of the seats within the Government’s favoured margin of 5 per cent and the remaining 5 per cent of seats—30, perhaps 25, seats—were allowed to fall under the amendment of the noble Lord, Lord Pannick, it would make the tasks of the Boundary Commission and the Government simpler. The noble Lord, Lord Pannick, has not tried to subvert anything the Government want to do; he has been very helpful in making it much easier for the Government to achieve what they want to achieve. Otherwise it will be very difficult to carry out the task.

This is also an important debate and, again, the question is whether or not we should ask the other place to think again. We on this side of the House think it is right that we should do so.

Again, there is an interaction of two issues: first, the extent to which the matter has been properly considered by the other place; and, secondly, the extent to which it is an important issue. On whether the Commons has had a proper opportunity to consider the issue, this debate was an hour long in the other place. In winding up for the Opposition, Mr Sadiq Khan pointed out that Mr Mark Harper had taken up two-thirds of the time available. Right across the debate there was the repeated theme that the Government were not listening and that there was not clarity about what was happening. I shall not quote from Labour Members but from coalition Members.

When addressing Mr Mark Harper, Mr Mark Field said:

“Does my hon. Friend not appreciate the concern that when we are discussing whether there should be any variance, be it of 5% or 7.5%, it is important to know how the process operates? … If we do not have at least a basic understanding of how it will operate, it will be difficult for us to make any value judgment as to where the variance should lie, which is the subject of amendment 19”.—[Official Report, Commons, 15/2/11; col. 864.]

That is what we are now talking about.

Mr Andrew George, a Liberal Democrat Member, said:

“Given the nature of some of the questions that the Minister has been asked in the past few minutes, does he agree that perhaps there should be an opportunity to review the wisdom of going ahead on the basis that he is describing?”.

Later again, the same Member—a coalition Member—went on:

“My hon. Friend is absolutely right, but I think that the inflexibility of the proposals will result in much more significant changes across the country … All I am asking is that the Government take a less intransigent and more flexible approach”.—[Official Report, Commons, 15/02/11; cols. 865-8]

One Labour Member is worth quoting. Mr Paul Murphy, who had a distinguished career and was Secretary of State for Wales, said:

“I do not understand why the Government and the Minister are being so rigid and fundamentalist on this issue”.— [Official Report, Commons, 15/02/11; col. 869]

The mood around the House, from reading Hansard, is that inadequate answers were given, that the Government were being unnecessarily rigid and that there was no proper understanding of how it would work. That is perhaps not surprising, because this amendment first saw the light of day—in the sense of it being passed by this House—a week ago today. The material in the other amendment is going back to the other place for further consideration. In my respectful submission, it would obviously be wrong if this did not go back with it.

Is this an important amendment? In my respectful submission it is. I do not know how many of your Lordships were present when the noble Lord, Lord Armstrong, told the story of Procrustes; or when the noble Lord, Lord Pannick, went through the detail of the work that he had done with the Government to get to a place with this extra 2.5 per cent. He was the only person in that debate—including the Government—who had done the work and thought through what the consequences were. For example, in relation to the point made by the noble Lord, Lord Butler of Brockwell, there are some wards that are so large that they will not be protected by 7.5 per cent, so obviously there will be even more wards that will not be protected by 5 per cent. The answer to the question put by the noble Lord, Lord Butler of Brockwell, is that more wards will have to be broken up under 5 per cent than under 7.5 per cent. I hope that blocks the retreat for the noble Lord, Lord Butler of Brockwell, at this particular point.

As far as the overall position is concerned, the noble and learned Lord, Lord Wallace of Tankerness, referred to the academics and the people involved in the area. Professor Johnston, the leading academic in relation to this issue, said he did not normally support public inquiries; however, what the noble and learned Lord, Lord Wallace of Tankerness, did not say was that he thought that, in the context of such a far-reaching change as is envisaged by this boundary review, there is a strong argument for the ability to make changes. Robin Gray, the former chairman of the Boundary Commission, said that some flexibility in addition to the 5 per cent was required.

In relation to the issues that were being considered in the previous debate, we considered the issue of judicial review in detail. Of course I respect the noble and learned Lord, Lord Mackay of Clashfern, in relation to the issues that he raised, but the noble and learned Lord, Lord Woolf and the noble Lord, Lord Pannick, both expressed the view that most judicial reviews, even on this, would fail. I also make the point that the courts, in looking at these issues, would be well aware of the deadline, which would be sometime in October 2013. These issues would arise during 2012, so the courts, in my respectful submission, would be well able to have timetables that would ensure that the deadline of October 2013 was met. They would not be faced with these issues late on in the process, but much, much earlier on. The application for leave for judicial review would take place at such a time that the court could deal with them quite smartly. The noble and learned Lord, Lord Scott of Foscote, made the point that hopeless applications for judicial review take time—which is absolutely true—but a court keen to meet a deadline set in statute would in my respectful submission be able to deal with that.

The final point dealt with in the debate in the Commons was the statement that it was not possible to craft a genuine exception—a point I should say that was not made by the noble and learned Lord, Lord Mackay of Clashfern, in this debate; but which was referred to by Mr Mark Harper, who cites a case called Al Rawi and others v Security Service, a case about the extent to which you can have a special procedure for terrorists. It is hard to imagine a case more different than the sort of case the courts would be dealing with here, and it may be an indication of the difficulty in finding support for that proposition. I do not ask that this House reaches a firm conclusion; all I say is that it is the right thing to do for this House to ask the other place to think again. That seems very little to ask. We support the noble Lord, Lord Pannick.

My Lords, once again I thank noble Lords who have participated in this debate on what is an important issue, as has been recognised many times during the passage of the Bill through your Lordships’ House. I start by picking up the points made by both the noble Lord, Lord Pannick, and my noble and learned friend Lord Mackay of Clashfern with regard to the lengthy delays in responding both to the report from the Political and Constitutional Reform Committee in the other place and to your Lordships’ Constitution Committee. I am not in a position to offer any explanation, but I do recognise that the time that was taken cannot have assisted either House and I therefore wish to apologise. Responding to the point made by my noble and learned friend, I will certainly take it upon myself personally to make sure that the comments made in your Lordships’ House—and indeed I will reflect the force of them too—will be conveyed to colleagues.

It has been argued that the role of the House in asking the other place to think again, and indeed in asking the Government to think again, has been well discharged in respect of these amendments. As has been acknowledged, the Government did engage to see whether there were ways in which we could find common ground and indeed there has been an opportunity for consideration in the other House. However, before inviting the House to send the amendments back again for further consideration, it is important that we perhaps reflect as to what this supreme constitutional principle that we are asking the other place to think about is. Is it just 2.5 per cent? One of the principles of the Bill, referred to by my noble friend Lord King of Bridgwater, is that of equal votes—one vote one value—as best we can throughout the United Kingdom. That is an important principle and one we believe is reflected in the Bill and which, bar the two issues that are now outstanding, has been accepted by both Houses. It is not slavish arithmetic, as I sought to explain. The 5 per cent variation, which gives 10 per cent in all, was not just conjured up—indeed my noble friend thought that it should have been lower than that. In response to the question from the noble Lord, Lord Butler of Brockwell, we believe that the 5 per cent is the closest we can get to achieving equality in the weight of a vote—I am repeating myself but it is important to do so—and an equal say for voters in the outcome of a general election while allowing the Boundary Commission for England to continue its practice of using wards as the building blocks of constituencies in England. I remind the House that the wards themselves are drawn up with local factors in mind.

The contribution of the now much quoted Professor Johnston, in his first session before the Political and Constitutional Reform Select Committee, noted that much local political activity and engagement was based on the ward structure. Crucially, the secretary to the Boundary Commission for England, in his evidence to that committee, said that under the rules in the Bill it would be possible to allocate constituencies using wards in the majority of cases. I did say, in my opening remarks, that an absolute prohibition on splitting wards would not be appropriate because there are some places—Birmingham is a case in point—where some wards are so large that it might not be possible not to split them. In these cases, the wards may even be so large that it might make more sense for local communities for them to be broken up to get a more readily identifiable sense of community. The basic point is that in the vast majority of cases it is believed that wards will be the building blocks for the constituencies in England. That is why the 5 per cent was chosen. We have yet to hear, with all due respect, a rationale for 7.5 per cent. I have sought to explain why 5 per cent is right and why there is a rationale behind it, but we have not yet heard a clear rationale for 7.5 per cent.

Another principle here is the one that the noble Baroness, Lady Finlay of Llandaff, mentioned when she said that we have departed from it. We have done so in three cases—in Orkney and Shetland, the Western Isles and the Isle of Wight. However, Parliament has decided that those should be exceptions to the principle. That is the proper way to go about it. We are trying to get the fundamental principle of equality of votes. When there are to be exceptions, they should be specified by Parliament; otherwise, we believe that we can operate within 5 per cent, giving the Boundary Commissions sufficient flexibility.

The other point of principle, mentioned by my noble friend Lord King of Bridgwater and my noble and learned friend Lord Mackay of Clashfern, is one of time. On a number of occasions—too many even to remember—we have talked about the importance of trying to get this legislation through, with a Boundary Commission that can report by 1 October 2013, so that the general election to be fought in May 2015 would be fought on new boundaries. If that does not happen, in respect of England, the boundaries on which that general election would be fought would be ones determined by the Boundary Commission based on the electorate in the year 2000, and therefore 15 years out of date.

Since the House passed this amendment last week, Professor Johnston appeared again before the Political and Constitutional Reform Committee in the other place. He was asked by the chair:

“But in fact, am I right in assessing that what you are saying is that the combination of the change from the 5% to 7.5%, plus the local hearings amendment, plus the time constraints, and plus the possibility of judicial review that follows on from those two amendments means that that combination could be fatal to the Bill?”.

Professor Johnston said:

“Well, it couldn’t be fatal to the Bill. It could be fatal to the implementation of the Bill within the deadline of 1 October 2013”.

That was the evidence given by Professor Johnston last Thursday to the committee in the other place.

If it is a matter of principle that we should be asking the other place to consider, there is an important principle, which we have now accepted, that the next election should be fought on up-to-date boundaries and on the principle of equality of votes. On that basis, I invite your Lordships to reject the amendment proposed by the noble Lord, Lord Pannick.

I am grateful to all noble Lords who have spoken in this interesting and important debate. The noble Lord, Lord King, suggested that I had come perilously close—I think that that was his phrase—to suggesting that we enjoy some sort of superiority over the other place. I am very sorry if I gave that impression to the noble Lord. That was certainly not what I said and certainly not what I intended. My suggestion, which is I think a modest one, was that in all the circumstances that I indentified in my earlier remarks, it was appropriate for this House to ask the other place to think again about this matter.

The noble Lord, Lord King, and the noble and learned Lord, Lord Lloyd of Berwick, along with the Minister, asked what the constitutional importance is here and why we should be worried about this matter. The constitutional importance is that we are debating a Bill that addresses perhaps the most fundamental aspect of our election law, such as questions of constituencies and the size of constituencies as well as questions on the electoral quota. The constitutional significance is whether this House really should approve an inflexible formula—that is what it is—that prevents the Boundary Commission going outside the 5 per cent quota whatever the circumstances it may find in any particular case.

The noble and learned Lord, Lord Mackay of Clashfern, expressed a concern that the substantive amendment would create a real risk of the boundary reviews not being completed by October 2013. I have enormous respect, as he knows, for his views and judgment—and that is not something that I say about all those whom I have represented in judicial reviews, as I did when he was the Lord Chancellor. However, I do say to him and to other noble Lords that in the context of the task already being imposed on the Boundary Commission, the additional discretion to avoid this inflexibility cannot cause real practical problems. The Boundary Commission will, in any event under Clause 11, be obliged to look at precisely these geographical factors and local ties in order to assess in its judgment whether it should move up to 5 per cent. All the amendment does is to give the Boundary Commission discretion when it has carried out that exercise and, because of the exceptionally compelling nature of the circumstances, thinks that it should move to 5.1 per cent, for example, to avoid some arbitrary barrier.

I understand the concern about judicial review, but the Administrative Court is quite capable of hearing cases speedily when that needs to be done. It does it every day. It recognises, because it does it every day, that public bodies should be left themselves to decide on the application of narrow exceptions given them by Parliament.

The noble and learned Lord, Lord Mackay, expressed agreement with my criticisms of the Government’s conduct in relation to the Select Committee reports. I suggest to noble Lords that this is surely relevant when they are considering whether we should take the view that the Government and the other place have not yet adequately considered the views of this House and whether the matter should be looked at again.

The noble Lord, Lord King, congratulated me on making what he described as a persuasive speech earlier this afternoon. I suggest to noble Lords that sometimes a speech may be persuasive because it is actually right. I ask noble Lords to accept that it is appropriate for this House to ask the other place to think again on this matter. I wish to test the opinion of the House.

Motion B agreed.

Motion C

Moved by

That this House do not insist on its Amendments 17 and 20 to which the Commons have disagreed, and do agree with the Commons in their Amendments 20A to 20E in lieu.

My Lords, during the passage of the Bill through your Lordships’ House there was a very important Committee debate on the Isle of Wight. As I indicated on behalf of the Government at that time, the fundamental principle underpinning the Bill is that one elector should mean one vote. At that stage the Bill was subject to only two exceptions. It was our view that a cross-Solent constituency, comprising part of the Isle of Wight and part of the mainland, was practicable as the island does not have the challenging geography of the other preserved constituencies. However, the arguments made in that debate, not least by my noble friend Lord Fowler, carried the day in this House. It did so by some margin and with considerable cross-party and Cross-Bench support. This undoubtedly gave us reason to reflect, and we have come to the view that the case against a cross-Solent constituency is persuasive.

That was the objective of the amendment proposed by my noble friends Lord Fowler and Lord Oakeshott. However, their amendment left open the question of whether there should be one seat or two on the island. That was left up to the Boundary Commission for England. There are practical reasons why we have reservations about that. The noble Lords’ amendment did not provide the Boundary Commission for England with any instruction on how it should determine the number of seats to be allocated to the Isle of Wight. Nor was any consequential amendment tabled to deal with the matter. The Government consider that if an exception is to be made for the Isle of Wight, it would be consistent and fair for it to be made on the same basis as for the other preserved constituencies in the Bill.

The amendments passed by the other place following a Division provide certainty for the commission by requiring that the island has two seats, and by taking those constituencies outside the formulae for the allocation of seats to parts of the United Kingdom and the calculation of the electoral quota elsewhere in the Bill. Two seats of around 55,000 electors each would be much closer to the electoral quota than one seat of around 110,000. That is consistent with the underlying principle of equality. Furthermore, I understand that the population of the Isle of Wight looks set to increase. Two seats would be likely to move closer to the quota, whereas one seat would move further away from it. It is practical and, as the honourable Member for the Isle of Wight in the other place confirmed in his speech yesterday, it respects the wishes of those who mounted a vocal and, as we have seen, effective campaign to prevent a cross-Solent constituency. I beg to move.

My Lords, I will be brief. I thank the Government for listening to what the House of Lords said on my amendment and for the decision that they have taken. My amendment was special in that we were dealing with an island that has only ferries connecting it to the mainland. I said in moving the amendment that it would allow there to be one or two constituencies on the Isle of Wight. The Government have decided to be specific and make two, and that is the right decision.

The only other options would have been to have one massive constituency on the Isle of Wight or, alternatively, a cross-Solent constituency. That cross-Solent constituency would have meant there being one constituency on the Isle of Wight itself, with the remaining 35,000 electors put together with part of, say, Portsmouth on the mainland. It would be divided by 10 miles of the Solent, with expensive ferries being the only means of communication. The constituency would be partly on the mainland and partly on the island. It is all very well to talk about community but the natural centre of that constituency would have been in the middle of the sea. There is no doubt that such a solution was rejected decisively by the people of the Isle of Wight. Eighteen thousand people signed a petition against it. The councils were against it, as were all the parties—the Liberal Democrats, Labour and the Conservatives.

In our previous debate the Minister suggested, without overstating his case, that there were some who had written in support of a cross-Solent solution. Very courteously, as always, he offered to investigate how many had done so. Unfortunately his reply was not entirely convincing. In his letter of 7 February, he said:

“You asked how many representations received about the Isle of Wight were in favour of the Bill’s original proposals and how many were against. The Cabinet Office does not record correspondence in a way that would enable us to readily identify whether the authors were for or against particular issues”.

Perhaps that is just as well in the Minister’s case, although it raises a few questions about the value of writing to the Cabinet Office on any issue. To be fair, the Minister went on to say that he,

“was not seeking to claim that there were an equal number of representations received both for and against the Bill’s proposals”.

The Minister was absolutely right. I congratulate him and the Government on reaching the decision that they have.

It has been a very long process but the Government have listened at the highest level and the Commons has decided. I thank all those concerned with this campaign, particularly the excellent Member of Parliament for the Isle of Wight, Andrew Turner, who has worked long and hard to achieve this outcome. No one could have done more. I also thank my supporters in the vote on 19 January from around the House—from all parties and the Cross Benches—including those who found pressing engagements when the vote was called and abstained. I thank the opposition Front Bench; it is the first time in my political career that Labour Whips have provided Tellers for any Motion or piece of legislation that I have introduced over the past 40 years.

I make just one further comment. Given the progress of the Isle of Wight debate, no one can be happy with the heavy timetabling in the other place. I know that it is inherited from the previous Government but it prevented the island’s MP putting the issue to the vote before it came to the Lords, and virtually prevented him making a speech. I hope that the Government will now look anew at that procedure. Having said that, this amendment, which the Lords have carried and the Government have accepted, seems to me to carry out the traditional function of asking the Commons and the Government to think again. They have done so and I congratulate them on their good sense and on the outcome.

My Lords, I congratulate the Isle of Wight on this great achievement and the noble Lord, Lord Fowler, on the work that he has done to secure it. I wish the people of the Isle of Wight well in relation to the conclusion that has been reached. It is a decent outcome. It could have applied to other places but now is not the time to dwell on that. I wish the Isle of Wight good luck. I assume that the conduct of the Government in relation to the Isle of Wight prefaces a good result later in the day on the amendment that we passed earlier.

Motion C agreed.

Postal Services Bill

Second Reading

Moved By

My Lords, many of us in this House will no doubt be experiencing a mild sense of déjà vu. After all, it was less than two years ago that this House debated a Bill of the same name. That Bill, in the name of the noble Lord, Lord Mandelson, was thoroughly scrutinised and improved by this House. However, the previous Government were unable to take it further, thus we find ourselves debating the same issues once again.

The purpose of this Bill is to secure the ongoing provision of the universal postal service and to safeguard the future of the Royal Mail and the Post Office. Before I turn to the detail of the Bill itself, I wish to explain why we must now take action. The universal postal service is a vital part of our economic and social infrastructure. Individuals and businesses across the country rely upon it, as they have done for nearly 200 years. The United Kingdom has been a pioneer in postal services and it is our duty in this House to do justice to this proud heritage and to safeguard the universal postal service for the future.

The noble Lord, Lord Mandelson, stood before this House two years ago and declared that we were living in a digital age. He is right. Our means and methods of communication are changing, with traditional options, such as the letter, increasingly bypassed in favour of electronic alternatives such as e-mail. The previous Government recognised this and, in 2007, commissioned an independent review of the postal services sector, chaired by Richard Hooper. Hooper was unequivocal about the need for action to safeguard the universal postal service. With the letters market in structural decline, he identified an urgent need for the Royal Mail to modernise and increase its efficiency. To do this, he argued, Royal Mail needed access to flexible capital. Noble Lords then in Opposition, and now occupying these Benches, accepted the recommendations of Hooper’s excellent report in full and we were prepared to support the Bill that was subsequently introduced by the previous Government. Indeed, we were sorry that, having left this place, the Bill did not complete its passage through Parliament.

It should come as no surprise that one of the first actions undertaken by my colleague, the Secretary of State for Business, on assuming office, was to ask Richard Hooper to update his report. That update, published last September, confirmed that if we are to secure the universal postal service we need to do three things. Royal Mail needs access to private sector capital and commercial disciplines; it needs to be relieved of its historic pension deficit; and the regulatory framework under which it functions needs fundamental reform. But Hooper’s most worrying finding was that Royal Mail’s already precarious financial position has actually deteriorated in the 18 months since his original report. The fall in letter volumes has, in fact, been more dramatic than was predicted: we now send 16 million fewer items per day than we did in 2005—a fall of nearly 20 per cent—and experts are predicting further global decreases of 25 to 40 per cent over the next five years. This problem is not unique to Royal Mail but the latter’s financial state means that it is not able to respond sufficiently.

To meet the challenges of the declining market, Royal Mail must modernise. Despite some progress, Hooper concluded that Royal Mail is still some considerable way from being best in class. This view is reinforced by Royal Mail’s Chairman, Donald Brydon, who told Committee Members in the other place:

“Compared with any other postal operator of quality or substance in the world, the Royal Mail is at the end of the queue in its modernisation”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 15.]

I am sure we will hear from noble Lords who will argue that Royal Mail must remain under the protection of public ownership. However, I put it to your Lordships that it is the Government’s ownership of Royal Mail that has failed Royal Mail. This company needs to be freed from the constraints of government ownership if we are to give it a chance to succeed.

I turn now to the Post Office and address some of the concerns raised both in this House and the other place, in particular, the concern that this Bill could lead to loss of business for the Post Office, and ultimately to Post Office closures. The Bill will enable the separation of Post Office Ltd and Royal Mail to allow for the private investment that Royal Mail so badly needs while maintaining the Post Office in public ownership. Opponents of the Bill have sought to portray this as a threat to the future of the Post Office. On the contrary, it is an opportunity for the Post Office. Separation will give its management the freedom to focus on getting the most out of the branch network and growing revenue across the whole business. Two thirds of Post Office Ltd’s revenue is unrelated to postal services, coming from areas such as financial services, government services and telecoms. It is in these areas that the growth opportunities for the Post Office lie. Government are far from alone in seeing the benefits of separation. The move has been welcomed by the experts at Postcomm and Consumer Focus, and by Richard Hooper himself.

Opponents of the Bill have argued that a privatised Royal Mail might not use the Post Office, leading to loss of business. Scaremongering over this issue was perhaps inevitable but I refer noble Lords to commitments made by Donald Brydon, chairman of Royal Mail, and a man who knows what he is talking about when it comes to Royal Mail’s commercial decision-making. In his evidence to the Public Bill Committee in the other place, Mr Brydon was clear that before any privatisation occurs, a new commercial contract will be put in place between the two companies for the longest time that is legally permissible. This is not a vague statement of hope. We have the chairman of Royal Mail putting on record his commitment that the commercial relationship between the two companies will continue, regardless of who owns Royal Mail, and your Lordships may rest assured that the Government, as shareholder, will ensure that this commitment is fulfilled. So we can be sure that the strong relationship between the two companies will continue, but with the Post Office in an even stronger position with its own fully constituted board and sole focus on what is best for the network.

However, the Government recognise that as well as the freedom to focus on its future, the Post Office also needs the means and support to do so. That is why we have committed to providing £1.34 billion in funding to the Post Office over the next four years. This will enable Post Office Ltd to undertake a substantial modernisation programme for the network and to maintain the network at its current size. This funding will help to put Post Office Ltd back on to a secure and sustainable financial footing. Once it has a stable financial base, the Bill offers the opportunity for Post Office Ltd to be transformed into a mutual. We believe that a mutual could be the ideal way to meet the distinct social and economic roles that the Post Office plays, giving sub-postmasters, employees, customers and communities a greater say in how it is run.

I should like to make one thing abundantly clear: there will be no programme of closures under this Government. Throughout this debate, we must never lose sight of the real reason for safeguarding the Post Office network. It is not about politics; it is about the millions of British people who rely on the Post Office—in particular, the vulnerable and those in rural and deprived communities. It is about the hard-working sub-postmasters and mistresses—the real-life Dorcas Lanes—who selflessly serve people up and down the country and whose value cannot be measured by profit-and-loss accounts alone. A mutualised Post Office will give these people a real voice, and I hope that noble Lords on all sides of the House will support these provisions.

I turn to the detail of the Bill. Part 1 removes restrictions on the ownership of Royal Mail. This is to enable the much-needed injection of private sector capital and disciplines. As I have already made clear, Royal Mail urgently needs to modernise. Some progress has been made already, which we welcome. But Royal Mail will need to continue the process of modernisation and transformation if it is to succeed in a declining market. This requires both capital and commercial disciplines that the Government simply cannot provide. The taxpayer has already made available billions of pounds for the current modernisation programme, and yet this covers only the costs envisaged three years ago. As Royal Mail’s Chief Executive, Moya Greene, told the Bill Committee in the other place,

“When you are in a business such as this, which is in a market undergoing dramatic change, you need to have access to capital continuously to keep up”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 4.]

I think we can all agree that government is neither the most flexible source of funding nor the most timely. There are competing priorities to consider, and any funding we provide to Royal Mail must go through the European Union’s sometimes lengthy state-aid approval process. Besides, government funds are too often accompanied by the spectre of political interference. What Royal Mail needs is flexible investment and commercial disciplines. The private sector is best placed to provide these.

However, a successful company needs more still. It requires a motivated workforce. Royal Mail has some of the best employees in the world, as amply demonstrated in the recent bad weather, and they deserve a proper stake in the future success of the company. That is why the Government have included provision for an employee share scheme which will hold at least 10 per cent of the equity in Royal Mail in the future. This is the strongest legislative commitment and largest stake of any major privatisation, and I hope that your Lordships will support it.

In terms of pension provision, the Bill will allow for government to take on Royal Mail’s crippling and highly volatile deficit—a deficit that ballooned from £2.5 billion in 2007 to more than £8 billion in 2010. We should not underestimate what this means to members of the Royal Mail pension plan. Members are rightly concerned about the security and safety of their pensions. Under the Government’s proposals, we will stand behind their accrued rights, giving members the security and certainty they deserve. Royal Mail itself will be left in a much more secure position with a smaller, more manageable scheme going forward. This is a good outcome for employees, both in respect of pensions and in boosting the financial health of the company they work for.

The Bill will also enable fundamental reform of the regulatory regime. It will transfer regulatory responsibility from Postcomm to Ofcom. This measure is entirely appropriate, given the convergence of communication markets, and has broad support from stakeholders. Crucially, the Bill will ensure that the primary duty of the regulator in relation to postal services will be to secure the continued provision of the universal postal service. The previous Government recognised the need for this, and similar provision was made in the 2009 Bill. This Government, however, have gone further and have added the requirement that in performing this duty the regulator must consider the financial sustainability of the universal postal service. This will ensure that both the service and its financial health are at the heart of everything Ofcom does in relation to postal matters.

As for the meaning of the universal postal service, the Bill sets in statute the six-day delivery and collection of letters at affordable and uniform prices. Again, I should like to address some scaremongering on this issue. The Government have no intention of downgrading the minimum requirements of the universal postal service. On the contrary, this Bill introduces new safeguards: first, that any changes can be made only after Ofcom has conducted a review of user needs; secondly, that any changes are approved by a vote in both Houses; and, thirdly, that prices must remain uniform and there cannot be different minimum requirements in different parts of the country.

There was some debate surrounding the 2009 Bill as to whether it went far enough to ensure fair competition between operators. We have looked again at the relevant provisions and concluded that tougher tests should be met before Ofcom can mandate access to Royal Mail’s network. Thus the Bill before us today specifies that mandatory access can be granted only where it meets all of the conditions of promoting efficiency, promoting effective competition and conferring significant benefits upon users of postal services. This is a departure from the 2009 Bill, which allowed for mandatory access where just one of these conditions was met, and is a change that we feel is vital in ensuring the right balance between fostering competition and protecting the universal service. Our position is clear: competition is beneficial, but it should not undermine the universal service.

This Bill also reflects a deregulatory intent. We are clear that regulation should be imposed only where there is a need for it. We are confident that this Bill, combined with Ofcom’s existing duties under the Communications Act 2003, gives the regulator the tools it needs to ensure that regulation is focused and proportionate, and that it can deregulate rapidly where there is effective competition in the market. I look forward to debating the detail with the many knowledgeable and experienced Members of this House who are, or have been, involved in economic regulation.

Finally, Part 4 introduces a special administration regime. This will enable special arrangements to be put in place should the universal service provider be at risk of entering insolvency proceedings. Their objective will be to maintain the universal postal service. While we do not expect to use these provisions, they are a sensible and prudent additional safeguard for the universal postal service. The measures mirror those that have been taken in the energy and water sectors.

The Bill is largely based on the same evidence and independent analysis as the previous Government’s Bill. However, we have looked at the issues with fresh eyes. The result is a Bill that builds on the consensus surrounding its predecessor, but which also improves upon it. Thus we have a Bill that is better for consumers, who will benefit from a secure universal postal service, and a strong, stable post office network—one that is better for Royal Mail, giving the company the best chance of a successful future while relieving it of a crippling pension deficit. It is a Bill that is better for Royal Mail employees, giving them security over their accrued pension rights while offering them a real stake in the future success of the company through the largest employee share scheme of any major privatisation.

Some provisions before us today will be difficult for some noble Lords to accept. I do not ask them to change their political ideology, but I do ask them to reflect on the fact that the call for action is coming not from this Government alone. It came from the previous Government when they presented their 2009 Bill to the House, and it is coming from individuals who are intimately acquainted with the problems facing Royal Mail and who have no political allegiance, such as Richard Hooper, the independent adviser to both the previous and current Governments, and Royal Mail’s senior management.

We will spend many hours debating the detail of the Bill and I have no doubt that it will leave the House all the better for your Lordships’ attention. It represents not just the latest but the best chance of securing the future of the universal postal service. I beg to move.

My Lords, I thank the noble Baroness, Lady Wilcox, for introducing the Bill and explaining the Government's position. I will grasp the first note of optimism from her acknowledgement that the Bill will leave the House improved—which can only mean that she will lend a ready ear to appropriate changes. I, too, look forward to today's debate, and in particular to the maiden speeches of the noble Lords, Lord Empey and Lord Dobbs.

My researchers tell me that the Royal Mail was first made available to the public on 31 July 1635 by King Charles I. That certainly indicates a long heritage, but whether it was an entirely happy start only historians will tell us. Since then, it has delivered the post to homes and businesses across the United Kingdom, and has been run as an essential public service in the public interest. Today's Bill would change all that. It would lead to the total sale of the Royal Mail postal service and its separation from the nation's post office network.

We all recognise that the competitive environment for postal operators has changed dramatically. The impact of technological changes such as e-mail, mobile phones and all the other modern ways of communicating continues to be felt. The worldwide postal market is expected to decline by 25 to 40 per cent over the next five years. Of course, action needs to be taken.

There are a number of elements in this Bill that we broadly support, including the principle of employee share ownership, dealing with the historic pension fund deficit and the transfer of regulation to Ofcom. We also agree that the possible mutualisation of the post office network deserves positive examination. However, the central question that the House must ask today and in the coming weeks is whether the Government have made their case convincingly that the way forward proposed by the Bill is the best one available. Secondly, if Royal Mail is privatised, have they made sufficient safeguards for the public interest, in particular in relation to the universal postal service and the future of the post office network?

We believe that abandoning the commitment to keep Royal Mail as a publicly-owned organisation is wrong. Among other things, it would pose a threat to the universal service obligation and to the future viability of the network of post offices throughout the country.

It used to be said that Royal Mail could not change without an injection of private investment and management. However, an important agreement was reached in March 2010 between the Communication Workers Union and Royal Mail, supporting the £2 billion modernisation plan. Both the CWU and management should take credit for the start that has been made. Sir Richard Hooper acknowledged that corporate experience has been injected, not least through the appointment of a new CEO, previously the head of Canada Post, who seems to have attracted universal praise.

The Government propose rightly to relieve the company of the historic pension fund deficit, worth £280 million per year in annual payments. There is also general agreement that the access prices set for bulk mail sorters have placed Royal Mail at a disadvantage. The company estimates that the value of this is about £160 million per annum. Investment funds are in place to complete the modernisation programme. In these circumstances, the Government should explain the anticipated capital requirement and why a 100 per cent sale is necessary to achieve it.

Alternative measures to raise capital have been proposed by my party in the past, while other mechanisms have been proposed from elsewhere. There has been no explanation of how best value will be secured for the taxpayer. Will the Government publish an independent valuation? What do they intend to do with the sale proceeds? They have not made clear the timing of the changes. In what way do they intend to discharge their obligation for transparency and accountability to Parliament over the nature of the sale and therefore the type of Royal Mail organisation that will emerge?

The Government have made it clear that they are not interested in who the purchaser is, and have no objection to a sale to a foreign owner. Is there anyone to whom they would not sell? Will privatisation be by a general sale of shares, or by sale to another postal company or to a private equity group?

I turn to the universal service obligation. As the noble Baroness said, Clause 30 sets out the terms of the universal postal obligation. It includes letter and packet delivery, letter and packet collection, affordable and uniform tariffs, registered items, insured items, services to the blind and partially sighted, and legislative petitions and addresses—so far, so good. The Bill proceeds to provide for changes to the level of the USO. Ministers have said they intend to maintain the USO. I do not question their good intention, but why does the Bill not only permit but require Ofcom to review the level of the obligation after only 18 months? The Bill also provides, in certain circumstances, for more than one universal service provider. Ministers may protest they do not intend this, but why does their Bill provide for it? The regulatory framework encompassing the universal service obligation is a very important issue. We will need to consider carefully in Committee whether the regulatory framework designed for a publicly owned company remains as well designed for a privatised Royal Mail.

The Bill breaks the umbilical link between Royal Mail and the network of local post offices, prized by residents of communities up and down the country. It does so in a way that threatens the future of thousands of local post offices. I have no need to emphasise to Members of this House the social value of the nation's post offices. Local post offices are at the centre of many communities. Many thousands of pensioners still collect their pension from their local post office. A nearby post office is vital for many people with mobility problems or some form of disability. In many rural areas and poorer urban districts, the local post office is vital.

The postal service is also vital to British business, because 84 per cent of small businesses use Royal Mail to dispatch parcels or express items. The local post office is the usual point of access for them. Again, Ministers protest that they wish to maintain the current network of post offices. They have continued the previous Government’s social network subsidy to maintain a network of 11,500 post offices in four years’ time. For that, we commend them and thank them. However, there is no guarantee that after that point a privatised Royal Mail will have to use the current post office network to its full extent. As Consumer Focus says,

“following privatisation of Royal Mail, subsequent contracts would require a competitive tender process with no guarantee that [Post Office Ltd] would retain this contract”.

We would like to hear from the Government what guarantees can be given about the future of local post offices, not just in the next four years but in the medium and longer term. What are they doing to build up the government business that is done through the Post Office? Why was the case for a post bank rejected? The National Federation of Sub-Postmasters has supported the principle of the Bill but it has stated that,

“ministers must recognise that their plans will only succeed if they deliver on access to government and Royal Mail work at post offices. If they fail on this, not only will plans to mutualise the Post Office be doomed to failure; there will be no way back for the network and our post offices will face even greater jeopardy”.

Part 4 of the Bill sets out the provisions for taxpayers to step in through administration if a privatised Royal Mail becomes insolvent. That should put paid to the idea that, once Royal Mail is privatised, the taxpayer will no longer need to worry about or bear any expense for failure. It seems that we are to privatise profit but perhaps nationalise risk.

This is a very serious Bill. It must be considered seriously and in detail in the weeks ahead. Whatever the good intentions of Ministers and the leadership of Royal Mail—and I do not doubt their good intentions—there is no guarantee that the same people will be in place when the crucial decisions are made. We cannot simply rely on good intentions. If the Bill is flawed, as we believe it is, sufficient protection will not exist.

So far, the Government have declined the invitation to secure a 10-year inter-business agreement, which would underpin the link between Royal Mail and the post office network. They have rejected calls to strengthen the commitment to the post office network or the universal service obligation. The Government have still not made the fundamental case for the full-scale privatisation that they have proposed; nor have they addressed the concerns that exist. Like the Minister, I look forward to the Committee stage, when we will probe and scrutinise the Bill most carefully.

My Lords, the importance of the issues dealt with by the Bill could not be demonstrated better than by the number of your Lordships who have put their names down to speak in this very important debate. We also very much look forward to the maiden speech of my favourite political novelist, the noble Lord, Lord Dobbs, and that of the noble Lord, Lord Empey, to whom I had better not yet put an epithet.

We have of course been here before, as the noble Baroness said, and I am delighted to see the noble Lord, Lord Mandelson, in his place. Whether he is going to show the scars on his back that he obtained when he was here before, I know not. However, we have been here before and we gave very detailed scrutiny to the Bill that he brought forward when it came to this House but was then, as the Minister indicated, withdrawn before it reached the other place.

As the Minister indicated, the reasons behind the legislation have not really changed since the noble Lord, Lord Mandelson, felt it necessary to bring that Bill forward on the recommendation of Sir Richard Hooper. The competition for Royal Mail from e-mail and the internet continues, resulting in shrinking volumes in its business. I do not know whether noble Lords who received lobbying from organisations that wish to maintain Royal Mail more or less in its current format noticed how much of that lobbying came by e-mail rather than through Royal Mail. That could be no better indicator of the problems that Royal Mail has in competing with the internet. Losses are continuing and, unless they are stopped, they will ultimately be the responsibility of the taxpayer. Then there is the massive issue of the pension deficit, which overhangs Royal Mail’s balance sheet.

The noble Lord, Lord Tunnicliffe, was brave enough to accede that this Bill contains a lot of similarities to the Bill that we considered last year or the year before. First, the pension deficit is dealt with and taken on by the taxpayer, as was the case in the Bill of the noble Lord, Lord Mandelson. Secondly, there is improved regulation, and I am glad that the noble Lord endorses the transfer of regulation to Ofcom. As is clear from both Bills—this one and that of the Labour Party—we all believe that that will give better protection to the universal service obligation, which is absolutely at the heart of Royal Mail’s business. Thirdly, as in the Bill of the noble Lord, Lord Mandelson, although it goes somewhat further than that Bill, this Bill provides for Royal Mail to have access to private capital.

There are of course a number of additions to the Bill which I suspect the Labour Party will agree with, although they were not in the Bill of the noble Lord, Lord Mandelson. There are new safeguards in this Bill to protect the universal service obligation, as was mentioned by the noble Baroness. First, before any recommendation to alter the universal service obligation can be made, Ofcom is required to take into account the interests of the users. Secondly, there is an absolute ban on any alteration to the uniformity of the service, as the noble Baroness explained, so that different prices cannot be charged in different places and a different service cannot be provided in different places. Most importantly, particularly in the context of the last Bill that we debated—I am sure that this will commend itself to your Lordships—no change to the universal service obligation can be made without an affirmative vote of both Houses of Parliament. Therefore, there is parliamentary control of any change.

Perhaps I may apologise briefly to my coalition colleagues for the point that I am about to make. I cannot let the moment pass without recording the fact that there are a number of issues in this Bill which are dear to the heart of Liberal Democrats. Of course, a Liberal Democrat Cabinet Minister is responsible for this Bill and a Liberal Democrat Minister took the Bill through another place. The latter is Edward Davey, who has extensive experience of post offices and mail services throughout the world. Of course, there are issues in this Bill that we endeavoured, but failed, to persuade the previous Government to include in theirs. The first is a much bigger commitment to employee shares. As the noble Baroness indicated, if the Bill goes through in its current form, the employee share ownership in Royal Mail will be the largest of any UK organisation. Secondly, the Bill provides for mutualisation of post offices. Liberal Democrats have always been keen on the mutualisation concept. We believe that, when Post Office Ltd becomes a mutual, that will be massively in the interest of all the sub-post offices, which, as the noble Lord, Lord Tunnicliffe, indicated, are at the heart of many British towns and villages.

We have all been assailed by endless lobbying on the Bill, which demonstrates the importance of the issue to the public. There seem to be two overall objections to the Bill, which no doubt other Members of your Lordships’ House will voice. The first is that Royal Mail does not need to be reformed. The noble Lord, Lord Tunnicliffe, has said that there has been a significant improvement in labour relations and that the technological developments that are necessary to compete in the modern world can be introduced without any resort to private capital. I do not accept that and I do not think that the coalition accepts that. If we want a comparison we can look at the fact that during the previous Labour Administration, 65,000 jobs were lost in the Royal Mail, at huge personal cost to those individuals. However, if we compare that with what happened since Deutsche Post floated in 2001, Deutsche Post has made an investment of £11.6 billion over the past 10 years in forming and modernising its network. Those two statistics demonstrate very graphically why the Royal Mail needs access to private capital.

The second objection, which the noble Lord, Lord Tunnicliffe, put extremely effectively, concerns why the relationship between the Royal Mail and the Post Office Limited cannot be enshrined better in this Bill. The Government have used two arguments for this, which I expected. First, any attempt to put that on the face of the Bill could be open to legal challenge as regards the privatisation mechanisms and the competition mechanisms. Secondly, and more importantly, it is attempting to say in 2011 what relationship will be necessary between the Post Office and Royal Mail in future years. How can we predict? That must be a matter for commercial negotiation between the Royal Mail and Post Office Limited. It seems almost inconceivable that anyone running the Royal Mail would not want to take advantage of the network of sub-post offices out there to help to distribute the mail. What other network would they use? That seems to me to be entirely a matter for commercial negotiation as the two organisations move into the next five, seven or 10 years.

The critical issue for Post Office Limited, as the noble Lord, Lord Tunnicliffe, indicated, is how it develops new business. From the Liberal Democrat point of view, I do not think that we will take any lessons from the Labour Party or our colleagues in the coalition Government about closures of sub-post offices. Many of us have campaigned for years to try to keep sub-post offices open while both the Tory Government, under Margaret Thatcher and John Major, and then the Labour Government, under Tony Blair and Gordon Brown, presided over huge closures of post offices. In the commitments that have been made by the new coalition, first on the investment fund, which the noble Baroness referred to, and, secondly, on commitments to explore new ways of developing business for the Post Office, coupled with, as I indicated, the advantages once the post office network can become a mutual, I think that the future of the Post Office is much more secure than it has been for many years.

My Lords, I trust that I might be permitted a little latitude as I make some opening remarks to your Lordships’ House. As someone who has been a lifelong believer in the union, I find it a great honour to come here, to this Chamber and to this building, and to see it adorned with all the symbols of the four home countries and the history that we have shared together over many centuries. It is also an honour to come here on behalf of those whom I have represented. I have had the opportunity to serve in politics since I was a student and I have spent the past 25 years as an elected representative serving at local, European and ministerial level in Northern Ireland. Coming here is a great honour and I look forward to making a meaningful contribution to the business of your Lordships’ House. I thank those officers of the House who have helped me both before and since I was introduced last month. Their guidance throughout that period has been most helpful.

Obviously, coming from my background, I have been involved in the peace process. I see at least one distinguished former Secretary of State for Northern Ireland in his place. We have worked together with others in this House over many years to try to improve the livelihoods and the quality of life of our fellow countrymen as they have faced huge challenges.

When it was made public that I was coming here, I had a number of comments from friends and colleagues and, especially when I arrived here, from a number of your Lordships. I was given some guidance on what to expect. I was told that we have here a concentration of expertise from all walks of life among people who are somewhat freed from the shackles of the day-to-day political cut and thrust that one sees in the other place. I must confess that my experience over the past few weeks has not quite measured up to that, as the circumstances in the House have been a little unusual. With tongue in cheek, I said last week when I was going home for the weekend that I was glad to go back to Belfast to some civilised politics. I am sure that this House will return to that which I was advised was the standard that I should expect.

I turn to the comments of the Minister. Having had a responsibility for Northern Ireland’s economy for a number of years as a Minister, I can say that Royal Mail and the Post Office are issues that perhaps go beyond the narrow confines. The general public do not distinguish between the Royal Mail and the Post Office; they see it all as the same thing. You put your letters in a red box and you used to make telephone calls in a red box. People do not understand the mechanics.

I think that we should look at the issue in this way. This is a serious piece of national infrastructure—it is just as important as broadband and it is just as important as roads and the electricity grid—because the service that it provides is vital in bringing our nation together. I cite Hooper, who said in the revised report in September last year that it,

“is part of the country’s social and economic glue”.

That is how I see it. If we wanted any evidence that that is the case, during the recent bad weather in December, before Christmas, how many businesses came on to the radio and television to say, “We can’t get our money in. We can’t do our business. We can’t get our products out”?

Although everybody understands the economics that Royal Mail and the Post Office face, we should not underestimate the significance of the service that is provided. We throw large amounts of public money at rural development policies. Indeed, European money comes in which we spend on rural development. We are trying to build up not only tourism but small manufacturing—cottage industries and so on. Many of them rely on Royal Mail services to distribute their products. Many of those businesses trade on the internet. Although they are in a rural part of the United Kingdom that does not have good transport access, they are able to get on a level playing field through the internet. Then they can distribute their products through the services provided by Royal Mail.

I have to say to the noble Baroness that there appears to be a little contradiction in some of the things that have been said. For instance, as the noble Lord, Lord Tunnicliffe, said, the 18-month review seems a little sudden. As I said, I have run a department and I know what a review means, or can mean. We have to be clear that we do not create an undercurrent of uncertainty within the business. We need to be careful about that. Secondly, coming from Northern Ireland, I know that population distribution is significant. We have a large geographical area where the population is spread thinly. That adds extra costs, but it is necessary to create a level playing field so that people in those more remote areas can compete. After all, we are trying to encourage business and to get people to compete and we are telling them that distance should not be a huge barrier to them in building up their businesses.

The population settlement patterns are different in different parts of the country. In some areas, they are concentrated in small villages and towns; in other areas, such as Northern Ireland, they are spread out. When the Government come to look at these issues, it is important that the universal service obligation means what it says. Equally, it is important that we understand that Royal Mail cannot be left with one arm tied behind its back, unable to compete, while allowing other operators to cherry pick the good bits, leaving Royal Mail as the deliverer of last resort. None of us would want that, because it will lead, ultimately, to a spiral downwards in revenues and profits. Therefore, the task in the Bill is to ensure that the USO survives in a meaningful way that frees Royal Mail from the shackles of debt and allows it to compete with its rivals, which are steadily eroding its current market base.

If we are serious about providing the meaningful infrastructure essential for the well-being of our economy in the years ahead, we would do well in the coming weeks, as the Bill goes through its stages, to ensure that the USO will survive, that there is certainty, that both customers and workforce fully understand where they are going and that the business is set an achievable target that will benefit all of the United Kingdom in the years ahead.

My Lords, I count it a privilege to rise to offer the congratulations of the House to the noble Lord, Lord Empey, on what I am sure all your Lordships will agree was a most impressive maiden speech.

The noble Lord, Lord Empey, comes to us as a most substantial figure in Northern Ireland politics. He has been a Belfast city councillor for 25 years, as he told us, and mayor on two occasions. He is a Member of the Northern Ireland Assembly. He spent nine years on the police authority of Northern Ireland, which means that he must be blessed with a broad pair of shoulders and a tin hat—perhaps these will equip him well for the political rough and tumble in your Lordships' House. He played a prominent part in the Northern Ireland peace talks in the 1990s and was leader of his party from 2005 to 2010. What is most notable is that he is a man of moderation and a man of peace. He not only has a broad pair of shoulders but clearly has a wise head on them. I am sure your Lordships will wish to hear from him on many occasions to come.

Turning to the Bill, my noble friend Lord Empey talked about the need for certainty underpinning the provision of postal services and the need to secure and firmly anchor the universal service obligation. These issues will figure prominently in my remarks. The Bill clearly has a number of features one can welcome. It provides a basis on which it should be possible for Royal Mail at least to attain a degree of stability. The Government will relieve Royal Mail of the crippling burden of its pension deficit, which was put at £10.3 billion at the most recent actuarial valuation, and the lifting of the restriction on the sale of shares in the Royal Mail Group will provide the means of bringing badly needed capital into the business. It is perhaps a moot point whether this need could not have been addressed while retaining Royal Mail in public ownership, whether through borrowing from the Government or the market. Privatisation is certainly not popular with the public according to a YouGov poll last October, but at least the Bill, if it passes, as opposed to being stillborn like the previous Postal Services Bill, will point a way forward for the business.

My main concern is with regulation and the universal postal service. Royal Mail welcomes competition, but it maintains that the regulatory regime needs to achieve a more level playing field. That seems to be right. The access headroom rule already means that Royal Mail is competing with one hand tied behind its back. The regulatory regime means that Royal Mail’s competitors are guaranteed access to Royal Mail’s network at any point and enjoy a guaranteed margin. In other words, Royal Mail is regulated in such a way as to be forced to subsidise its competitors by 2.5p per item, which comes to a total of £160 million. Indeed, 80 per cent of the business is regulated. In introducing the Bill, the Minister pointed to the declining financial position of Royal Mail, but a good case could be made for saying that the draconian regulatory regime has a good deal to answer for in this regard. In order to be able to compete effectively, the proportion of the business that is regulated needs to be reduced so that Royal Mail can negotiate commercially, certainly with its larger customers. The postal service in no other country is regulated in this way. The Communication Workers Union agrees about this so, at a stroke, the Government have achieved the singular feat of uniting Royal Mail and the Communication Workers Union.

This is linked to the universal service obligation or the universal postal service, as it is now to be known. The Royal Mail is currently undertaking a vast modernisation programme costing hundreds of millions of pounds. This is based on the assumption that Royal Mail will continue to provide the universal service for the foreseeable future. Indeed, Royal Mail’s whole business plan is based on providing the universal service. However, the Bill designates Royal Mail as the universal service provider for a period of only three years. After that, the regulator can consider allocating the service to another provider or providers. This does not provide a stable planning horizon long enough to justify this level of investment. Something much more like 10 years would seem appropriate.

Such a short timescale also potentially undermines the interbusiness agreement with the post office network, 37 per cent of whose income comes from Royal Mail. Notwithstanding the Minister’s professions of good intent regarding the maintenance of the post office network, the loss of Royal Mail business could put many post offices at risk. The unpopularity of Royal Mail privatisation is as nothing compared to the hostility which would attend another round of cuts to the post office network, which is truly seen as part of the fabric of British society, as has already been underlined in the speeches that we have heard.

The universal postal service, a delivery and collection service for six days a week at a uniform and affordable price, is further put at risk, as the noble Lord, Lord Tunnicliffe, has pointed out, by the requirement in Clause 29 that Ofcom should carry out a review of the universal postal service within 18 months of Part 3 of the Act coming generally into force. A review of the universal postal service can go only one way: down, not up. The universal service obligation is loss making, and any private operator will inevitably seek to reduce the burden that it places on them. In the Netherlands, the privately owned incumbent, TNT, which has been mentioned as a possible investor for Royal Mail, has described the universal service obligation as a kind of Jurassic park that we should get rid of.

Ofcom, which will take over regulation from Postcomm, will have a primary duty to secure provision of the universal service obligation. In discharging this duty, it must give specific consideration to the financial viability and efficiency of the service. This contrasts with Postcomm’s primary duty to ensure provision of the USO, unqualified by considerations of finance and efficiency. This change is not in keeping with the public service character of the USO and can only tilt the balance in the direction of degrading it.

The Bill thus makes the universal service vulnerable, whatever the noble Baroness says. One reason—not the only one, but the one that I wish to highlight at a little more length in the time that remains to me—why this is of particular concern to me is that the universal service obligation is of particular importance to people with disabilities, given their greater reliance on and use of mail services. Postcomm recently carried out some research with Consumer Focus into consumers’ needs, which found that people with a disability are more likely to use mail services as a means of communicating than those without a disability, are more likely to rely exclusively on traditional means of communication such as mail, and are less likely to predict that their use of mail for communicating with family and friends will decline in the next three years.

The research also indicated that people with a disability are particularly vulnerable to reductions in the service or increases in a cost that a privatised Royal Mail is likely to push for. They are more likely to rely on second-class post, and are less likely to be willing to pay for specific delivery options or go to a delivery office to collect a package. They also receive less fulfilment mail—the more profitable items for Royal Mail. They also place greater value on the post office network, and use it more heavily for posting mail than those without a disability. There are also just under 4 million Post Office card accounts for the payment of benefits and pensions.

As I have already suggested, the separation of the post office network and Royal Mail could jeopardise the future of the Post Office. I am particularly concerned about the integrity of the universal service obligation because it includes the articles for the blind scheme. This stipulates that Royal Mail must provide, free of charge, first-class postage for packets of up to 7 kilograms in weight that contain letters, books, papers and a range of equipment designed for use by blind or partially sighted people. Nine million items were sent through the articles for the blind service in 2006-07, at a reported cost of £5 million to Royal Mail. A private operator is bound to wish to minimise such costs. The requirement for Ofcom to consider the financial viability of the USO is bound to come into play at this point.

When the previous Postal Services Bill was going through your Lordships' House, I managed to persuade the Government to include the articles for the blind scheme in the universal service obligation. Initially, the scheme was protected only by a complicated series of licence agreements, but I argued that it was not enough simply to rely on ministerial assurances. Ministers might fully intend, as I am sure the noble Baroness who has introduced the Bill today fully intends, the articles for the blind scheme to be safeguarded, but who can say what will happen in conditions of financial stringency?

Ofcom is currently consulting on abolishing its Advisory Committee on Older and Disabled People and merging this with its Consumer Communications Panel and the Advisory Committee for England into an advisory committee for the nations and communities. These individual committees were set up to support Ofcom’s specific duties to consumers under the Communications Act 2003. With no dedicated committee rooting for the consumer, the practical effect of these changes is likely to be a downgrading in the prominence given to these issues in Ofcom’s decision-making.

As we are constantly being reminded, we are experiencing conditions of extreme financial stringency. I can already hear the Minister’s words ringing in my ears, “Believe me, I would like nothing more than to be able to maintain the articles for the blind scheme. If it were up to me, how much I would wish it were possible to do so. But sadly it is just not sustainable in the current economic climate”.

The present USO is enshrined in statute, or at least it will be when this Bill is passed; I believe it should require an Act of Parliament to change the universal service obligation, or it should at least be guaranteed for a period of five or 10 years. I shall be seeking changes in the Bill in Committee to provide for this.

Sex Offenders Register


My Lords, with the leave of the House, I would like to repeat a Statement made earlier today in another place by my right honourable friend the Secretary of State for the Home Department.

“The sex offenders register has existed since 1997. Since that time it has helped the police to protect the public from these most horrific of crimes. Requiring serious sex offenders to sign the register for life—as they do now—has broad support across this House. However, the Supreme Court ruled last April that not granting sex offenders the opportunity to seek a review is a breach of their human rights—in particular, the right to a private or family life. These are rights, of course, that these offenders have taken away from their victims in the cruellest and most degrading manner possible.

The Government are appalled by this ruling, which places the rights of sex offenders above the right of the public to be protected from the risk of reoffending, but there is no possibility of further appeal. This Government are determined to do everything that we can to protect the public from predatory sex offenders and so we will make the minimum possible changes to the law in order to comply with this ruling.

I want to make it clear that the court’s ruling does not mean that paedophiles and rapists will automatically come off the sex offenders register. The court found only that they must be given the right to appeal. The Scottish Government have already implemented a scheme to give offenders an automatic right of appeal for removal from the register after 15 years. We will implement a much tougher scheme.

Offenders can apply for consideration of removal only after waiting 15 years following release from custody—in England and Wales there will be no automatic appeals. We will deliberately set the bar for those appeals as high as possible. Public protection must come first. A robust review, led by the police and involving all relevant agencies, will be carried out so that a full picture of the risks to the public can be considered.

The final decision on whether an offender should remain on the register will be down to the police and not, as in Scotland, the courts. The police are best placed to assess the risk of an offender committing another crime and they will rightly put the public first. There will be no right of appeal against the police’s decision to keep an offender on the register. That decision will be final. Sex offenders who continue to pose a risk will remain on the register and will do so for life, if necessary.

Where we are free to take further action to protect the public, we will do so. We will shortly be launching a targeted consultation aimed at closing down four existing loopholes in the sex offenders register. We will make it compulsory for sex offenders to report to the authorities before travelling abroad for even one day. This will prevent offenders from being free to travel for up to three days as they are under the existing scheme. We will force sex offenders to notify the authorities whenever they are living in a household with a child under the age of 18. We will require sex offenders to notify the authorities weekly as to where they can be found when they have no fixed abode. Also, we will tighten the rules so that sex offenders can no longer avoid being on the register when they change their name by deed poll.

Finally, I can tell the House today that the Deputy Prime Minister and the Justice Secretary will shortly announce the establishment of a commission to investigate the creation of a British Bill of Rights, for it is time to assert that it is Parliament that makes our laws, not the courts, that the rights of the public come before the rights of criminals and, above all, that we have a legal framework that brings sanity to cases such as these. I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I am grateful to the noble Baroness for repeating the Statement, although I have some concerns about the tone adopted in it towards the courts. As she said, the register has existed since 1997. Since then, it has helped the police to protect the public from these most horrific of crimes. Requiring serious sex offenders to sign the register for life, as they do now, has always had broad support from across the House. Our priority must be public safety. The indefinite period of being on the sex offenders register with no option for appeal is automatic for the most serious sexual offences. The register was implemented for a reason: the victims of these crimes have suffered and continue to suffer greatly because of the actions of these offenders. Offenders can still pose a threat to the public. The Supreme Court judgment in F and Thompson notes that Article 8 of the European Convention on Human Rights also applies to public safety and the protection of the rights and freedoms of others. With that in mind, we should consider the Supreme Court’s judgment and how Parliament should respond.

Clearly the priority must be public safety and the protection of our young and vulnerable people. Does the noble Baroness agree that, while the rights of an individual are important, including those who commit a crime, the rights of families and communities up and down the country are paramount? What is her assessment of the impact of the judgment on those currently subject to the notification requirements—how many offenders subject to them will this affect? What factors does she think will need to be taken into account in any review mechanism for those subject to the requirements? Does she agree that any such review needs to be extremely tough, given the seriousness of the offences and the need to have tough punishments in the eyes of the public? When does she expect Parliament to be able to debate the implications of the judgment? Could she also give me some indication of the timescale for when the changes have to be made?

I also ask the noble Baroness to explain the reasons for the decision of the Government that it is the police who will decide whether an offender should remain on the register with no right of appeal. What is the process? Will it be behind closed doors? Will the chief constable or the elected police commissioner take such a decision? Will the Government publish guidelines to the police and will those also be debatable in Parliament?

Finally, I would like to ask the noble Baroness about a couple of comments in the Statement about the role of the courts. The Statement starts by saying that the Government were “appalled” by the ruling of the Supreme Court and ends by saying that it is time that Parliament, not the courts, made laws and that a commission will investigate the creation of a British Bill of Rights. I rather thought that Parliament made the laws and that it was for the courts to interpret those laws. I hope that she will reflect on the rather intemperate words used in the Statement in respect of the courts; given her wide experience, I am sure that they are not hers. Ministers should be very wary of undermining the role of the courts. I hope that the Minister will take this opportunity to make it clear that that is not her intention. Does she accept that, while Parliament would be called on to enact any Bill of Rights, the courts would inevitably be called on to interpret such an Act in due course?

My Lords, perhaps I may deal first with the noble Lord’s last point about the attitude of the Government to the courts. Of course the Government respect the role of the courts. It is precisely because this is a law-abiding Government who respect the rule of law that we do not regard it as a practical option not to bring forward legislation to ensure that we are compliant with a ruling of the court. Nevertheless, there is extremely strong sentiment in the country, which the Government share, about the need to protect the public against the marauding activities of sex offenders, who display great ingenuity in the way in which they go about their offence. It is extraordinarily important therefore to have in place a robust system for the management of those offenders who are not in custody.

The noble Lord raised a number of practical points, which I shall try to answer. We certainly agree with him that priority should continue to be accorded to the safety of the public, which is the purpose of today’s Statement. We certainly agree that rights of families remain paramount. Damage can be done to young people by offenders of this kind which lasts for the whole of their lives. We must bear in mind these considerations when we look at the management of offenders in this category.

The noble Lord asked about the factors that would be taken into account in any review process. Perhaps I might explain how that might work. The offender will have the right under this scheme to ask for a review after 15 years. That review will be conducted by the police—it would obviously be a senior policeman—taking into account all the information that they have at their disposal about the behaviour of the individual, what assessment they are able to make of the likelihood of further offence, the gravity of the offence in the original instance and any other relevant consideration before coming to a view.

If the police reject the application for removal from the register, the individual will have the right to ask for that to be looked at again, but there will not be recourse to the court. They will be allowed to present any further factors that they consider the police have not taken into account in coming to their view. The individual concerned will therefore have an opportunity to say why they should be released from the obligations involved in being on the register.

The parliamentary process will be accomplished via remedial order in relation to the Human Rights Act. It will be a remedial order of a non-urgent kind. That means that an order will be made available for public examination as soon as the Government are able. The Joint Committee on Human Rights will have the opportunity, as will Members, to make comments and put across their viewpoint during that process. The Government will then take into account the views that have been put forward. The order will then be laid for another 60 days, after which there will be a normal parliamentary process by affirmative action before the order in whatever form it emerges is adopted. We expect that parliamentary process to be completed sometime in the autumn.

We are looking at the desirability of guidelines for the police. I agree that it would be sensible to have them.

I think that I covered the various points made by the noble Lord. If I have not done so, other Members of the House will no doubt pick me up on it.

I have the same concern as that expressed by the noble Lord, Lord Hunt, about the language used in parts of the Statement. We know how important language is in this area—for example, those who hear what they want to hear manage to ensure that paediatricians are driven out of their homes. One has to be terribly sensitive. On the review and the consultation, I hope that the language of the Statement does not indicate that the outcome of the review is entirely predetermined. Will the views of the trial judges—who, after all, have heard the facts of each case—and of NOMS, whose job, in part, is to assess prisoners for parole, be considered? The offences of those who are covered by the Sexual Offences Act and subject to inclusion on the register cover a very wide range; it must also be the case that there is very wide range of risk of reoffending.

It will be a proper consultation and, obviously, noble Lords and others will be free to put forward their views. On the evidence and information that will be taken into account by the police in the review, I can confirm straightaway that the MAPPA process, NOMS and those who have relevant information will be involved. It is right that NOMS has considerable experience of probationary periods, and the police will be under an obligation, which I am sure they will understand, to make the review both fair and thorough.

My Lords, it is deeply depressing to revisit this way of dealing with decisions made by the courts. It is familiar to those of us who are lawyers because we had to endure it under the previous Government, when tomorrow’s headlines dictated the way in which they responded to a wholly reasonable decision by the courts. In this case, the court decided that there should be an obligation to ensure that people have the right to appeal. It in no way suggested that paedophiles should be removed willy-nilly from the register.

There are occasions where someone should be able to appeal. For example, a young man in his 20s has sex with an underage girl and is put on the sex register. When he is a man in his 40s—married, with a family and holding down a job—it may seem reasonable to him that his name should be removed from the register on which it was placed for something that he did with an underage girl when he was in his early 20s. That is the kind of offence that the court envisaged when it said that there should not be a blanket situation where there can be no appeal whatever.

The reasonable response of the Government would have been to say clearly that an opportunity to appeal should be available, that it will be rarely used but that they support its existence. That is the position that the Government should have taken. I always get the feeling that there is something in the drinking water at the Home Office that makes sensible people lose their nerve and good sense when it comes to these matters.

As to the comment on the need for a Bill of Rights, how would the situation be any different if, as I have heard government Ministers say, all that is contained in the current European Convention on Human Rights would be in a British Bill of Rights, but with additional matters included? If that were the case and the Article 6 protections of due process, under which this kind of appeal, in given circumstances, is available, were included, how would it be any different? I suspect that this would be available in a British Bill of Rights, as it is now. Surely good sense should have been the response of the day.

The Government regard what they are doing as bringing them into compliance with their obligations under the Human Rights Act. Therefore we do not envisage that the work of the Commission—and of course the terms of reference have yet to be agreed—would be affected by what we are doing here.

The Government have put in place a review process. Sex offences are extremely difficult to make judgments about and we believe that those who are involved in their rehabilitation, NOMS and the police, who will have had the obligation to supervise their conduct in the interim, are better placed to do that than the courts. That is why we have instituted the review of the process that we have put in place. I also rely on London tap water—I find it keeps me entirely sane.

My Lords, I ask my noble friend to come back once again to the last sentence of this Statement and its rather combative tone, where it says that it is time to assert that it is Parliament that makes our laws, not the courts. Will she accept from me that I know of no case whatever in which a court has questioned, let alone rejected, that statement of constitutional functions; and that the court’s function is to apply laws, either made by Parliament or specifically adopted by it?

There is no doubt, as has just been said, that it is Parliament’s right to make the laws and the courts’ to interpret them. However, what worries me most of all, as with the Statement in the other place regarding prisoners, is the difficult issue about private and personal rights and about freedoms. In our Human Rights Act, that is a balance between Article 8 and Article 10 as well as other articles. That is to be interpreted by the courts—in this case, our Supreme Court. Presumably they will not be saying similar things about the judges in this particular case as they said about the Council of Europe.

If a new bill of rights is to be considered, presumably that balance between the public and private interest has to be established. Who will determine what that balance is? Will it be the Government, reacting to the publicity about certain unpopular cases? Or will we leave it to the judges to make their decisions, and, if we disagree, change the law? At the moment the Government seem to be running before the publicity, and then, as with the prisoners’ case, saying, “We back the Court of Human Rights”. That is the judgment we are facing today. I worry about the attitude of this Government in respect of personal rights.

Perhaps I could point out to the noble Lord that this piece of legislation, which the courts have decided is not entirely proportionate, was passed under our predecessors, the Labour Government. This Government, in the light of the Supreme Court’s judgment, are now putting in place a mechanism that we believe will restore proportionality that evidently the courts thought was lacking.

I apologise to my noble friend for interrupting her earlier. Given the real and perceived importance of this issue, will my noble friend help the House by explaining why the Government feel that it is best to deal with this by a remedial order, which, although there would be consultation, is not capable of any form of amendment? We have until the end of the year to deal with this and the matter could better, one might suggest, be dealt with by addition to primary legislation currently going through Parliament, which would be open to amendment by Members of both Houses. Furthermore, does my noble friend agree that the one thing the Government cannot and would not wish to do is to exclude the potential for judicial review, where a decision has been taken that is perverse or otherwise Wednesbury unreasonable?

My Lords, ideally, the police will be aware of the fact that their judgments in any given instance could be subject to judicial review. The law has not changed in that respect. As for the previous question about the alternative legislative route, I am not a lawyer and I hesitate to get terribly far into this terrain. I was advised that this was regarded—as there is no obvious legal vehicle in which to incorporate this particular bit of legislation—as related to our obligations under the Human Rights Act, and that it was a speedy and sensible way of bringing us into compliance.

My Lords, I have to say that I was rather depressed by this Statement. I had not intended to speak at all. When I was a Minister, I tried to produce things not for the Daily Mail but for the House. I have a feeling that this is for the Daily Mail, not for the House. On a number of occasions, I was pretty grumpy about decisions made in the courts, but I do not think that I would ever have allowed a piece of paper like this to come out. Some of the wording used is quite intemperate, and I think that that is very unfortunate. I know the noble Baroness well and I know that she would not have drafted it in this way. I do not know how we can go about tackling this in some way so as to make it clear that this is not the view, because what is being said about the courts is really quite stark. A number of noble Lords have spoken about this, and there is no doubt at all that it is up to the courts to interpret the law. I do not think that there is any doubt at all that Parliament makes laws, not the courts, as the noble and learned Lord said. That has never been disputed. I find this quite extraordinary. Is there some way in which to temper this Statement, because I do not think that it is the sort of Statement that should be made? I think it is very unfortunate.

The noble Lord made his point several ways round. The Government are acting in conformity with the principle that they must be in conformity with the law, which is why they have brought in this amendment to the law. We perfectly well recognise that the courts interpret the law and are acting on that principle.

Will my noble friend acknowledge that there is great disappointment on these Benches, too, at the tone of this Statement? Some of us had hoped that the days when these sorts of Statements would be made about the judges and the courts had gone with the new Government, and are very disappointed to see that, perhaps, they have not. Why do the Government appear to believe that, with regard to appeals against the inclusion on the sex register, the police are better placed to do justice than the Queen’s courts?

My Lords, I think that I explained in response to an earlier question that it is very hard to judge the merits with these particular offences, particularly in relation to expectation about future conduct. Therefore, we feel that those closest to the individuals or offenders concerned, who have been monitoring their conduct, are best placed to take an informed view and come to an informed decision about the balance that needs to be struck thereafter between the freedoms that can be accorded to the individual and the rights of the public to safety. This is a very practical view of how to come to the best decision possible.

Can the Minister please explain to me—because I do not understand—why the Government in their Statement make the assumption that individual police officers in particular places will necessarily, or even ever, have detailed knowledge of the individual who is making the appeal? I have some limited experience in local government. The only time I have actually ever cried in your Lordships' House was on reading the story of the north Wales child abuse inquiry. The people who may be the most dangerous are often the most mobile and disappear all over the place, reappear and then get lost. Why the police? I am particularly concerned about that aspect.

My Lords, individuals on the sex offenders register are very closely supervised—and quite rightly. Therefore, the police, NOMS and others have very detailed knowledge of the behaviour of the individuals concerned. We keep on coming back to who is best placed to make what most people would regard as a fairly difficult judgment about likely prospects for the future, given the nature of the offence and the sort of people involved. It is for those very reasons that we feel that this is the best place to do it. The noble Baroness is quite right that people do try to disappear. That is precisely why, in severe cases, limitations are placed on people’s freedom of movement and why they have to notify before they go anywhere. That is one reason why the Government are taking the opportunity to strengthen that provision.

My Lords, can I express my sense of shame at hearing the language that has been used in this Statement? It is precisely the sort of thing that we attacked for years when we were in opposition and I am very sorry to hear that this headline-grabbing language is being used again. Like the noble Baroness, I simply do not understand why applications for the removal of a name from the register should not be made in an open and transparent way before a court. After all, it is the court that imposes the sentence of 30 months, which is the threshold when a person is placed upon the register for life. I see no principle—I see nothing—in this Statement that would assuage my feelings about it.

The noble Lord has certainly made his point. I fear there is very little that I can add to what I have already said, by way of explanation to the House, on why the Government have taken the view that they have about the right place to take this decision.

Postal Services Bill

Second Reading (Continued)

My Lords, I can tell the House and my noble friend on the Front Bench that I very much welcome this Bill. I welcome the decision to separate Post Office Ltd from the Royal Mail; I welcome the prospect of Post Office Ltd becoming a mutual; I welcome the decision to privatise the Royal Mail; and I welcome the decision to transfer the regulation from Postcomm to Ofcom. However, as will become apparent, I am a bit concerned about the future of the competition which currently operates in the handling and sorting of letter mail. It seems to me that the Bill risks converting the Royal Mail from a state-owned business into a legislatively protected privatised monopoly and, if that is right, I cannot believe that that is in the full interests of users.

I speak with the experience behind me of having been the Minister who launched the process that led to the privatisation of British Telecom nearly 30 years ago. We had British Telecom as a nationalised monopoly and it became apparent that there was no way that it was going to raise the capital that it needed to finance its expansion and research, and all the rest. Therefore, we eventually privatised it. That was met with almost foreseeable opposition, particularly from the staff, who thought that it was almost the end of the world. The fact of the matter is that when it was privatised the staff happily not only took their free shares—of which there was a large tranche—but went into the market and bought the shares. I therefore take with some circumspection the opposition of the unions to the privatisation of the Post Office. I will return to the parallels in a moment, if I may.

Competition in the mail market was introduced in 2004. There is little doubt that that has led to more customer choice and to prices being lower than they otherwise would have been. It has certainly led to a slowing down of the reduction in volumes. As a number of speakers have mentioned, one of the really key issues here is the growth of e-commerce and e-communication. The introduction of competition has also led, particularly for businesses, to reduced postal bills. That has been to the advantage of customers. Above all, it has led to a considerable spur for Royal Mail to come to grips with a long legacy of inefficiency and the refusal to modernise systems to improve its service to customers.

It is also right to say—this has been established by independent research—that it has led to a significant boost to the UK economy. We have heard echoes of that in the debate. Royal Mail has argued and continues to argue that competition is a major cause of its woes. It is not competition from competitors that is reducing Royal Mail volumes; overwhelmingly, it is competition from e-commerce. As a user of e-mail with now limited outgoing mail, I entirely understand that. The figures that I have been shown suggest that for every £10 of reduction in the volume handled by Royal Mail, £9 is due to e-commerce—e-mail and so on—and only £1 to competitors. Furthermore, contrary to the arguments that one hears from Royal Mail, it does not subsidise its commercial competitors. This argument was also voiced by the noble Lord, Lord Low, and there were hints of it in the speech of the noble Lord, Lord Tunnicliffe. On the contrary, commercial competitors have to negotiate a price for the last mile of delivery so that their products can be handled by Royal Mail. It is a negotiated price, which is backed up by the legislative provision in the earlier Act for the right to access.

Therefore, the House may ask why I am concerned. I start from my firm belief that there needs to be a robust competitive framework in this as in other businesses and that it needs to be firmly at the heart of the Bill. I should have thought that the great majority of people would accept that. However, when one looks at the Bill itself and some of its details, to which we will want to come back at a later stage, there seems to be a marked shift away from the principle of competitive access to the Royal Mail that was inherent in the 2000 Act.

At this point I return to my experience of the privatisation of BT. BT was a natural monopoly—an almost total monopoly in line telecommunications. Therefore, regulation of prices was essential to protect the public. The formula of RPI minus X was developed and formed a central feature of that regulation. However, the second requirement was that there had to be access to the market for competitors, and that it had to be guaranteed. I stress that one cannot draw parallels too closely between Royal Mail and British Telecom but one result was the huge growth in telecommunications, including the growth of the mobile telephony system.

I was the Minister who refused to allow BT to become an operator of a mobile system, simply to make sure that there was competition. I heard the former chairman of Vodafone tell a meeting that his company was worth around £80 billion at that time. Someone asked him what he ascribed that to. He said, “It was the refusal of the Government to allow BT to become a mobile operator”. When I asked him when I would get my share I am afraid there was not a very happy answer.

However, that process was so effective in ensuring competition that in the end it was possible to dispense with the price controls on BT. There you have the example of a nationalised monopoly that turned initially into a privatised monopoly, subject to regulation but with free access to competitors, and then into a very viable system. No one wants to return to the previous monopoly. Very few people argue that Royal Mail should stay a state monopoly. We have not really heard that argument as we had the previous Bill introduced by the noble Lord, Lord Mandelson. I look forward to his speech.

However, far from encouraging more competition, this Bill seems to be dealing with the matter the other way round. There appears to be a good deal of pressure on the Government to limit and hamper the competition, as I am sure there was on the previous Government. Indeed, it may have led to the previous Bill being abandoned in another place. The CWU and Royal Mail have certainly tried to hamper the competition. I think that this has been partly driven by the recognition that the Royal Mail has found it extremely difficult to secure agreement to the necessary modernisation. One thinks particularly of the final stage of electronic sorting which happens in every other country but is still not happening in this country. I suspect also—I hope that my noble friend can reassure me on this—that there is a very natural desire on the part of the shareholder executive in BIS to maximise the price that it will get for the sale of Royal Mail by restricting the competition. That is what it looks like but perhaps my noble friend can reassure me that that plays no part whatever in the Government’s modernisation.

Nevertheless, the fact remains that some of the provisions in the Bill, especially Clause 37, which gives Ofcom, the new regulator, power to impose conditions on access to Royal Mail as the universal service provider, seem to be aimed more at restricting the access rights of competitors than protecting the consumer. I shall explain very simply how that works. Under the 2000 Act, Ofcom—it was then Postcomm—could not impose a USP access condition unless it appeared to it that the condition was appropriate for one or more of three purposes: promoting efficiency; promoting competition; and conferring benefits on the users. However, this Bill says that all three purposes have to apply, not just one of three. To gain access to the Post Office network, a competitor has to satisfy each of the purposes relating to efficiency, competition and benefits. In my noble friend’s speech from the Front Bench, I caught a hint that that was intentional. I therefore ask: can the Bill be said at the same time to be promoting competition; and if not, why not?

Clause 43 deals with the proposed universal service compensation fund. Perhaps it will be necessary to use that in the last resort but it most certainly must not be used simply to shield Royal Mail from the necessity of getting rid of its inefficiencies. Those are details to be discussed in Committee but I make a strong plea that the Bill should not risk losing the gains which have come since 2000 from the introduction of a competitive regime. It should not give the regulator powers that could materially prejudice the position of competitors.

With many others, I warmly welcome the prospect that Royal Mail should be able to operate in the private sector as a successful and profitable business, but it must be competing strongly and fairly. It must be right, from the point of view of mail users and the industry as a whole, not to risk the advances that have been made over the past 10 years.

My Lords, I certainly do not come to this Bill with particular hostility: it is easier to consider than the previous one. I suspect that that is due largely to the passage of time, and perhaps some lessons were learnt. I apologise to the noble Baroness on the Front Bench. Due to the excitement this morning I missed the first six or seven minutes of her introductory speech.

My concern is the problem of unintended consequences. I am lucky enough to live next to a farm that is approached by a road which is about three-quarters of a mile long. The local farmer is constantly called out because people’s sat-navs have directed them up that road. Come rain or shine, they get caught in the mud and snow. I am anxious that the Bill should not be a sat-nav and that we should try to ensure that it produces what we and the electorate really want.

The trailblazer in the privatisation of post offices was the Netherlands—although I find it easier to say Holland. That process began in 1989 when that country’s Government began to sell its post office in tranches, and by 1995 they had lost their majority control. There have been several changes in name of the Netherlands post—all prefaced by “Royal”, of course. It was called PTT Post, TPG Post and is now called TNT Post. It is run by the multinational company TNT. What has happened since then? These are the problems that I want to ensure we avoid. One of the issues is minor in a sense, but I suspect that it is also quite a populist one. That country’s red post boxes have become orange. I do not recommend that we change the colour of ours. We should make sure that it does not happen here, but I am not sure that such a provision should be in the Bill. We have similar problems with telephone boxes.

In the Netherlands, 90 per cent of the post offices have closed. I shall return to that issue later; as a Member on the Cross Benches has already mentioned, it is a key issue in the Bill. Post boxes in the Netherlands are now emptied only once a day. Ours are emptied certainly twice and perhaps three times a day. In the Netherlands there are considerable complaints about lost post. To some extent, we have similar complaints here. TNT has not been prepared to recognise some of these problems in the way that we would expect. On lost post, TNT is quoted as saying, “As a company we are not in a position to deliver the post on time, particularly on Saturdays or Mondays”. The Netherlands allowed competition. New firms are paying low wages that have markedly impacted on TNT’s profits. TNT is proceeding with a policy of employing part-timers and franchisees in order to reduce the working hours of its staff to three days a week. If we want to proceed with a different service from that, we may have to provide some form of continuing subsidy.

The managing director of TNT, Peter Kunz, said that the universal service obligation—this may have been referred to earlier—was,

“a kind of Jurassic Park and we should get rid of it”.

Do we want this here? I do not think so and, as I said earlier, my concern is that the Bill and the Act should ensure that this sort of thing does not happen.

I am not sure that the noble Lord, Lord Razzall, who is not in his place, was correct to say that Royal Mail was still making losses. If he did not say that, I am happy to be corrected. It may be making net losses, but it is certainly making a gross profit and the difference, if there is one, is the cost of maintaining the pension fund, which we know is being dealt with in the Bill.

I have no faith in golden shares or any of these things. We must ensure that the universal service obligation is effectively protected in perpetuity, because that is what the British people wish.

On the issue of regulation, according to the Post Office—or rather, Royal Mail; like lots of people, I see them as one—an effective subsidy of £160 million is being given to competitors who are cherry-picking what they want and requiring Royal Mail to deliver the rest. We must meet the objective of a level playing field, especially on price and across all postal business—this is not limited to letters.

I turn to the issue of shares to employees. I saw this with BT which, with respect to the noble Lord, Lord Jenkin, was a significantly different case from this. As the chairman of a modest investment company, I was faced with a dilemma by the then investment manager, who asked, “What do we do about the BT share offer?”. It was opposed by the TUC and the union. There I was, with a different hat on and different responsibilities. I said, “You’d better buy them. The worst that can happen is that they sack me”. Of course, they did not. The shares opened the next day at a significant profit and within weeks or months, all the shares given to the employees of BT were sold. I hope that, when this happens, in whatever form, we will ensure that the shares are held in a trustee fashion to benefit the working people, and not individually, because I assure the House that they will not keep them. There will be a significant change in that respect.

I see this as a bit of a comparator for British Rail. I am not arguing about scale or making a political point; it is water under the bridge and one would not do it today in the way that it was done. People were skimming off profit. A good deal was sold off during the exercise, and significant sums were pocketed by the ex-employees who had acquired it. There is also a continuing subsidy to the railways. As I meant to say slightly earlier, I do not expect answers from the noble Baroness to all the points that I have raised today because, with respect, I would much prefer more considered answers. However, I would be grateful if the noble Earl, Lord Attlee, who has responsibility for the Department for Transport, would let us know what has been paid to the railways in the form of subsidy since they were privatised. I think that most of us would be very surprised at the scale of the figure. I hope that my point will become clear as I go on.

The Bill must include clarity on the arrangements for the sale, or whatever else it may be. It must state its nature and limitations. The Bill is negative; there is no indication that there are limitations. I find it much easier to say who may not buy it than who might. I do not think that the queue to buy it is any longer now than it was in the days of the noble Lord, Lord Mandelson.

We must ensure that no asset-stripping occurs. Reference was made by, I think, the noble Lord, Lord Razzall, to the investment by Deutsche Post. That investment has been made in the parcels business—the one thing that is clearly growing and making profits in Royal Mail. If you sold Royal Mail to me, I would want to see how much capital profit I could make out of selling the parcels side of the business. I believe that these things have to be preserved in the totality of the business. What is the timescale of the sale? I am worried about it being done with some urgency, as I do not see the need for that.

I understand, informally, that a valuation of the business has been made. I have not seen anything about it but it is essential that we do see it. The coalition is about openness. I believe that the public, never mind your Lordships’ House, are entitled to know the valuation of what the Government are seeking to sell. What are the scale and scope of the valuation? Does it, for example, include land and building assets? When was it done and who did it? We know none of these things. If a valuation is not needed for any other reason, one is needed if Royal Mail is seriously going to be split from the Post Office, because assets owned by Royal Mail will go to Post Office Ltd. Therefore, I hope that we shall have some openness on this and that the details will be published so that the world can know exactly what we are seeking to sell.

With regard to post offices, the Crown offices are a complication. They are already in the position of securing a significant benefit from the subsidy that the Government have made available to post offices. A table has been produced by Post Office Ltd in relation to the different sorts of post offices. One huge group—local post offices—could by no stretch of the imagination be continued, either because of the government subsidy required to maintain them as things stand, or because post masters and mistresses will be unable to make sufficient income from them. Many of us love and support our local post offices but a typical local post office could lose 65 to 75 per cent of its income as things stand under the Bill. Thirty-seven per cent of their business comes from Royal Mail. Notwithstanding the need for competition and profitability, it seems to me that somehow or other we need to sustain that sort of business. Therefore, what is the hurry?

I am unclear, as I am sure is the noble Baroness, exactly what mutualisation of the Post Office means in practice. It is one thing to set up a mutual to run a building society or whatever, but dealing with 50,000 post offices owned in different ways is very much more complex. I think that we should have clarity on that before we decide that it is a road to go down. I do not wish Ministers to come back here saying, “Our intentions were good. We meant to do it, but”. That would be unsatisfactory on an issue of this importance to Britain.

Mr Hooper has already answered one of the questions that appeared in his first report about the capacity of Royal Mail to provide the skilled management required. He said that that has been done with the appointment of Miss Moya Greene.

We are left with two inescapable issues, one of which is achieving capital. Questions have already been asked about how much they want, when they want it and how might it otherwise be obtained. A lot of questions need answering before we can comfortably go ahead with this Bill as it stands. I ask the Government to think carefully before Committee stage. It would be unfortunate if we were to face a raft of amendments when common sense tells us that some of these things should be dealt with beforehand.

The point of my question to the noble Earl, Lord Attlee, was about the social value of the Post Office and Royal Mail network—no one argues with this—which has been put at more than £2 billion. We either want to ensure that that continues or we want to throw up our hands and say that it has nothing to do with us. I echo the noble Lord, Lord Empey, in this. I thought that his contribution was most helpful. We must try to get this Bill right. If we do not get it right, another generation will say, “They got it wrong”. Looking back 10 or 20 years, we can see other privatisations which we would all have wished to see done a little differently. We must not have an early cheap sale, with people walking away with money.

Perhaps I may offer a blue-sky solution to this: take time to think hard about a Post Office bank. I draw your attention to Northern Rock, which is now a bank. It is ripe for something to happen to it. What would be better, what would be more popular in this country than converting Northern Rock into a Post Office bank with a sort of holder-trustee role for the Royal Mail and Post Office network? I hope that the Government will think about that.

My Lords, first, I extend my welcome to the noble Lord, Lord Empey. I knew him well. We worked closely together when I was Secretary of State for Northern Ireland. Judging by his maiden speech this afternoon, I believe he will make a very distinctive contribution to this House. I am also looking forward to the maiden speech of the noble Lord, Lord Dobbs. I was just talking to him outside the Chamber when a colleague of his came up and hailed us both as “the men of fiction”. I am not quite sure what he meant by that.

Some things never change. This Bill is a bit like the repeat of a bad dream with its unhappy ending. The noble Lord, Lord Razzall, who is not in his place, referred to the scars that I bear. I can assure the House that I bear them fairly lightly, but it is noteworthy that the scars, such as they are, were inflicted not by this House but by another.

Yet again we are debating the Royal Mail and the structure and regulation needed to secure the universal postal service which the public demand but which—this is the crucial factor—we all depend on much less because of digitalisation. We are debating the same, broadly unchanged, Royal Mail which can and should perform like a modern logistics company but which retains too many of the characteristics of a government department. There is nothing wrong with government departments—I miss them greatly—but they are not commercial organisations, which the Royal Mail needs to be.

The Royal Mail needs a settled existence, which is why I cannot go along with my noble friend Lord Christopher in suggesting that we should drag our feet for a longer indefinite time. To create such uncertainty for the Royal Mail would be a tremendous disservice to it as an organisation and to its customers. No, it needs a settled existence, but one different from the structure and the regulatory framework in which it is currently operating. That is why the previous Labour Government introduced their legislation, which shared the same aims and objectives as the Bill—indeed, I notice that many of the clauses are similar—albeit with one significant difference: we proposed to keep the Royal Mail in overall public ownership.

Others before me have described how digital communications have transformed the Royal Mail's world and its market. That does not need further elaboration from me. That means that the Royal Mail has to reinvent itself. It must rationalise and modernise, as almost every other postal service among developed countries has done. It must harness all the new technology available to it to adjust its cost base and show real enterprise and innovation in the services it provides.

The Royal Mail has started to do that, but is it really capable in its present form of changing in the way, to the extent and at the speed that is needed? My answer to that is no; the answer of the coalition Government is no; and the answer of the previous Labour Government was also no. It is just too unprepared, too unfit. It does not have the right commercial structure to operate it. It has a single company union, which is, frankly, too remote from the wider world. It has relations between management and workforce that must be further substantially improved to enable change to take place at a faster pace. The company has a single client regulator that is not only overly constraining, in my view—I will come back to that—but insufficiently versed in the wider digital world. It is dependent on state aid, which is, frankly, slow and inadequate for what it needs to do.

For all those reasons, the Government have no alternative—just as we found when we were in office—but to bring forward a Bill that enables a fresh start to be made. I am very sorry that Labour MPs came under considerable union pressure to derail the previous Bill. The CWU succeeded in its aim, which was regrettable for this reason above all. In defeating our Bill, the CWU paved the way for the Bill that we are debating today. Quite literally, the CWU has, through its actions, become the midwife of the Royal Mail's privatisation.

I thank the noble Lord for allowing me to make a comment. I know the leadership of the post office workers’ union—I have worked with them at the TUC for many years—and I do not acknowledge the picture that the noble Lord has painted of the Luddite trade unionists who work on behalf of Post Office and Royal Mail workers. They are good people doing their best for ordinary working people.

I rather regret that my noble friend used the word Luddite in relation to the employees of the Royal Mail. I did not use that term, and I very much regret that it should be so misapplied, as he has misapplied it, to the overwhelming mass of employees of the Royal Mail who know that they need to embrace change but, I fear, did not and do not have the leadership of the union to enable them to do so in the way that they need and wish to.

The task now is to make sure that the new Bill secures the Royal Mail's future and the viability of its business model, underpins the universal letter delivery service that the public require and rely on and sustains the relationship between the Royal Mail and the nationwide post office network. This needs to be got right in this Bill. These goals are chiefly dependent not on the Royal Mail's ownership but on the new legislative framework of regulation which the company will operate within. I have no doubt this needs extensive rethinking. I say this frankly: Labour did not get the Royal Mail's regulatory regime right early on when we introduced legislation, and that is why we proposed extensive reform in our Bill.

In my view, the priority for debate and amendment in this House should concern chiefly the clauses of the new Bill concerning future regulation. This is the nub of the issue and where the greatest and most detailed examination needs to take place because we need regulation that enables Royal Mail to compete without both hands tied behind its back. This means regulation which recognises the unique role of the Royal Mail as the universal service provider and its need to be profitable in delivering the service. It must also provide the basis for attracting much-needed new capital to the company and experienced management who can provide skill and expertise.

I accept that it is at least arguable that under Labour's original legislative proposal for a strategic partner in a minority position in the company, it might have been hard to attract the required capital and management strength, and that, from this minority position, it might have been too difficult to bring about the necessary change to turn round the company. In any case, this is history. What I cannot accept, though, is that a so-called foreign presence in the ownership of the Royal Mail is somehow treacherous or bound to lead to disaster, as we have heard expressed again and again in the other House. Deutsche Post and TNT in the Netherlands have shareholders from across the world, including Britain, and international alliances between Europe's postal operators will be widespread in the future. We do not have a nationality test for investment in Britain. The previous Labour Government were implacably opposed to such a thing, notwithstanding the wider review of takeover rules that I initiated. We are successful in Britain at attracting inward investment. In former utilities, we now have EDF, RWE and E.On, for example, and many people's jobs in Britain depend on that investment and that ownership. So let us not have false, little-Englander sentiments injected into the debate.

Our examination of the Bill should focus instead on the detail of the new system of regulation, on which I hope the Government will be open to argument and persuasion. However, we cannot let this moment, an opportunity for reform, end in failure again. Royal Mail, once reformed, will then need stability and to be allowed to get on with its job, and in that context I welcome the fact that from Labour's Front Bench we have not heard a commitment to renationalise the Royal Mail should it pass out of state ownership. This is sensible. As with gas, water and electricity in the 1980s and 1990s, Labour moved from a position of flat-out opposition to change, to a decision not to renationalise, to an embrace of these utilities performing well in the commercial sector. I suspect that history will repeat itself should privatisation be achieved.

My last observation is only that there is probably a wider moral to the Royal Mail saga: that when difficult issues come along, we cannot just run away from them. There is a Labour way to change things, and for us that meant bringing in a new partner but in minority ownership. When that Labour way does not happen or is stopped, the issue does not go away. It comes back, sometimes with a solution in a less palatable form than we originally wanted. That is exactly what has happened here, just as the then Prime Minister and I warned would happen if our reform and our Bill did not go ahead. I am only sorry that our warnings fell on deaf ears at the time.

My Lords, I rise on a somewhat nervous knee to address this House. The warmth of the welcome that newcomers receive here is well known, and I am immensely grateful for it. I have had the honour of being introduced here by two of my longest-standing friends in politics. I advised the noble Lord, Lord Hunt of Wirral, at the very start of his parliamentary career 35 years ago, and he is now returning that favour with his characteristic gentleness and humour. As for the noble Lord, Lord Tebbit, I have been a friend of his and his very special wife Margaret for almost as long. I began working closely with him at a time when he was referred to in another place as a semi-house trained polecat, and I was described as his baby-faced hit-man. Time changes many things. I am unsure whether that polecat has yet morphed into a pussycat, but the baby face has, I fear, melted into middle age. I am fortunate to have many friends of long standing in this place, but I would like to mention one in particular. I have been a colleague and friend of the noble Lord, Lord Sharkey, for a quarter of a century. Today we sit on different Benches, but when we started here together he was kind enough to send me a simple message: “Brothers in arms again”. Those words sum up beautifully the very special spirit of this House.

I crave one further indulgence, if I may, to say how superb has been the support given to me by the staff, particularly the Doorkeepers, whom even now stand at the ends of the Chamber like my own Praetorian Guard, discouraging both invader and deserter alike.

When I first heard from the Prime Minister that he wished to take the surprising risk of sending me here, I was standing in the queue at my local post office in the beautiful Wiltshire village of Wylye, which, like post offices in almost all rural areas, has faced the whirlwind in recent years. On a crowded afternoon such as this, it is not necessary for me to spell out in detail the ferocious impact that the closure of rural post offices has had on the central fabric of village life; the noble Lord, Lord Empey, and many others here this afternoon have already done that. I therefore applaud wholeheartedly the Government’s initiative in deciding to invest additional money in the post office network and, among the many other things in this Bill, their determination to sustain the rural post office network. Yet the additional funds, as generous as they are, will not be a panacea. Many rural post offices are hanging on by their fingertips. They still face immense challenges, and they deserve better than they have been given in recent years. In 2007, Post Office Ltd announced a massive closure programme. Many local communities were not properly consulted. I had plenty of experience of that failure myself and Consumer Focus, the statutory body for the post office consumers, concluded that communications from the public during this period were treated as nothing more than a necessary evil. Rural post offices are far too important for such a process to be repeated.

In welcoming this Bill, may I draw one point to the attention of my noble friend Lady Wilcox and offer one suggestion? The point is this: Post Office Ltd statistics suggest that we still have more than 11,000 post offices in this country. That is not correct. More than 800 of that total are not really post offices at all, but what might better be termed “postal outlets”, part of what is called the outreach programme. Many of them are former post offices that have been redesignated as outreach partners. They lack any real security. In the case of Wylye, for instance, we had a post office one day and an outreach partner the next. It offered almost identical services; the same personnel, the same premises and the same hours—even the same post box. The difference was that the income the shopkeeper received for this work had dropped by more than two-thirds. There is no longer any pension; no sickness pay; no holiday entitlement. In many rural areas, far from the post office subsidising the shopkeeper, it is the shopkeeper who is now subsidising the post office.

They do this because of their sense of civic duty—a desire to carry on serving the community. In that, they truly are the big society come to life. Yet, the good will on which many rural postal outlets survive is evaporating and one day will run out. Close the post office or outreach service and we will be forced to watch the disappearance of all the other associated services—many of which are entirely unpaid but are the sinews of village life.

I would ask my noble friend if she would take to heart the very different nature of these outreach services and keep a close eye on them. They are desperately vulnerable and the current reporting requirements contained in this Bill may not be adequate for that job. It would be futile to insist that there be no further closures—sometimes circumstances will dictate—but perhaps I may encourage her to consider the following. When a rural post office or outreach service is facing closure, a minimum of 16 weeks’ notice should be given to the local community—particularly parish councils—so that it can have sufficient time to come up with an alternative solution that might keep the postal outlet open and keep alive the host of other vital associated services. Rural communities are incredibly resilient. They can be very inventive. They should be given the chance to show what they can do to help themselves.

Post Office Ltd's own code of practice talks of a six-week consultation period, but its record of consultation is not good. Six weeks is not enough—not when so much is at stake. I would ask my noble friend Lady Wilcox to strike a blow for the rural big society and help strengthen village life in this way.

The red eye of the digital clock is staring at me, warning me that I must not overstay my welcome. Winston Churchill used to talk about having, “so much more still to do, and so little time to do it”. I believe he was talking about alcohol, but they are wise words for anyone making their maiden speech. I thank you for your patience. I look forward with tremendous anticipation to finding my place here among you, as a keen and enthusiastic supporter of this Government, if never quite their slave; and, most of all, as a patient, wholehearted and faithful servant of this House.

My Lords, we have heard a brilliant maiden speech. Comparatively few of us follow in the steps of the great people of the past in creating phrases that become quoted and are everyday phrases in our lives, such as those coined by my noble friend. I was thinking:

“You might very well think that. I couldn't possibly comment”.

However, I know that we are all thinking what an outstanding speech that was—and I am the one who can comment on it, and I will. It was 35 years ago that the now noble Lord appeared in my life—I am reminded of the radio programme: “35 years!”; it seemed an age. I am not sure why the Guardian coined the phrase “baby-faced hit-man”, but this personality came into the by-election in Wirral to write my speeches, coin my phrases and take over the campaign, and suddenly I was transported into the other place with the largest Conservative majority anywhere in the UK, so I have known for some considerable time of his outstanding speech-writing and famed organisational skills.

As my noble friend Lord Tebbit knows too, my noble friend Lord Dobbs has gone on to be a successful chief of staff but, in particular, a superb writer of—I think—17 novels now. We got a sense of that in the speech that we just heard, and he is now a valued Member of this House. If I am allowed another phrase of his, I shall say that he has just given us a remarkably effective demonstration of his being the epitome of elegant elocution; the last word was slightly different in House of Cards. I am sure that we will hear many great speeches from him. Today was the first in what I hope will be a long line of effective contributions, for which we thank him.

I declare the interests shown in the register, particularly my being a partner in the national commercial law firm of Beachcroft, where I have in fact been a partner for 42 years. I pay tribute to the speech from the noble Lord, Lord Mandelson, my former close working colleague in the British Youth Council. It was a remarkable insight into what we are debating. Having heard the other, very effective maiden speech from the noble Lord, Lord Empey, I say what a debate we are having.

I suppose that we are a fortnight late for Groundhog Day; noble Lords may remember the film starring Bill Murray, in which the leading character was doomed to relive the same day again and again. As my noble friend Lord Razzall said earlier, this debate has a remarkably similar feel to it to many others that we have had. Of course, we had the Second Reading of a Postal Services Bill on Tuesday 10 March 2009. On that occasion all the Front Benches were in favour of it and, after some process, the Bill was improved. The three main recommendations of Richard Hooper in his excellent first report—private sector capital, pension reform and regulatory reform—were not only accepted but embraced by this House. The title of that report, Modernise or Decline, could not have been more apposite. Sadly those dissident voices that were heard from time to time, particularly in the other place, eventually won the day, despite the best efforts of the noble Lord, Lord Mandelson. For once, the noble Lord’s powers failed him. It was one of the few occasions on which a Bill with overwhelming all-party support was withdrawn. Now, almost two years on, we are here again.

So what has changed? As the noble Lord and other speakers have pointed out, we now find the Royal Mail in a financial situation that has deteriorated further. Its core market is declining at an even faster rate than predicted, and a dangerous chasm is opening up. The accounting deficit on the pension scheme has more than doubled and, to quote Sir Richard Hooper’s latest report,

“doing nothing is not a tenable option … without serious action, Royal Mail will not survive in its current form”.

I could not agree more.

It is no exaggeration to say that unless the serious structural problems are urgently addressed, the future of the universal postal service, or UPS, could be in serious jeopardy, which would be unacceptable. Despite its declining core postal market, the Royal Mail remains the only entity that can preserve the UPS. As Richard Hooper rightly observed in that second report on the future of the Royal Mail, commissioned by my colleagues in the coalition Government, the UPS,

“is part of the country’s social and economic glue”.

There has been a further development, which is acknowledged in the second Hooper report; namely, that the Royal Mail has changed in a positive direction its management. The need for private capital has intensified, but the need for private sector expertise has now been addressed. New management has brought with it a completely revised and revived sense of mission. I compliment Moya Greene, the chief executive, and her team on having achieved just that. The need now is not for some kind of hybrid, collaborative arrangement with external investors and expertise from the private sector, because Royal Mail possesses the necessary expertise. This new Bill, which I warmly welcome, offers privatisation rather than public/private partnership and is entirely fit for purpose.

I am also delighted that Ministers in the department have heeded calls to involve employees in the sale. The Conservative and Liberal Democrat parties have long agreed that a degree of co-ownership and employee involvement is essential in privatisations such as this. We supported the noble Lord’s Bill, but he may recall that we pressed him to be more explicit in ensuring that widening employee share ownership was an objective of the legislation. How to engage employees in an exercise of this kind is of critical importance, and balance must be achieved in a number of respects. Above all, as several speakers in this debate have pointed out, employees must be offered a genuine and meaningful stake in the new enterprise, but managers must retain the power to manage. An important firm such as this must never be vulnerable to being held to ransom by an unrepresentative cabal of activists, be they employees or whoever else.

The coalition agreement commits the Government to the following:

“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.

As my noble friend has just pointed out, the Royal Mail will become part of the big society. The details of this will be worked out by us all in Committee, but, in principle, it must be the best way forward. Many of us, of course, have had a hand in the privatisations of the past. I was the junior Minister given the responsibility of taking through the legislation to privatise British Gas. I confess to the House, privately, that I was never aware that the uncle of my boss, the late Lord Walker of Worcester, was actually Sid. So in appealing for Sid, I had not realised that I was appealing not only to the wide world. However, it became a successful privatisation in the spirit that my noble friend then always dreamed of. There is no need to reinvent the wheel and I am sure that my noble friend and her ministerial colleagues will draw upon the considerable expertise that is available and at her disposal in this House.

However, I stress that time is not on the side of Royal Mail. It was the height of irresponsibility for the previous Government to take up so much important parliamentary time with this legislation only to abandon it. We were never quite sure why it was abandoned but it seems to have been on the grounds of political expediency. It is very much to the credit of Vince Cable, Ed Davey and my noble friend the Minister, strongly supported by their Conservative colleagues, that they now seek to succeed where Labour lost its nerve and so signally failed.

The urgent need to address the secular decline of Royal Mail was first identified in the 1990s by the Major Government and then, through a parliamentary Statement, on 17 December 1998 by the Labour Government. We have wasted enough time. The time has surely come to give to the Royal Mail the opportunity that it craves, not only to survive but to flourish. I hope that all sides of the House will see that, by giving the Bill our constructive support, it could be on the statute book by the summer. Then, and only then, will the Royal Mail be transformed into the success story that it deserves to be.

My Lords, I, too, add my warm congratulations to our two maiden speakers, the noble Lords, Lord Empey and Lord Dobbs, who undoubtedly will add to the riches of this House. It is wonderful to have them here.

The Post Office plays a special role in our society. It is one of the best known and respected institutions and is vital not only to our economic life but to our social and community life. It regularly delivers to every address in this country—on average 75 million letters every working day of the year—and the nationwide network of post offices is visited each week by the equivalent of half the population. If noble Lords are reeling at the statistics, so did I.

I applaud efforts to modernise a resource which is so precious. I, too, want it to work ever more efficiently and effectively in our contemporary world, where there is an increasing reliance on electronic communications, on the one hand, and, on the other, a burgeoning of online shopping which increases package delivery. The Post Office needs to evolve new ways of working; it needs to be better at business. Technological advances should be absorbed and the local post office should be strengthened as a source of community cohesion.

I say immediately that there are pluses in the Bill. I, too, support the way in which the Government seek to deal with the pension deficit. I, too, am in favour of the transfer of regulation to Ofcom, although I would like to play a part in the detail of the regulations. I also welcome the idea of employee share ownership, as long as it is not just icing to make palatable a privatisation which may, in many ways, be distasteful.

However, I am alarmed at the route the Government are taking, and I am not alone. Polling has shown that the public do not want to see the privatisation of Royal Mail. They see it as the turning of a public service into a private monopoly. This is regardless of political party—it was interesting to see from the polling that members of the Conservative Party were just as concerned as members of other parties. A majority see this policy as a threat to the six-day delivery service and they suspect that private providers will not want to subsidise unprofitable parts of the universal delivery system. They believe that privatisation will lead to higher prices. The experience of the privatisation of other services, from rail to gas, supports their suspicion.

The noble Lord, Lord Empey, made an important point that, to the public, the Post Office and the Royal Mail are all one—the public fear that, despite promises that are being made by the Government, their local post office will be put at risk of closure. I know the Government have promised that there will be few closures of major post offices and they have made a commitment to maintaining 4,000 large post offices and 2,000 smaller outlets operating out of local shops. However, analysts have shown that the restructuring of the post office network through setting up mutuals will probably deprive post offices of, certainly, at least a third of their income unless other ways are found of filling that. I am very happy at the idea of mutuals—I like the John Lewis Partnership idea—but sub-postmasters who run sub-post offices out of retail shops, after discussion among retailers, have expressed concern that, without new business, the mutual concept will not make economic sense.

It was very entertaining to listen to the noble Lord, Lord Mandelson, rebuke the unions, Labour MPs and others who rejected his own Bill. However, what he seemed to forget was that a much more imaginative, radical and exciting proposal was made around the same time by the think tank Compass, which proposed that the Royal Mail be turned into an independent company, based on the structure that was created ultimately for Network Rail. A restructured Royal Mail and Post Office, operating as a not-for-profit company, would have the ability to borrow and to invest in new technology without affecting government borrowing limits. Creating such a not-for-profit company would have also put a halt to the ridiculous business of separating out the Royal Mail from the Post Office. However, as the noble Lord, Lord Tunnicliffe, has said, this is a classic case of selling off that which is profitable to the private sector but holding in national ownership that which is non-profitable. You privatise the money-making element and let the taxpayer carry the cost of that which is risky.

I did not hear the noble Lord, Lord Mandelson, mention the inadequacy of the management of the Post Office when he was criticising the current regime. The managers are, in many ways, lacking in entrepreneurial spirit, overpaid and part of the problem. I hope that the new man who is coming in to lead will make the changes necessary—

It is a woman, is it? Well I am sure that will be better. If it is a woman then it is bound to be an improvement.

All I can say is that, while there has been criticism of the unions, there seems to have been insignificant criticism of those who managed. When Compass came up with the proposals for a not-for-profit company, it was argued that the unions would have to come on board; that they would have to be willing to enter into a new and real partnership with new management, with the public and with Government; and that they would have to agree to new technology and abandon old practices in sorting offices. I am sure they could have been won round to that proposal, but sadly the Government opted for the sell-off that is in this Bill.

I have sat through many debates in this House in which noble Lords have expressed concerns about the destruction of communities and I have listened as they talked about the glue that holds society together. The social value of post offices cannot be underestimated, yet here we are with an opportunity to modernise the Post Office and Royal Mail in ways that strengthen those ties but we have baulked at taking that more radical way forward. A sense of community is reinforced by citizens in an area sharing certain resources whatever their social background—the local library, the primary school and the post office. A modern post office should be reinvented, as we have heard others say, as the shop window of local and central government as well as the provider of postal services.

When I chaired the Power report, one recommendation that we made was that there should be the creation of local democracy hubs as centres of information and advice about the working of our polity. Those hubs provide the public with the right channels for complaint or provide an opportunity to contribute ideas to good governance; they are a place to find out about local initiatives, and are where voter registration could take place. There is no reason why the Post Office could not take on that kind of role. It would also be the locus for passport and licence application and the local centre for pension and other social entitlements. All this could be added to the remit of large post offices, making them the interface between government and the citizen. They could house offshoots of Citizens Advice, providing advice on debt and advice on small legal problems. If communication is your raison d’être, why not introduce some computer terminals so that those who have no computers at home, including the elderly and disadvantaged, can send e-mails. With the assistance of someone in the post office, they would be able to use the new technology for which they do not yet have the skills. Post offices should be the centre of high street community life, as well as fulfilling the functions mentioned by the noble Lord, Lord Dobbs, in outreaching rural areas.

The big disappointment in this Bill is the failure to use the post office as the site of the people’s bank. I heard laughter when that point was made by the noble Lord, Lord Christopher, but whole sections of the public want only simple high street banking, with none of the high-risk casino components that put savings and mortgages at risk. They want banks like the old Trustee Savings Bank and the National Girobank, which were put out of business by the banking industry. A people’s bank could be all that many citizens want and, in addition, could lend like credit unions to poor but prudent citizens in need of small loans to keep them from the loan sharks. Those people’s banks could even be a way of exploring micro-financing in some communities, so that small groups of neighbours can come together to support each other’s borrowing to establish small, self-sustaining businesses. We see it working in other parts of the world and, in fact, being tried out in my home city, where the Grameen banking system is being used to help people set up in businesses that do such things as hairdressing, laundry systems, ironing services and clothing alterations. Those are small things that keep families together and help to sustain them.

If the big society has meaning, this Bill should really be rethought to encompass some of the ideas that are around, of which the Government have taken no account. I know that they have put a lot on their own plate, but this piece of policy could benefit from a great deal further thinking. I know that I will be going into battle with the coalition Government on the privatisation aspect of the Bill but, on the reinvention of the post offices, I hope that with others around this House I can make a more constructive contribution and help to see ways in which to revitalise the post office system.

My Lords, I add my congratulations to the noble Lords, Lord Empey and Lord Dobbs, on their excellent maiden speeches. I have had the pleasure of speaking to the noble Lord, Lord Dobbs, and I am sure that I will shortly have the pleasure of speaking to the noble Lord, Lord Empey. I look forward to their contributions in times ahead.

I have a number of comments to make on the Government’s proposals in this Bill. I have no issue with the injection of private capital or private finance into the Royal Mail. Noble Lords will be aware of the proposals made by the previous Government. As noble Lords have said, there are a number of similarities in the two Bills. I want to see a successful Post Office and Royal Mail. However, I am not clear about the employee share ownership scheme and hope that the Minister will be able to talk further about this when she responds. How will the shares be distributed, what can employees do with them and what are the benefits of the proposals?

I hope that during the passage of the Bill through this House we will explore the issue of protecting the name “Royal Mail”. I am sure that the Minister will say that there is no need to worry about that and that any new owner would be daft to change the name. Well, people do daft things all the time. I recall the short-lived Consignia, whose rebrand was reversed in haste in 2002. I am pleased that the Government are not proposing the sale of Post Office Counters.

At this point, I declare an interest as a member of the Co-operative Party and a big supporter of mutuals. The possibility of the Post Office moving to mutual status at some point in the future is interesting. Again, we need to explore that further as this Bill progresses through the House. It could be a welcome part of the solution to the problems of the Post Office. I know that the Minister is aware of my support for the development of credit unions in this country; we have had a conversation outside the Chamber and I recently asked her an Oral Question on that subject. I am very supportive of the link-up between the Post Office and credit unions. By developing the credit union back office, millions of people would gain access to credit union services at any post office in the country.

I contend—and I think that many noble Lords would agree with me—that the big society is in some trouble. We have again had a relaunch from the Prime Minister. It could be said that this would be a good example of the big society, as I understand it. I suggest to your Lordships that the passage of this Bill is an ideal opportunity to explore these proposals further. It is certainly one of the growth areas that the noble Baroness referred to when she opened the debate.

I am pleased with what the Minister said about protecting post offices and that there will be no further closures; I made a careful note of that. I am particularly pleased that noble Lords on all sides of the House recognise the central position of post offices in supporting communities. In any link-up, the Post Office needs to be successful both in rural communities and, just as importantly, in deprived communities in our towns and cities, as it is central to community life. I welcome the proposals to deal with the Royal Mail pension fund, as I do those to transfer the regulator’s obligations to Ofcom.

In concluding, I concur very much with the remarks made by the noble Lord, Lord Low of Dalston, about the universal postal service obligations and the Minister’s remarks that the Bill will benefit greatly from consideration by your Lordships’ House. I hope that we will be able to suggest amendments that will improve the Bill and that those amendments will be considered carefully and in some cases accepted before further proposals are brought back at Third Reading.

My Lords, I, too, congratulate the noble Lords, Lord Empey and Lord Dobbs, on their quite excellent maiden speeches. I also start by thanking the noble Baroness, Lady Wilcox, for the excellent way in which she introduced this government Bill. It is clear that the Bill is welcome in a number of ways; equally, it is clear that all of us share a number of concerns about how the future will work out for this service—this serious piece of national infrastructure, as the noble Lord, Lord Empey, put it so well—particularly for one of our nation’s most cherished institutions, the Post Office.

The Post Office is clearly valuable to all of us but it is uniquely placed to cater for vulnerable and deprived groups. It is also the largest retail network of its kind in the country, with more branches than the major high street banks combined. It has also gone above and beyond its statutory obligations to ensure that it provides accessibility and additional services for those who require them. This is especially true for their disabled and elderly customers.

The Post Office has recently conducted access audits across the whole of the branch network. A temporary team of 50 managers visited over 850 branches and talked with sub-postmasters about their plans to improve accessibility within their outlets. I enjoyed listening to the noble Baroness, Lady Kennedy of The Shaws, about the potential of her further ideas for how they could be even better used. Part of the audit showed that impressive information was gathered about accessibility and facilities, such as low payment counters, induction loops, alternative language availability and other services. Of course improvements are required but the erosion of this valuable network would be disastrous for those who rely on such services. Today I will consider how any deterioration in the network’s strength might best be prevented.

First, the Bill is a welcome attempt to address the dire situation facing our universal postal service—Royal Mail and the Post Office. Let us be in no doubt that the future of the two companies, though structurally separate, will be entwined after the passage of the Bill, thankfully. The Bill goes a long way to addressing the problems Sir Richard Hooper identified in the immediate crises facing these companies, as many people have referred to. Perhaps most importantly, it alleviates the crushing burden of the £10 billion historic pension deficit. This alone costs the company around £300 million a year, so that is a most welcome development. It also allows Royal Mail to continue on the long and sometimes tortuous path of modernisation—although at a faster pace, I hope.

Secondly, a healthy, vigorous Royal Mail is critical. I am sure your Lordships will be united in wishing to see the business look to the future with greater financial certainty and a substantial investment to meet the needs of rapidly changing consumer demands. Only by modernising and meeting the needs of modern consumers can Royal Mail generate the income to meet properly its universal service obligations. In turn, this should enable it to operate a commercially productive relationship with the Post Office long into the future.

Thirdly, the Bill attempts to address the regulatory landscape in which postal services operate, which the noble Lord, Lord Mandelson, and others have mentioned. There is wide agreement that the current framework has failed. However, I have my doubts as to whether the Bill does enough to provide change in this area. There is a bizarre situation, which others have mentioned, whereby the taxpayer and domestic mail users subsidise private companies to the tune of around £160 million a year through privileged access to the Royal Mail network. I am sure all noble Lords would like assurances that such a scenario does not continue. Again, if the bleeding of funds away from Royal Mail through such regulation continues, it will adversely affect its ability to put business through the Post Office.

I have spoken in support of the Bill as it stands, but what is of concern to those of us seeking to protect the national network of post offices is how little is included on the future of Post Office Ltd. The Bill makes provision for a possible mutualisation of the Post Office. Like others, I welcome that idea but how this will happen is unclear and very much a matter for the Government of the day, whenever that day comes. I believe the Minister for Postal Services has also stated in another place that this will be very much on the horizon some time after 2014. What is of concern to parliamentarians seeking to protect the post office network is the extent to which its future will be at the whim of the policy of the Government of that time, and not subject to the legislation before us.

The present Government have committed to a £1.34 billion funding package to transform the network, which is, of course, very welcome, as, indeed, is the commitment to maintain the network at its current level with no further programme of closures. Nevertheless, when Ministers are trying to tighten the reins on public expenditure, the level of government business being put through the Post Office becomes even more crucial. Until very recently, such business was the most important source of revenue for sub-postmasters. It also raised footfall through their branches and made their ancillary businesses viable. However, as we have all heard, government business has declined dramatically over recent years. Indeed, in 2008, the Government very nearly took away the contract for the Post Office card account—a critical source of revenue—but for the last-minute intervention by worried senior Cabinet Ministers at that time.

The current Government have promised to make the Post Office the “front office for government”. What I, your Lordships, sub-postmasters, consumers, and many other interested parties would, I am sure, like to hear are specific proposals and commitments on how this can be achieved, and when. Therefore, I look forward to hearing detailed assurances from the Minister when she replies.

My Lords, first, I welcome the maiden speeches that we have heard from the noble Lords, Lord Empey and Lord Dobbs. As a newcomer to this place myself, I am delighted to be in such illustrious company.

The Royal Mail is something that the British public hold in high esteem. It is not to be meddled with without great consideration. Many of your Lordships will have chosen to forget that unfortunate episode when, in a silly quest for change, the Royal Mail and post offices were subsumed into Consignia. That expensive exercise was later summed up by the BBC as:

“Nine letters that spelled fiasco”.

Consignia did not last long; new management tossed it on the pyre of corporate nonsense. As Ecclesiastes says:

“A good name is better than precious ointment”,

and, despite its occasional problems, the Royal Mail undoubtedly retains a good name because it delivers a remarkable service.

However, the need for change in the business is pressing. The Bill enables that change. It seeks to separate Royal Mail from the network of post offices. They are separate businesses with a trading relationship that we are assured will remain. However, guarantees of that, at least for the medium term, might be appropriate. The current chairman of Royal Mail has given his absolute assurance of that continuing relationship, and there is every reason why we should trust Donald Brydon. However, as part of our review of the regulatory framework, we might, for the benefit of post offices, seek something stronger. Even the best chairmen do not last for long in corporate Britain.

I wish to make two points, one on each of the organisations which will emerge. The first concerns the crucial proposal that the Royal Mail should be sold entirely. Its need for a new life freed from the constraints of the public sector is clear. There is a future for Royal Mail despite declining volumes. Direct marketing may be junk mail to some of us but is potential revenue for Royal Mail, so is much that is purchased via e-commerce, the business which has taken over from mail order. The picture is not all gloomy.

The universal service obligation must be maintained but we have to be realistic about this. The Bill gives Ofcom the right to review the sustainability of that obligation. It needs to be measured against genuine demand. A recent survey found—admittedly by a narrow majority—that individuals and small businesses would consider a move to a five-days-a-week service if reliability could be upheld. We should remember the outcry at the loss of the second daily delivery. I contributed to that outcry. Some said that it would be impossible to live without that second delivery. Life went on and business did not, on the whole, suffer.

My plea now is that we should aim to float the company through an IPO, rather than to sell it to a corporate bidder, almost certainly from another country. That is not because I echo the “little Englander” views that the noble Lord, Lord Mandelson, said were far too prevalent these days, but we need to try once more to create the share-owning democracy that was part of the ambition of the noble Baroness, Lady Thatcher. We have heard reference to the successful flotation of BT. What happened afterwards was not entirely wonderful but was nevertheless part of obtaining a bigger shareholding base in this country.

Yet, since the success of those early privatisations, the proportion of UK-listed shares owned by individuals here has been on a downward trend. From a height of 54 per cent, it had by 2006 sunk to 13 per cent, and the most recent figures from the Office for National Statistics put the proportion at just 10 per cent. The Bill makes provision for employees to become shareholders, but as we heard from the noble Lord, Lord Christopher, employee shareholders do not always hang on to the stock. A solid core of private investors, however, makes for good corporate governance. These people invest for the long term and take an interest in the company far more than institutional shareholders. Private shareholders turn up at annual meetings and ask questions. Institutional investors are too often the absentee landlords of British business.

An army of “Sids” subscribing to shares in Royal Mail would not be able to turn back the tide of correspondence migrating from letters to e-mails, but they might make a difference. They would see the merit in doing business with the company they owned. They might decide to send greeting cards through the post, rather than merely pressing the button on that abhorrence, the e-card, which is a poor replacement for an enticing envelope arriving through the letter box. For that and for more fundamental reasons, I hope that as the sale of Royal Mail approaches the possibility of an IPO will be top of the list of favoured options. I know that the Government’s position is that the sale is open to all comers, but an IPO would get my vote.

My second point relates to the post office network, which this Bill promises will not be sold, although it could be mutualised. Like the noble Lord, Lord Christopher, I should like to hear more details of the proposed mutualisation. Nevertheless, as we have heard, post offices remain a remarkable retail business, each week serving more than 21 million customers. That puts the organisation on a par with Tesco. The Post Office is a trusted brand. Compare that with the banks. The annual trust barometer recently published by Edelman showed that the UK’s trust in banks had fallen to just 16 per cent—a 30-point reduction over three years. Hence, I agree with those who this afternoon, led by the noble Baroness, Lady Kennedy, have said that the Post Office is, and should be, an alternative bank. Noble Lords may recall Girobank, launched in the 1960s, but it was not properly nourished and was eventually sold in 1990. Today’s climate would surely be more welcoming to such a venture.

The Banking Commission, when it reports later this year, will undoubtedly highlight the need for greater competition in banking. The Post Office could provide it. That is not a novel thought. The previous Government came up with the name, the “People’s Bank”, although that may have overtones with which some noble Lords do not feel entirely comfortable. However, the concept of building up the Post Office as a trusted bank is surely worth pursuing. It already offers mortgages and credit cards. Some might argue that as a major owner of bank shares, the Government would not wish to encourage more competition in the marketplace—but competition is required and it is coming. The Post Office is surely well placed to provide it. I take this opportunity to add my voice to those asking the Minister to look again at the possibility of building up the banking business of the post office network.

My Lords, I, too, congratulate the noble Lords, Lord Empey and Lord Dobbs, on their maiden speeches. Perhaps I should advise the House that I represented telecom workers, including those in BT, and following union mergers became an employee of the CWU as deputy general secretary of its telecommunications sector.

I am concerned about the regulatory framework within which a privatised Royal Mail will operate and the implications for investment in the company and for the universal service obligation. There is a broad view that the regulation of Royal Mail has been harsh. That is clearly Moya Greene's view. Richard Hooper stated in his report that he was,

“struck by the depth and range of disagreements between Royal Mail and Postcomm. Even the most basic facts are disputed”.

He also concluded in his updated review that,

“The overall burden of regulation should be reduced”.

The compulsory regime of access to Royal Mail’s network, particularly downstream access—local delivery in the last mile—results in Royal Mail subsidising its competitors. As my noble friend Lord Christopher and the noble Baroness, Lady Howe, said, Royal Mail makes an average loss of 2.5p on every letter that it delivers on behalf of a competitor. The subsidy is of the order of £160 million a year.

Richard Hooper, in his evidence to a committee in the other place, commented:

“Cherry-picking is a big issue ... It basically means that somebody comes in and starts delivering two days a week to Liverpool, Birmingham, Manchester, Edinburgh, Glasgow and Cardiff, and then expects the rest of his or her mail to be delivered by Royal Mail to all the nasty places that cost lots more money”.

I am advised that Royal Mail has now lost 60 per cent of the upstream bulk mail market to competition in this way, and the figure keeps rising. It is also subjected to significant price regulation even in the most competitive parts of its market. That regulation has an asymmetrical feel about it. It will not sustain a viable business model; it will not secure major capital investment; and it will not deliver the requisite universal service.

It is clear that a truly universal national service that ensures delivery at affordable prices and meets the country's social and economic needs requires cross-subsidisation. If Royal Mail ceases to be a publicly owned body and becomes a private company, there will be a need for considerable confidence that the Government are giving to Ofcom both the instruction and the power to prevent cherry-picking damaging the universal delivery service, levels of investment and the viability of Royal Mail itself. If the conditions set by the regulator for competitors' access to Royal Mail's network disadvantage the company, a private buyer will struggle to see a business model that is in their commercial interest, and will certainly be reluctant to make the significant levels of investment necessary to deliver modernisation, develop new digital businesses and get the company to best in class.

Market conditions for postal service operators are challenging because of the growth of e-substitution and digital media, as any potential buyer will know. The regulatory settlement must allow the owners of Royal Mail to succeed commercially and bring capital and investment to the company in a manner that meets the needs of the users and sustains the universal service. Ofcom has a good reputation, but experience teaches us—the evidence is there—that regulators do not always get it right, and certainly not first time, when they set the terms and price for network access. This can undermine the level of capital investment in the major network provider. Equally, determining the definition of universal access and service requirements and the extent of the cross-subsidy can be greatly contested, particularly in changing and challenging market conditions, and the citizen’s national strategic interest can be lost in that debate.

In postal services it is important that the response to this challenge—because that challenge will be there and Ofcom will have to address it—is not to reduce the extent of the universal service and the products delivered. In fact, in our e-commerce world there is a powerful case for strengthening the obligation. If the new regulatory regime is to place postal regulation within the broader context of the communications market, it is important to remember that for many small businesses, certainly in rural and remoter communities, a universal postal service is as important as broadband access to their ability to participate nationally and internationally in an e-commerce world. The statistics confirm, for example, that internet sales are a growth area in the mail market, with internet shopping estimated to be worth £60 billion a year.

If the Bill does not unequivocally secure a meaningful universal service for all communities across all geographies in the country, many will be disenfranchised from areas of the mainstream—whether that is a cluster or hub of companies in Cornwall or the Highlands or a grandmother receiving a birthday card at her door. More than 10 years ago, I and many others argued passionately for universal access to broadband when regulators and civil servants were saying that such a proposition was unachievable; now, the debate is about speed and the need for universal access is simply taken as a given. Many people and companies cannot universally engage in e-commerce without the logistical back-up of an efficient and affordable universal delivery service.

The Bill sets the primary duty of Ofcom in relation to postal services as securing the provision of the universal postal service, but it also gives the regulator the authority to review what it considers must be provided by such a service. The Bill potentially weakens the universal service obligation. For example, it allows Ofcom to assess the financial burden of the universal service on Royal Mail and to make recommendations on how to alleviate that burden, which could include a recommendation that the minimum requirements in the Bill be reduced.

Indeed, Ofcom is directed to review the minimum requirements within 18 months of the passage of the Bill, which coincides with the time period over which the Government are looking to make a sale. A private company interested in acquiring Royal Mail will act in its own commercial interests and may well seek to push for a narrower definition of requirements or resist a lock-in to the post office network. Governments keen to secure a buyer will be under pressure to maximise freedom for the purchaser. A great deal is left to regulation. There is a real risk that the rigour of a regulatory review in the interest of the citizen and the consumer will be a casualty of the forces of political pragmatism, for whom the necessity of achieving a sale will be paramount.

The House of Lords Delegated Powers and Regulatory Reform Committee, while recognising that many of the delegated powers in this Bill are the same as those in the earlier Bill from the previous Government, drew to the attention of this House that the Bill gives a significant power to the Secretary of State to alter the minimum requirements for a universal postal service. This indicates that parliamentary oversight of changes to the requirements should be strengthened, and certainly that Ofcom’s review under Clause 33 should be laid before Parliament in a report. This, I believe, would be consistent with the recommendations in the 2008 Hooper report.

In conclusion, I have stressed what I believe to be both the economic and the social value of maintaining a universal delivery service. However, I certainly do not have in mind Charles I—not known for his willingness to be accountable to Parliament—who, my historian husband assures me, used his Royal Mail officials to regularly open and illegally copy diplomatic mail from the French.

My Lords, I am glad to be able to welcome the Postal Services Bill here today. I also welcome the two excellent maiden speeches given by the noble Lords, Lord Empey and Lord Dobbs. When I heard the speeches of the noble Lords, Lord Mandelson and Lord Hunt, I had a sense of déjà vu, which the noble Lord, Lord De Mauley, might share. I hope that on this occasion we shall see a successful conclusion to our deliberations. I apologise to the Minister for not being present for a few minutes at the beginning of the debate. I heard most of her words and shall read the rest in Hansard.

As has already been made clear, everyone expects that some action has to be taken to improve the current situation with the Royal Mail and the Post Office. The Bill addresses that and is designed to improve the current problems that the services face. It is also important to note that the Bill takes a major step forward in committing to at least 10 per cent of share ownership by the employees. That will ensure that there is not a total privatisation. The unsuccessful Bill introduced by the previous Government did not contain such a provision for shared ownership.

It is important that the Post Office diversifies and opens up its services by encouraging new initiatives. Those will include post offices in rural areas perhaps, developing services tailored to customers’ needs or providing a one-stop shop for government services in inner-city areas by offering services such as the verification of documents and the processing of benefit payments. I know that there are many other ideas about how to use the Post Office in the future. I welcome the fact that the present Government have committed funds to support this process. We must encourage an entrepreneurial spirit to ensure the Bill’s success and generate innovative ideas.

It is a pity that the post bank initiative has not been carried forward in the Bill, as there is room for alternative systems in light of the banking crisis. I ask the Minister to clarify any role that a post bank or similar could have in the future. It is certainly very useful that the consumer can access the big banks’ services through post offices, but it will be good if other initiatives can come forward. Recently there has been quite a lot of talk about the expansion of credit unions, for example. The noble Baroness, Lady Kennedy, and the noble Lord, Lord Christopher, spoke about that aspect of the future for the Post Office. Where you have local post offices, it is very important indeed that people feel that they can use them in some form as a bank.

Coming from a small business perspective, I know that the Royal Mail and the Post Office have played an integral part in the running of businesses on a day-to-day basis. Like many others, I welcome the fact that the Bill reinforces the universal service, which ensures that small business’s needs are listened to and considered. Some 77 per cent of small businesses say that they use the Post Office to send their parcels to their clients and customers. It is so important that this Bill will be part of the process to ensure that we get good delivery of the mail and a good service locally for businesses and people in all parts of the country.

Mutualisation has been mentioned, and I know that that will be developed when we discuss the Bill in Committee. It is another very important aspect of the Bill in terms of the changes that we can and should make. I welcome the Bill. I believe that it lays down the necessary framework to ensure the future success of the Royal Mail and the Post Office.

My Lords, I support the Bill, which, in principle, I welcome warmly, as indeed I supported in principle a Bill on similar matters which the then Government introduced in 2009. The Bill has in many respects cured certain significant defects in the 2009 version.

Before I go further, I welcome and thank my noble friend Lord Empey and the noble Lord, Lord Dobbs, for their excellent contribution to our proceedings this afternoon.

As many noble Lords have said, there is much probing to be done as well as the tabling of amendments at later stages to ensure that the sale of Royal Mail achieves optimum value for the taxpayer, on the one hand; and, on the other, that it secures a universal postal service which is appropriately enshrined in statute. At the same time, increasing flexibility on pricing, and hence on margins, is needed over substantial parts of the current business which are controlled by the regulator. I refer to large packets and large parcels, for example, which have already been mentioned, which, as often as not, are contracted to third parties who finally utilise the distribution network of the Royal Mail at subsidised prices.

Responsibility for the universal postal service within a private entity must receive greater protection than the Bill provides. Accountability to Parliament needs to be strengthened, and your Lordships may also wish to consider a requirement for primary legislation before any changes to the service can be made.

I welcome the proposal to allocate equity to employees, and I am very pleased to note the considerable improvement in labour relations within the Royal Mail since the arrival of new management. Longer periods between the review of the universal postal service must also be considered both to assist the attractiveness to a purchaser and to provide greater confidence to the public and to Post Office Ltd.

I turn briefly, therefore, to the part of the Bill dealing with the transfer and establishment of the Post Office company. Assurances have been given in the Department for Business, Innovation and Skills document CM 7946 of October 2010. On page 3, it provides six government commitments. I draw your Lordships, attention to the statement:

“We are clear that there will be no further programme of Post Office closures”.

I suggest that we will need to understand the precise definition of the word “programme”.

I echo what some of your Lordships have already said this afternoon. Some provisions of the Bill are too short term for either the new company, Royal Mail or Post Office Ltd to have confidence in their respective business plans. They need an interbusiness agreement of a longer duration than that in the Bill. Whereas I appreciate, as the noble Lord, Lord Razzall, said, that such matters should be more properly negotiated commercially between the two parties, it is the duration of that agreement that gives me concern. I believe that that is crucial to stability for both parties and for the public. Indeed, the duration of any further amended agreements should be considered.

I hope that the Government will consider strengthening their commitment to maintaining the current number of post offices. In her introduction, the Minister referred to certain “myths”. Within the current stable of our post offices, I understand that there is some confusion about definition. For example, of the current number up for sale, how many are being blighted by the uncertainty about an interbusiness agreement? How many of those up for sale are classified as “long-term temporary closures”? In regard to Crown offices, am I right in understanding that the guarantee for them expires at the end of this year?

Finally, I am sure that we are all relieved that the pension deficit will be removed. However, perhaps the Government will at some stage inform us of what is planned for the assets of the pension fund, which I understand are estimated at around £26 billion.

My Lords, I think that I have to admit that I am standing here today only because of the Post Office. As a hereditary Peer, I have to recognise that a peerage was conferred on our family probably entirely because my grandfather was Postmaster-General, although I was later elected here. It is strange that you should have an affection for things that your ancestors have done. Before this debate, rather than going to the Library again and reading all the regular documentation, I read through the 365 entries in Hansard where my grandfather, as the longest serving Postmaster-General in history, had to deal with things. I looked first and foremost at Postmasters-General. They all had a charter. What it said was:

“We do by these Presents give and grant unto the said”—

in my case—

“Sir William Mitchell-Thomson full power and authorities to execute all the powers of any Act now in force or which shall hereafter be in force”.

In my grandfather’s case, I do not think that it was ever rescinded, so I have to feel that I may have some legal obligation to take the powers offered by this Bill. I will probably look at that with an international lawyer. However, today I shall be supporting not the Government—because, quite frankly, of this strange coalition agreement; I have considered forming a Select Committee to scrutinise the coalition agreement—but my noble friend Lady Wilcox, for whom I have great admiration. She is without doubt the best person to be in charge in this event.

As my noble friend will know, the greatest number of questions asked of my grandfather related to post offices in Cornwall: why there were not three deliveries a day, why there should not be more post offices, why a letter posted in Padstow should not arrive in Tre—something beginning with T—within so many hours. So I had a look and thought, what is the change now that we are introducing a Bill? First, however, I should say that this has been the best debate that I have listened to for a long time. I wish that all the other stuff that has happened over the past few days had been put down at the bottom of the pile. I was the one who also supported the Isle of Wight, which also should have more post of