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Scotland Bill

Volume 768: debated on Tuesday 19 January 2016

Committee (2nd Day) (Continued)

Amendment 59

Moved by

59: After Clause 50, insert the following new Clause—

“Business associations

(1) Part 2 of Schedule 5 to the Scotland Act 1998 is amended as follows.

(2) In section C1 (business associations) at the end of the Exceptions insert—

“(c) the law on partnerships and unincorporated associations,(d) the creation of new forms of cooperative enterprise,(e) the creation of new forms of mutual enterprise,(f) the creation of new economic interest groups where the European Economic Interest Group under regulation EEC 2137/85 is not available because the members do not come from more than one state.””

My Lords, Amendments 59, 60 and 61, which are tabled in my name and that of my noble and learned friend Lord Wallace of Tankerness, are Liberal Democrat amendments, but they have been very much inspired by the hard work of the Law Society of Scotland. I thank it and Michael Clancy, in particular, for the detail that has gone into these amendments.

Amendment 59 adds further exceptions to the reservation to the UK Parliament of the creation, operation, regulation and dissolution of types of business association. Under the Scotland Act 1998, the UK Parliament can make law to create business associations, such as partnerships and limited companies. Law can also be made concerning the operation, regulation and dissolution of these associations.

Section Cl of Part 2 of Schedule 5 has a number of exceptions to this reservation. These include the creation, operation, regulation and dissolution of particular public bodies, or public bodies of a particular type established by or under any enactment and charities—your Lordships can see that lawyers have helped me with the wording. A business association is defined as any person, other than an individual, established for the purpose of carrying on any kind of business, whether or not for profit. “Business” includes the provision of benefits to the members of an association. We believe that the exceptions from the reservations should be amplified to include the law of partnership and unincorporated association, and to provide for the creation of various types of new forms of enterprise to allow flexibility for businesses to grow in Scotland.

The Partnership Act 1890 already regulates partnerships in Scotland and recognises in some respects the differences between Scottish and English law in this area. The Law Commissions reviewed partnership law and published a report in November 2003 that dealt with the Partnership Act 1890 and the Limited Partnerships Act 1907, with particular reference to independent personality, continuity of business irrespective of changes of ownership, simplification of solvent dissolution and model partnership agreements. In 2006 the Government announced that they rejected the Law Commissions’ recommendations on general partnerships but that they intended to implement the recommendations specifically relating to limited partnerships. That change was carried out by way of the Legislative Reform (Limited Partnerships Order) 2009. However, some of the reforms concerning general partnership reform could be of benefit to Scottish businesses, and an effective means of executing these reforms could be through the Scottish Parliament legislating on these matters. Currently that is not possible, so this amendment would enable the Scottish Parliament to carry out the legislative changes that the Scottish Government may wish to consider and which are contained in the Law Commissions’ joint report. The Parliament should also have the freedom to create new forms of enterprise as listed in the amendment.

Amendment 60 would fully devolve the regulation of solicitors, no matter what function they performed, to the Scottish Parliament and allow the Parliament to make law for licensed providers under the Legal Services (Scotland) Act 2010 in the areas of immigration and asylum, insolvency practice or financial services. There is no provision that reserves the regulation of the Scottish legal professions. Nevertheless, in the Legal Profession and Legal Aid (Scotland) Act 2007, which regulates,

“the making of complaints about legal services”,

it was provided that that Act did not apply to complaints about the provision of advice, legal services or activities relating to consumer credit, insolvency practitioners, financial services or immigration. This was because the Scottish Government took the view that the supervision of the legal profession when giving advice about these reserved matters or providing services was itself reserved, and was therefore a matter for the UK Parliament to regulate. In other words, the Scottish legal professions are regulated partly by the Scottish Government and partly by the UK Government, according to what advice or services they are providing.

In Section C3 there is an exception from the reservation of competition law that covers the regulation of the legal profession, but that exception applies only for the purposes of that section. The problem is that the provision of advice, legal services or activities relating to consumer credit, insolvency practitioners, financial services or immigration is considered to be reserved. Irrespective of whether this view is correct—the Minister and others may reflect different views on this—it is suggested that the Scottish Parliament should be able to regulate all aspects of the Scottish legal professions. That includes alternative business structures formed between solicitors and other professionals as licensed providers under the Legal Services (Scotland) Act 2010.

Finally, Amendment 61 deletes the reservation to the UK Parliament of regulating estate agents in Scotland under the Estate Agents Act 1979. Estate agency in Scotland works within the context of Scottish land law practice and conveyancing, which is, as we all know, different from the law applicable to other parts of the United Kingdom. Were estate agency in Scotland to be devolved, the Scottish Parliament would be able to make law relating to estate agents which would be more closely aligned to the Scottish legal system and the needs of consumers in Scotland, and which would allow the Parliament to legislate fully for licensed providers comprising estate agents under the Legal Services (Scotland) Act 2010. The inability of the Scottish Parliament to legislate in this area is a stumbling block to completion of the legislative framework for alternative business structures in Scotland.

I hope that the Government will give careful consideration to these proposed very detailed and technical amendments, which could improve the regulation of solicitors in Scotland and improve circumstances for consumers in Scotland in these important areas.

The noble Lord, Lord Stephen, has spoken on a number of amendments which relate to the amendments put forward by the Law Society of Scotland. I echo what the noble Lord said about the role played by Michael Clancy and all his hard work. I can see that he is sitting in the Box this evening, and I met him last week to discuss these amendments.

Your Lordships will be aware that the context of this Bill is, as we have discussed many times, the implementation of the Smith commission agreement. The commission considered a range of areas for devolution, and the amendments spoken to this evening do not fall within the scope of that agreement. If noble Lords permit, I will briefly explain why, in addition to this, the Government do not support these amendments.

Principally, the UK Government are committed to ensuring that the UK is one of the best places to start up and run a business. To devolve legislative competence for the creation of new business entities or health and safety to the Scottish Parliament would add complexity and confusion to the business landscape in areas where we are already considered world-class. We are also committed to protecting consumers, and to devolve one aspect of the regulation of estate agents would lead to fragmentation of the approach across Great Britain. The Government consider that this would be ineffective and could harm consumers. We are striking the right balance of powers in the Bill while maintaining the strength and security and benefits for British business and for our consumers.

Amendment 59 would allow the Scottish Parliament to legislate for partnerships and unincorporated associations and allow the Scottish Parliament to create various new forms of enterprise in Scotland. The pressures that businesses face are generally the same throughout the UK and, therefore, when considering whether new business entities are appropriate, it is right that we should take a UK-wide view. It would not be right to have competing regimes of business regulations north and south of the border, and therefore I urge the noble Lord to withdraw the amendment.

Amendment 60 is unnecessary because regulation of the legal profession in Scotland is not a matter reserved by Schedule 5 to the Scotland Act 1998. However, the legal profession in Scotland advises on a diverse range of issues, including matters such as consumer protection, for which this Parliament retains responsibility for legislating. The Scottish Parliament does not have the legislative competence to make provision that relates to a reserved matter or modifies the law on reserved matters. This means that the Scottish Parliament cannot make provision specifically targeted, as the amendment proposes, at the regulation of insolvency practitioners, which is reserved by Section C2 of Schedule 5 to the Scotland Act 1998. Given this explanation, I urge the noble Lord not to press this amendment.

Finally, in addition to Amendment 61 being outside the scope of the Smith commission agreement, it is inappropriate. The Estate Agents Act 1979 is just one of the pieces of legislation that apply to the regulation of estate agents in order to protect consumers. Devolving this aspect of consumer protection policy while reserving other aspects, such as unfair and misleading practices, would lead to fragmentation of the approach across Great Britain. This would be ineffective and could harm consumers. Therefore, I urge the noble Lord to withdraw the amendment.

I thank the Minister for his response, although clearly he does not agree with me or with the Law Society of Scotland on this issue. He mentioned fragmentation. Another word for that is devolution. The same argument about areas that are considered to be world-class could apply equally strongly to health, education, transport or housing. I can see no inconsistency whatever in saying that throughout the United Kingdom we will have world-class health and world-class education but with differences—substantial differences in some cases—between the Scottish system and the system in other parts of the UK.

It seems to me that the point about business and partnerships was well taken by the Government of 1890 in this country, who made separate provision, as I said in my previous speech. Back in 1890 there was a Partnership Act—I am sure that the Minister will be able to get briefing on this in due course—that recognised the differences between Scotland and the rest of the UK, so what is being proposed here is in no way ground-breaking. It would be interesting to find out the colour of the Government back in 1890 when this measure was introduced, but it was long, long before the introduction of the new Scottish Parliament through the Scotland Act in 1999.

I also differ with the Minister in relation to going no further than, or implementing only, the Smith commission proposals. I think it is fair to say that that has been a pretty constant reference from the Government Front Bench. In quite a few respects the Government already have gone further—for example, the amendment in relation to abortion was not contained in the Smith commission report—so why not go further when it is a sensible measure, when it could be of advantage to Scottish consumers and Scottish business, and when it is something that is quite technical and detailed but has been given a lot of thought by the Law Society of Scotland and would make for sensible, better devolution?

I hope that the Minister might see sense and come back to us at the next stage with some amendments in this area but, for the moment, I beg leave to withdraw the amendment.

Amendment 59 withdrawn.

Amendments 60 to 62 not moved.

Clauses 51 to 53 agreed.

Clause 54: Rail: franchising of passenger services

Amendment 63

Moved by

63: Clause 54, page 53, line 38, after “operator” insert “or not for profit operator”

I am so used to my noble and learned friend Lord Davidson speaking for me that I almost mistimed rising to move this amendment, which would allow for the scrutiny and review of previous tendering arrangements. Amendments 63 and 64 in this group stand in my name and that of my noble and learned friend Lord Davidson of Glen Clova. They are minor but important amendments, which would alter Section 25 of the Railways Act 1993 by removing the prohibition on public sector operators bidding for a franchise in relation to a Scottish franchise agreement. They would also establish legislative review and evaluation procedures.

The Smith commission report states that,

“power will be devolved to the Scottish Government to allow public sector operators to bid for rail franchises funded and specified by Scottish Ministers”.

The amendment would go a small but significant step beyond that by allowing not-for-profit operators also to bid in the process, echoing what the right honourable Gordon Brown proposed prior to the referendum. The Scottish Government are already responsible for letting and funding the ScotRail franchise. The legal framework for letting the franchise is provided by the Railways Act 1993, the Transport Act 2000 and the Railways Act 2005. These collectively preclude state-controlled organisations from bidding for franchises.

The paradox is, however, that state-controlled bodies from other countries are not precluded from holding a franchise. Members of your Lordships’ House will no doubt be aware that as a result of this anomaly, Abellio, an offshoot of the Dutch national state railway, was recently awarded the ScotRail franchise by the Scottish Government. A number of concerns were raised in response to this decision, not least from trade unions because, given the forthcoming proposals outlined in the Bill, the tendering process could have been delayed, after which the franchise could have been awarded to a public or not-for-profit operator. There has been a number of problems, most notably the cancellation of services after pay talks with the train drivers’ union ASLEF stalled and staff being offered voluntary redundancy despite Abellio guaranteeing that this would not happen. As the general secretary of the RMT has said:

“Scotland could have taken control of its own railways”.

Labour has stated that it believes that:

“The best deal for Scotland is a People’s ScotRail, a railway company whose commitment is not to a group of shareholders or a foreign Government, but to the people of Scotland”.

In the light of this evidence it is vital that while we move forward in the devolution process we learn from the decisions that were taken in the past. The amendment would facilitate this by allowing the scrutiny and review of previous tendering decisions, not to cause any uncertainty or rock the boat in any way but to learn lessons from how things were conducted. I believe that this is a genuine opportunity to enshrine in legislation the value of critical evaluation in the decision-making process. I beg to move.

It is nice to welcome back to the Dispatch Box the noble Lord, Lord McAvoy. Clause 54, to put it simply, will allow public sector operators to bid for and be awarded rail franchises specified and let by the Scottish Ministers. This will provide greater freedom to decide which organisations are eligible to bid for franchises in Scotland and fulfil the Scottish Government’s aspiration to allow public sector operators to participate in the rail franchising market in Scotland. At present, and as with the rest of the UK, not-for-profit entities are not precluded from being rail franchises under the Railways Act 1993. Once Clause 54 is commenced, not-for-profit entities, irrespective of whether they are public or private organisations, will be able to bid for rail franchises, just as other public sector operators will also be able to. As such, the Government do not consider that Amendment 63 is necessary.

Amendment 64 would allow discretion as to whether public sector operators, on commencement of Clause 54, can bid in respect of live procurements where an invitation to tender has already been issued. There are currently no live procurements for Scottish rail franchises. There are two current Scottish franchises: the Caledonian Sleeper services and the ScotRail services. It is the responsibility of the Scottish Government to manage the tendering of these contracts. The ScotRail franchise, for example, the biggest in Scotland, operates over 2,200 train services each day, delivering 92 million passenger journeys each year. In December, it announced a £475 million investment in its rolling stock over three years.

I am listening carefully to what the Minister has to say. Under the arrangements that he has just described, would it therefore have been possible for the east coast main line to bid for running the east coast franchise, which of course it was disbarred from doing? That is, of course, a cross-border railway and it was operating very efficiently, although it was not allowed to submit a tender to run the railway into the future.

Obviously the noble Baroness has stated the facts. I do not want to add to that because she is a great expert in these matters. I am simply talking about this amendment and what would be possible in the future.

To go back to what I was saying, both existing Scottish-related franchises have been in operation since April 2015 and their contracts are for 15 and 10 years respectively. The ScotRail franchise has a break clause after five years—

I am not clear about the implications of what the Minister is saying. He seems to be saying now that it is possible for not-for-profit and public companies to bid for tender to run a railway. Is that the case? It was certainly not the case recently when the east coast railway was not allowed to bid for the continuation of the east coast service. Is he simply describing the situation as it will be in Scotland or as it exists at the moment, not just for Scotland but for the UK? Is he also describing the situation for a cross-border service, which is what the east coast main line is?

Just to clarify, the clause that we are talking about relates to Scotland-only franchises. As I said earlier, not-for-profit entities are not precluded from being rail franchisees under the Railways Act 1993.

To return to what I was saying, both franchises have been in operation since April.

If a not-for-profit enterprise is allowed in Scotland, could that not-for-profit enterprise bid for a cross-border railway to the Department for Transport, or would that be disallowed? That is the issue.

I think we are talking about devolution to the Scottish Government and the Scottish Parliament. Therefore, we are talking about only rail services that are in the province of the Scottish Government, not ones that are let through the Department for Transport’s process.

If that is the case, and given the potential decision-making for the Scottish Parliament, it is important for the Minister to go back and get clarification on this issue. This could become a live issue in a short period of time.

I am happy to give the noble Lord the assurance that we will get clarification. I am happy to write to him on that.

To complete what I was saying, the ScotRail franchise has a break clause after five years, but in practice that means that a new competition for either Scottish rail franchise will not occur until 2020 at the earliest. For those reasons, the Government consider Amendment 64 to be unnecessary and that it would only add uncertainty to the clause. Therefore, I urge the noble Lord to withdraw it.

I thank the Minister for that answer. I particularly welcome his indication of interest from the Scottish Government in discussions and negotiations. That shows that sensible and calm negotiations—not looking for aggressiveness on either side—will deliver to the Scottish Parliament and therefore the Scottish Government the powers that he just outlined. That is an important statement to come out tonight.

A couple of things tonight could almost have been interpreted as doubting the ability of the Scottish people to run the services proposed for devolution in the Bill and hopefully in the fiscal framework—time after time. It is a little insulting to the Scottish people to suggest that we cannot run services in a proper and efficient manner. Doubt has been cast on that, denigrating the ability to come forward and run these things. So I welcome the Minister’s statement and the positive notes coming from the Scottish Government. I beg leave to withdraw the amendment.

Amendment 63 withdrawn.

Amendment 64 not moved.

Clause 54 agreed.

Clauses 55 to 57 agreed.

Clause 58: Renewable electricity incentive schemes: consultation

Amendment 65

Moved by

65: Clause 58, page 67, line 21, after “electricity” insert “or heat”

My Lords, this group comprises a number of amendments relating to renewable energy. The background is not only proposals for devolution but obviously must be seen against what the Government have done with regard to the Energy Bill, or least what they had done until this House took out the provision relating to the acceleration of the closure of the renewable obligation for onshore wind.

The first set of amendments, Amendments 65, 66, 68, 70, 71 and 72, are concerned with renewable heat incentive schemes. The Smith commission, which of course is holy writ, states at paragraph 41:

“There will be a formal consultative role for the Scottish Government and the Scottish Parliament in designing renewables incentives and the strategic priorities set out in the Energy Strategy and Policy Statement to which OFGEM must have due regard. OFGEM will also lay its annual report and accounts before the Scottish Parliament and submit reports to, and appear before, committees of the Scottish Parliament”.

The initial amendments were intended to incorporate references to the renewable heat incentive schemes, whereas the clause as it stands relates only to renewable electricity incentive schemes. I was grateful to the Minister for writing to me on 1 December last to say that he did not think that this set of amendments was necessary. He indicated that heat was,

“not covered by any of the reservations in the Scotland Act 1998, and so should be treated as already devolved”.

He went on to say that, with specific regard to the renewable heat incentive,

“the Scottish Government already has a formal consultative role on both the domestic and non-domestic RHI schemes. Section 100 of the Energy Act 2008 states that for regulatory changes to RHI schemes, the Secretary of State for Energy and Climate Change”,

had certain obligations relating to the,

“competence of the Scottish Parliament”,

and the “consent of Scottish Ministers” but, where there was not a competence within the Scottish Parliament, he had a consultation requirement on Scottish Ministers. Having received the Minister’s letter, I decided that it was still better to leave these amendments in so that we could have on the record why renewable heat incentives were not included. I know that their omission has caused some concerns in the industry, but this makes it clear that there is nothing to stop the Smith commission recommendation being given full effect in that regard.

There is, however, an important issue with regard to Amendment 68B. On how many occasions in the course of our debates have we heard the Minister pray in aid, “This is what the Smith commission says and this is what we are delivering”? I am sure that the Smith commission was never intended to be a straitjacket, but that is sometimes how it appears. I shall repeat:

“There is to be a formal consultative role for the Scottish Government and the Scottish Parliament in designing renewables incentives and the strategic priorities set out in the Energy Strategy and Policy Statement to which OFGEM must have due regard”.

But look at what is in the Bill. It states in Clause 58:

“(1) The Secretary of State must consult the Scottish Ministers before—

(a) establishing a renewable electricity incentive scheme that applies in Scotland, or

(b) amending such a scheme as it relates to Scotland”.

Let us turn to the next two new subsections:

“(2) Subsection (1) does not apply to amendments that appear to the Secretary of State to be minor or made only for technical or administrative reasons”.

I am actually prepared to live with that. It is probably perfectly reasonable provided that not too wide an interpretation is made of “technical or administrative reasons”. But new subsection (3) goes on to say:

“(3) Subsection (1) does not require the Secretary of State to consult the Scottish Ministers about any levy in connection with a renewable electricity incentive scheme”.

Where in the Smith commission is that exception made? We have heard how important it is that we should stick rigidly to the commission, yet it does not make the exception that the Government seek to import into this provision.

Moreover, the Command Paper which was published almost exactly a year ago stated specifically that, in implementing paragraph 41 of the Smith commission agreement, a clause would be included in the Scotland Bill to,

“establish a broad duty on the Secretary of State to consult the Scottish Government on the design of new incentives to support renewable electricity generation, or the re-design of the existing incentive schemes … The duty will arise where the new incentive would apply in Scotland, or any re-design would affect the way an incentive operates in Scotland. It will apply to incentives that are both statutory and non-statutory in nature”.

If that had been translated into the legislation, it probably would have been fine. The paper was clear that the reference to existing incentive schemes included the renewables obligation and contracts for difference. There were no exemptions, yet exemptions have been added. The Government have to explain to the House why they are departing in a very material way from the recommendations of the Smith commission. Quite clearly, any levy in connection with the renewable electricity incentive scheme could put a coach and horses through what is given by new Section 90C(1), to be inserted into the Scotland Act 1998 under Clause 58. The Government may have a guilty conscience because they sought to bring about the early closure of the renewable obligation in relation to onshore wind and solar panels with precious little, if any, prior consultation with Scottish Ministers. Therefore, they are trying to cover their tracks by this rather niggardly exclusion that they have sought to put in. The Minister owes it to the House to explain why he has driven a coach and horses through that new subsection.

Again, I wrote to the Minister and asked about the consultation with Scottish Ministers. On 21 December, he helpfully responded saying that,

“similarly to the position on the Renewables Heat Incentive, we have not included a requirement to consult Scottish Ministers on the Strategy and Policy Statement … as the Energy Act 2013 already gives Scottish Ministers a clear formal consultative role in the development of the SPS. The process of designing the SPS requires two rounds of consultations where Scottish Ministers can provide their views on the draft document before it is designated. As legislation already exists to address paragraph 41 of the Smith Commission Agreement, no additional provisions have been included in the Scotland Bill”.

It provides us with a rather unusual situation. The Government are saying that something that was already in existence pre the Smith commission is being used to fulfil the recommendation of the Smith commission.

We must assume that the Smith commission was fully aware of what the pre-commission legislative position was because of things such as the British Transport Police. We have been assured that it knew all the implications of what was being proposed. We must assume that it knew the position under the Energy Act 2013.

I am curious about things and about systems. Was there not any report back from the Liberal representatives on the Smith commission to the noble and learned Lord’s party?

I do not remember the precise detail of what went in when they came forward with this proposal but I presume—I give credit to those who were on the Smith commission, including the noble Lord’s own party members—that they did not seek to make a recommendation and that it already existed. I hope that the noble Lord would give due credit to the other members of the commission—the Labour members—that they would not have signed up to something that was already there. That is why I want the Minister to explain why he thinks that the Government’s interpretation of that recommendation is satisfied by something that was already in place. Can we not reasonably assume that those who were engaged in this were looking for something more? Indeed, Scottish Renewables is not satisfied that the legislation is sufficient. In an email to me, it said:

“If this recommendation is not to be carried forward through the Scotland Bill, we would like clarification about how any new or improved mechanism will be formalised outside of the primary legislation”.

We have to get some indication from the Government as to what more they are doing than what was already in place before the Smith commission sat.

I fully accept that Amendment 73A goes well beyond the Smith commission, so that probably bottoms it out before I even open my mouth. But there is an important point here as well. When the Smith commission was deliberating, it did not know that several months later the Government would pull the rug from under the onshore wind industry, not just in Scotland but throughout the United Kingdom, by bringing forward the date of closure of the renewables obligation. We are entitled to speculate that, if the Smith commission had deliberated after the announcement to accelerate the closure of the renewable obligation for onshore wind and solar, it may well have incorporated something along the lines of what we propose in Amendment 73A.

Amendment 73A says that:

“Within three months of the passing of this Act, the Secretary of State shall publish proposals to transfer to the Scottish Ministers powers on the awarding of contracts under Contracts for Difference and the setting of electricity feed-in tariffs in respect of electricity generation from renewable sources in Scotland”.

This is quite a major step, but it is very much within the Government’s ability to shape what kind of scheme they would bring forward. We propose this because there are a number of different ways of doing it. There could be a full set of powers through a suitable adaptation of the Energy Act 2013; the Government may wish to limit it to onshore wind to encourage electricity generation by onshore wind; or it could be done by an intergovernmental agreement on budget limits and a restriction on the power to set the strike price.

The position we have is that there is general support and broad agreement that a single electricity market and climate change policy is in the interest of both Scotland and the rest of the United Kingdom. All sides of your Lordships’ House argued that very forcefully during the referendum campaign. There is also agreement that Scotland should be entitled to deploy electricity capacity of its own choosing that enables the efficient functioning of the single electricity market and achieves UK-wide climate change objectives, and that the deployment of renewable technology choices by Scotland should be supported by UK-wide subsidy schemes where such subsidy is required and where Scottish deployment choices enable an overall reduction in the level of the UK-wide subsidy to deliver climate change policies.

I was the Enterprise and Lifelong Learning Minister in Scotland, and my noble friend Lord Stephen also had a big part to play in getting the offshore wind industry moving in Scotland. Many years of investment in that industry have brought about considerable advancements that have led to the generation of electricity by onshore wind being one of the cheaper forms of renewable energy. There is much scepticism in the industry as to whether the Government will do anything to support the onshore wind industry, but to give Scotland the opportunity to devise its own programme of contracts for difference and to develop the indigenous industries, skills and employment that go with that in a way that would help to reduce the cost to the United Kingdom taxpayer seems to be, by any stretch of the imagination, a win-win situation. I accept that this goes beyond the Smith commission but, as I have said, were the Smith commission deliberating today—in the light of what we have seen since the Government took office in May and brought forward their changes in the initial Energy Bill—one might expect this to be a sensible proposal to come from it. It is one that can suit the Government’s agenda, as well as giving meaningful and worthwhile powers to the Scottish Parliament. I hope that it will commend itself to the Minister and that he will see that there is merit in this somewhat different but ambitious and innovative proposal. I beg to move.

My Lords, I shall speak to Amendments 68A and 69 in this grouping. They are quite different. Amendment 68A simply seeks to put into the Bill a reference to hydro-electricity. I mention this because it is the poor relation of the renewable energy sources. Solar and wind power are mentioned a lot; hydropower is hardly ever mentioned. I am talking about not the big hydro-electric schemes in Scotland, which have made a big contribution to our energy needs, but small hydro-electric schemes. For example, in none of the three big reservoirs that feed Edinburgh, from the old ones, Talla and Fruid, to the new one, Megget, which was built during my time as the local MP—I never thought to raise this at the time, so I plead as guilty as everybody else for overlooking this—was a turbine added to the dam outfall so that energy could be produced.

The argument is that these small schemes produce only enough energy for local consumption, but added together they can be very significant. I recently visited two quite new ones on the River Ettrick and the River Yarrow in my old constituency. I was very impressed by the contribution that they can make to local communities. It is true that, when the wind does not blow there is no energy produced from wind power and that when the sun does not shine solar power does not work, but the water is flowing all the time—rather excessively, as we have seen in recent days, but it is there all the time. Added together, small hydro-electric schemes can make a major contribution to the energy needs of the country. That is why I would like to see it in the Bill in the way I suggest in Amendment 68A. It is a modest amendment but one that I hope might find favour with the Government.

Amendment 69 is the same as the rather more sweeping one that my noble and learned friend has just put forward. Amendment 69 seeks to take out the extraordinary new subsection (3), which says that the Secretary of State does not need to consult Scottish Ministers about introducing any levies for renewable electricity incentive schemes. I simply do not understand why that provision is there. In my view, the more consultation we write into this Bill and the more we make it essential for the Scottish Government and the Secretary of State to consult, the better. I am surprised that this provision appears in the Bill at all and I support my noble and learned friend in seeking its removal.

The noble and learned Lord, Lord Wallace of Tankerness, is very interested in these energy schemes and very knowledgeable about them, and has spoken on other pieces of legislation in this connection. He raised a number of specific points in the debate. I am, of course, very happy to meet him to discuss those further.

Clause 58 creates a formal consultative role for the Scottish Ministers in the design of renewable electricity incentive schemes that will apply in Scotland. Our aim is to ensure the Scottish Ministers are able to comment on the design of new incentives to support renewable electricity generation that will apply in Scotland, or the redesign of existing schemes as they relate to Scotland. The new arrangement provides for a general duty to consult the Scottish Ministers on the design of incentive schemes for renewable electricity which will apply with respect to the existing schemes as they relate to Scotland, and any new schemes that will apply in Scotland.

The noble and learned Lord has tabled amendments that would extend the scope of Clause 58 to heat incentive schemes. We have exchanged correspondence and discussed it further. He has put on the record the response that I gave in my letter, so I will not repeat what he has already said. However, we believe that these amendments would duplicate existing regulations and are therefore unnecessary.

Amendment 67 seeks to amend Clause 58 to require the Secretary of State to consult the Scottish Parliament, in addition to consulting the Scottish Ministers, on renewable electricity incentive schemes, treating the Scottish Parliament as a conventional stakeholder rather than a legislative body. The amendment requires the Secretary of State for Energy and Climate Change to statutorily consult all 129 Members of the Scottish Parliament when making changes to renewable electricity incentive schemes. In our view, this would lead to overly complex and time-consuming consultations that would affect the smooth operation of renewables schemes. For example, were the Scottish Parliament in recess, this could delay the conclusion of a consultation, delaying the implementation of UK government policy. The Government consider the inclusion of consultation with the Scottish Ministers is appropriate. However, Members of the Scottish Parliament are already able to make their views known during public consultations.

Amendment 68B seeks to amend Clause 58 to require the Secretary of State for Energy and Climate Change to consult the Scottish Ministers on amendments to renewable electricity support schemes which are of a minor nature or are made only for technical or administrative reasons and to consult the Scottish Ministers about any levy in connection with a renewable electricity incentive scheme. The noble and learned Lord took on board the de minimis aspect of the first part of that. As drafted, Clause 58 excludes the requirement to consult the Scottish Ministers on minor, technical or administrative issues. In general, this exclusion will apply to changes unlikely to have a significant impact on generators or potential generators, such as making changes to references to technical documents, or making changes to an application procedure. This amendment would, therefore, lead to overly complex and time-consuming consultations that would affect the smooth operation of the schemes.

Amendment 69 also seeks to amend Clause 58 to require the Secretary of State for Energy and Climate Change to consult the Scottish Ministers about any levy in connection with a renewable electricity incentive scheme. I note what the noble and learned Lord said about that and I am very happy to discuss this further with him. Levies on particular companies—for example, electricity suppliers—are sometimes created to sit alongside renewable energy incentive schemes as a way of funding them. An example is the supplier obligation which requires electricity suppliers to pay for the contracts for difference scheme. Levies to fund renewable support schemes are considered to be a form of taxation and taxation is generally a reserved matter. Devolution of specific tax powers is dealt with elsewhere in the Smith commission agreement

I am grateful to the Minister for giving way. My first question is: where in the Smith agreement is provision made for such an exception? Secondly, even allowing for what he says— and I would want to read it and consult on whether it is a legitimate point—does the Minister not think this is drafted very widely? It says “any levy”, and could completely negate what is set out in subsection (1).

As I have said, I am very happy to meet with the noble and learned Lord to discuss this specific point and I undertake to do so.

Similarly, Amendment 68A is also unnecessary as the phrase “a renewable electricity incentive scheme” would include a hydropower incentive scheme. I met and discussed this with the noble Lord, Lord Steel, last week. I put on record the importance of small-scale hydro installations. Some 500 of these have been built in Great Britain since the start of the feed-in tariff scheme in April 2010. These installations represent a doubling in the number of hydro sites across the country but a significantly smaller proportion in terms of capacity, as none of these new sites is above 2 megawatts in size. The majority of these are in Scotland, where hydro accounts for 16% of the capacity of all feed-in tariff installations, with solar on 44% and wind on 39%. Going forward, the tariffs should still offer sufficient incentive for well-sited installations, with an estimated return of 9.2%, based on costs supplied by the industry. It is therefore estimated that around 500 further installations could be installed in the next three and a quarter years, to April 2018-19.

Clause 58 ensures that Scottish Ministers will have a formal consultative role on contracts for difference, the renewables obligation and feed-in tariff schemes, all of which incentivise the deployment of hydropower. Therefore, we do not believe it necessary to make specific provision for any of these amendments within the Scotland Bill and I ask that this amendment not be moved.

Amendment 73 would duplicate existing arrangements. The Energy Act 2013 already gives Scottish Ministers a clear, formal consultative role in the development of the Ofgem strategy and policy statement, which gives them an opportunity to influence its content. Section 135 of the Act makes the Scottish Ministers “required consultees” on drafts of the statement and Section 134 also requires the Secretary of State to consult them on the action that she proposes to take following any review of the statement. The current strategy and policy statement arrangements give effect to the Smith agreement and therefore the amendment is unnecessary.

Amendment 73A seeks to introduce a new clause to transfer powers to the Scottish Ministers to award contracts under the contracts for difference scheme and to set the level of feed-in tariffs in respect of electricity generation from renewable sources in Scotland. Publishing such proposals, as well as the transfer of any such powers, goes well beyond the Smith commission recommendations, as the noble and learned Lord himself said, which relate to consulting on establishing and amending schemes that apply or relate to Scotland. In addition, both contracts for difference and feed-in tariffs are Great Britain-wide schemes and do not currently operate in a regionally specific way. This is linked to the fact that we have a GB-wide integrated energy system on which those schemes rely, which has been shown to work well over many years and from which all energy consumers benefit.

Scotland has more than proportionally benefited from financial support from all GB bill payers under current energy policies. Around 9% of the UK population is in Scotland, but we estimate that just over 20% of the support under the renewables obligation as a whole—around £760 million of the total—will go towards funding Scottish renewables projects. For feed-in tariffs, Scotland represents over 10% of the renewable electricity capacity installed to date, particularly in the wind and hydro sectors. In conclusion, I urge the noble and learned Lord not to move this amendment.

My Lords, I am very grateful to the Minister for his reply and I certainly appreciate his offer to discuss this. I very much hope it will be a productive discussion.

There are things here which merit further discussion. In particular, Scottish Renewables does not feel that the Bill has met the Smith commission proposal on consultation on Ofgem’s energy strategy and policy statement. Legislation might not be necessary, and I would be interested to pursue that with the Minister. Obviously, the Smith commission included the Deputy First Minister, who had overall ministerial responsibility for these matters during part of his time in office, so one assumes he felt that there was a need to go further than the Energy Act 2013.

I cannot say that I am surprised by the Minister’s response to the new clause proposed by Amendment 73A, but it is unfortunate because this is an opportunity to build on the Smith commission in the light of developments that have taken place since. I will take one point of issue with the Minister. He talked about the importance of the integrated UK market and I entirely agree—indeed, I made that point myself. He seemed to indicate that there was no room within that for regional variations. Perhaps he should get those who prepared his brief to ask what has been going on for the past seven, eight or nine years. The renewables obligations have been dealt with on a separate Scottish basis under executive devolution, and this has worked very well. Indeed, my noble friend Lord Stephen and I, and our successors in office, have been able to do some innovative and imaginative things with the ROCs, so the system would not fall apart if there was regional variation. I am disappointed, and perhaps on reflection, the Minister may think there is still a case for that.

I thank the Minister for his offer of a meeting, which I will certainly take up. I am appreciative of that. I beg leave to withdraw the amendment.

Amendment 65 withdrawn.

Amendments 66 to 72 not moved.

Clause 58 agreed.

Amendments 73 and 73A not moved.

Clauses 59 to 64 agreed.

Amendment 73B

Moved by

73B: After Clause 64, insert the following new Clause—

“Political and economic impact of this Act on the United Kingdom

The Secretary of State and the Scottish Ministers shall, in exercising any power or order provided for under this Act, consider—(a) the impact of exercising the power or order on the political and economic strength of the United Kingdom as a whole, and(b) the importance of strengthening the United Kingdom as a whole, both politically and economically.”

Amendments 73B and 73C are in my name. I am glad there is cross-party support for Amendment 73C from the noble Lord, Lord Shipley, the noble Viscount, Lord Ridley, and the noble Lord, Lord Curry of Kirkharle, whom I am pleased to see in his place. Indeed, the noble Lord, Lord Shipley, has also co-signed Amendment 73B.

Both amendments have been tabled to highlight the issues in the Bill which have implications, and possible implications, for the rest of the United Kingdom. In particular, Amendment 73B refers to the areas bordering Scotland—the north-east of England and Cumbria. Amendment 73C asks for a report from Ministers within a year of the passing of the Act, and an impact assessment of its measures on the areas adjoining Scotland. In particular, it seeks an impact assessment of Parts 2 to 5.

Amendment 73B stresses the importance in implementing the Bill of having regard to the need to help promote the political and economic well-being of the UK as a whole. Many of us are very happy that the referendum result was a strong no, but people in Scotland voted to maintain the United Kingdom in its present geographical form because they wanted to see a successful UK in the future. A commitment to ensure the success of the UK as a whole is therefore important, as well as delivering on the Smith commission and the specific devolution proposals which the Bill contains.

When I tabled these amendments, I had not realised that so many of today’s debates would in effect be about them. Many of the debates have been about not only respecting devolution but looking at ways of strengthening the UK as a whole. We had an interesting debate about the future of the British Transport Police. Whatever comes out at the end of this process, I think we would all agree that we need a system which ensures that there is effective policing of our transport network, including on cross-border trains. I say that with some feeling, given that every train I travel on to get from my home in Northumberland to this House is a cross-border train. I certainly want to see the highest safety standards on those trains. Similarly, I would like us to commit ourselves to ensuring that the UK as a whole is successful and, as far as we can, to ensuring its overall political and economic harmony.

When I spoke at Second Reading I said that I supported the Bill, and I do. These amendments, which are probing, do not seek to damage the Bill but arise from the concern we have expressed about the need to promote economic and social solidarity across the UK. A lot of today’s discussion has been about the Smith commission and the extent to which it is set in stone. These amendments do not contradict the commission in any way, but they add to the requirements on Ministers regarding the UK as a whole. They would require that the need to improve the union of the UK is adhered to.

We are all influenced by our backgrounds and our ties with particular parts of the UK and, not surprisingly, as a north-easterner I am keen to see that the north-east prospers in the future. It has had a lot of economic upheaval in the past and has been very innovative in recent years, but it certainly needs to improve economically. I would not want any Bill before Parliament to result in worsening the position of one of the UK’s poorer regions, so I do not apologise at all for tabling an amendment which is very much related to the north-east and Cumbria.

There were concerns in the north-east at the prospect of a yes vote in the referendum—concerns about what having an international border on our doorstep would mean for us, given the uncertainties about currency and immigration controls, for example. The two countries might have very different immigration policies. There were also concerns about people crossing the border each day for work—in both directions—and people wanting to access health services on either side of the border. Given the outcome of the referendum, we should certainly make a strong commitment to ensuring that people on both sides of the border have access to the facilities and services they need, and that those facilities and services are of a high standard.

Later in our proceedings we will be looking at air passenger duty, but here I will raise one transport issue that is of concern to people on both sides of the border and seems to me a prime candidate for a cross-border project which would help people on both sides of the border: the improvement of the A1 between Newcastle and Edinburgh. When driving last week up to Haddington in East Lothian, I was again very much aware that north of Morpeth almost until you get to Edinburgh, the road is a mixture of dual and single carriageway. That possibly explains why so many of the accidents on that road have been head-on collisions—because people get confused about whether they are on a dual section of the A1 or a single section. The road is, ironically, entitled the Great North Road, but it is anything but that in its present state. What we do not want to see as a result of devolution is less prosperous areas of the UK losing out further, and we need to make a conscious commitment to avoid that happening. That will involve lots of practical measures.

The amendments might seem rather sweeping, but many different issues could be encompassed within them. Earlier, the noble and learned Lord, Lord Wallace of Tankerness, talked about the tribunal system and the usefulness of being able to transfer tribunals from one part of the UK to another in order to avoid backlogs. That seemed to me a small but rather important example of how we should ensure that the UK works better as result of what we are doing.

I would like the Government, in responding, to say two things. First, how do they intend to ensure that the UK will work more successfully in future? In particular, what cross-border projects are they in favour of to ensure that there is some enthusiasm across the border about improving roads, infrastructure and other facilities on which people on both sides of the border rely? I certainly hope that the Government will look sympathetically at the spirit of these amendments, and I look forward to the Minister’s reply.

My Lords, I rise to speak in support of Amendments 73B and 73C, to which my name is attached. I agree with the noble Baroness, Lady Quin, that the Bill concerns the whole of the United Kingdom and not just Scotland. It has to be considered not just from the perspective of the two Governments—the Scottish Government and the UK Government—but from the perspective of the people living in those parts of the United Kingdom that share a border with Scotland.

Although I support strongly the principles behind the Bill and welcome the proposals to devolve powers, responsibilities and further tax-raising capabilities to Scotland, I am very aware that the level of public spending on Scotland is significantly higher per capita in Scotland than it is in the north of England. To give the figures from the latest year for which they are available, in 2014-15 in the north-east of England the total identifiable expenditure on services per head was £9,347, in the north-west of England it was £9,197, in Yorkshire and the Humber it was £8,660, but in Scotland it was £10,374. These are very different levels of per capita spending, and they need to be explained so that the general public understands the basis for them. I look forward to seeing and considering the fiscal framework when it is published shortly, which I hope will explain these differences. We will then see what impact any changes will have on the operation of the Barnett formula and how far the Scottish Government will need to use their powers over income tax to pay for better public services, where they decide to have them, than are available in the rest of the UK.

The two amendments, Amendments 73B and 73C, reflect this problem. The UK and Scottish Governments should not proceed by disregarding the impact of the fiscal settlement on the rest of the United Kingdom. I hope that both Governments will understand the need for the whole of the UK to be strengthened, not just one part at the expense of another. In that respect, it is very important, as the noble Baroness, Lady Quin, explained, for there to be a report by both Governments on the actual impact on the areas south of the border. I hope that the Minister will recommend that it should become an annual statement, as it would aid public understanding of the devolution agreement.

The noble Baroness, Lady Quin, talked about air passenger duty. If the Scottish Government reduced air passenger duty by 50% or 100% to boost Scottish aviation, the impact of such a decision on airports south of the border might be significant. A small outflow of passengers attracted by lower fares in Scotland could cause a movement of carriers. It would be of little help to the connectivity of the north-east of England if passenger duty was not reduced there in line with Scotland. One solution that the Minister may be prepared to consider would be to charge much lower rates of air passenger duty for non-congested airports.

The amendments are intended to provide a positive probing of the issues, and I hope that it may be possible between Committee and Report for us to meet the Minister to talk further if that would help.

Finally, there is one other matter. We need to clarify people’s rights, whichever side of the border they live on, to access public services across the border if that is easier for them. I hope that, during the passage of the Bill, this matter can be clarified.

My Lords, I welcome the opportunity to participate in Committee on the Scotland Bill. I support the comments of the noble Baroness, Lady Quin, and the noble Lord, Lord Shipley. The noble Viscount, Lord Ridley, has also put his name to the amendment.

I support Amendment 73C, requiring the preparation of a report reviewing the impact of Parts 2 to 5 of the Bill on the areas adjoining Scotland, particularly Cumbria and the north-east of England. Having been born and bred in Northumberland, I naturally have a vested interest in its economic welfare, and I am concerned when I suspect that legislation such as this may indirectly, but perhaps significantly, disadvantage the north-east. I was a member of the Adonis review team, which was commissioned to look at the economy of the north-east of England. As a consequence, I am critically aware of the interdependencies between Scotland and the north-east of England.

According to the Scottish Government’s figures, which the noble Lord, Lord Shipley, has already cited, £1,200 more per capita of public expenditure is spent in Scotland than in England. The Bill will allow further investment in Scotland, which is good for Scotland—like my colleagues, I do not oppose the Bill—but the consequence could be that the gap becomes even wider, to the economic detriment of the north-east. This is serious in view of the fact that many of the social indicators, geographic challenges and historic dependence on heavy industries are very similar in the north-east of England to those in Scotland.

Not only does the north-east receive some of the lowest funding in England, it borders Scotland, which has the highest spend per capita in the United Kingdom due to the Barnett formula, which will have increased benefits as a consequence of the Bill. The current irrelevance of the Barnett formula has been widely recognised, even by Lord Barnett himself, who called it “grossly unfair” and called for it to be scrapped. It was deeply regrettable that the Prime Minister gave an undertaking at the time of the Scottish independence referendum not to review it. I believe that it should be reviewed and that it is now unavoidable and overdue, and that will become even more apparent if an economic report was prepared and published after one year, as we have suggested in this amendment.

I fully understand that the north-east is included in the northern powerhouse concept. As noble Lords know, we in the north-east have constantly to remind Whitehall that the northern region does not end in Manchester, York or Leeds. Even if the investment promised in the northern powerhouse materialises, it will not compensate for the shortfall in public expenditure. So the north-east is still expected to compete with both Scotland and much of England, despite receiving much lower public support. The noble Lord has mentioned the potential impact on the airport in Newcastle. One could not conceive of a situation where London Stansted was granted special favour over Heathrow—yet that is exactly what may happen between Edinburgh and Newcastle.

I expect the Minister to counter our arguments by referencing the devolution agreement for the north-east. This is very welcome and a huge step forward, but it does not compensate for the differential in funding between the north-east, Scotland and much of England. The north-east is proud of its history; it is making good progress in reducing unemployment and increasing economic growth, but it could contribute even more to the overall economy of the United Kingdom, given a more level playing field. For these reasons, I support this amendment, and I hope that it will be supported by the Minister.

My Lords, I rise to congratulate my noble friend Lady Quin, who is a long-standing friend of Scotland, and tonight has epitomised concerns not only for her own north-east homeland and heartland but also of her fellow citizens in Scotland. She has been a great supporter of Scottish causes throughout the years and a doughty champion for her own north-east area. It is a tribute to her commitment to both these areas that she has been here so long waiting patiently—or maybe impatiently—as the night wore on.

As was the case on the first day in Committee, on the face of it a review is reasonable enough. I accept that these are probing amendments, but we have mild objections on the grounds that they afford no agency to the Scottish Parliament when it comes to the parties to be consulted and the general scope and remit of the review, and it is generally left to the discretion of Secretary of State. When there is a lack of parameters or involvement with the Scottish Parliament, that provides the Secretary of State with considerable scope to set the terms of any convention and what is reviewed.

We think that the answer, or at least part of it, lies in the constitutional convention that we support, which would involve every nation and region in the country being engaged in a dialogue with the people about how power needs to be dispersed, not just in Scotland, Wales and Northern Ireland but in England, too. Quite rightly, there are concerns, particularly in the north-east and Cumbria, and maybe in other parts of England as well, that there is no detriment to their areas with the passing of more devolution to the Scottish Parliament. It is quite right that these concerns are raised; they are representing their areas well in bringing these concerns.

I do not know the noble Lord, Lord Shipley, that well, but I certainly know my noble friend and know that she will be motivated. As the noble Lord, Lord Shipley, said, it is a concern not just for one side of the border but for both sides so that we can all come to a mutual way of working and find forums for agreeing matters of dispute or interest, or problems causing particular tension. I welcome the discussion from both my noble friend Lady Quin and the noble Lord, Lord Shipley, and I commend both of them for bringing this forward for discussion.

First, I echo what the noble Lord, Lord McAvoy, said about the noble Baroness, Lady Quin, who I know to be a doughty champion for the north-east. I support the sentiment behind the amendment; Governments should always consider the impact on the union and, in particular, the economy, when they make decisions. Likewise, before and after making policy, Governments should as a matter of course assess whether any particular region is impacted disproportionately. That is not just my view; it is this Government’s stated policy and our approach in practice. Not only that, but there are opportunities for Parliament to scrutinise the Government as they do this and hold us to account. I welcome and encourage that scrutiny.

The UK Government have considered carefully the impact of devolution on the union as a whole throughout the development process for this Bill. The commission set up by the noble Lord, Lord Smith of Kelvin, had that at its heart. One of the principles under which the commission operated was to,

“not cause detriment to the UK as a whole nor to any of its constituent parts”.

As the Committee will be aware, the UK Government and the Smith commission rejected candidates for devolution—for example, the devolution of national insurance. I believe it is right that they did, precisely because devolution of such areas could undermine the union. However, the UK Government also believe that devolution to the Scottish Parliament will make it more accountable to the people who elect it. Our objective has always been to encourage that accountability without undermining the union. Let me reassure the Committee that this Government do not require a legal requirement in the Scotland Bill to ensure that we take these considerations into account.

I hope I can give similar reassurance on how the UK Government consider the impact of policy-making on specific regions and locations. This Government are committed to rebalancing growth across the country, from creating a northern powerhouse to strengthening our great city regions. A number of noble Lords mentioned this. To give a specific example, the UK Government are well aware of the potential impact of the devolution of air passenger duty. That is why we have issued a discussion paper and consultation to engage stakeholders and find a workable solution. There are procedures in place. These policies are scrutinised in Parliament and open to challenge, especially in the other place where MPs can represent their constituency interests in Parliament.

The noble Baroness suggested joint working on projects on both sides of the border. I entirely agree with that sentiment. The borderlands initiative is a good example of that sort of work. The noble Lord, Lord Shipley, raised reporting. I am very happy to look at it as a subject and at how it could be further improved. I am always happy to meet, and I would be very happy to meet him.

While I fully support the sentiment behind these amendments, I do not believe requirements in legislation are necessary. The UK Government are committed to this approach. The fiscal framework and how we put into practice the no-detriment principle were raised by a number of noble Lords. I am certain that we will return to them on our next day in Committee. I urge the noble Baroness to withdraw the amendment.

My Lords, I am grateful to the Minister for his reply and to noble Lords who spoke in favour of the amendments and their spirit. I am also grateful to my noble friend Lord McAvoy for his sympathetic reply to the concerns that have been raised. I hope that the Government’s commitment to the union and to cross-border projects and ventures will be translated into reality in many practical ways. We look forward to seeing the results of that in coming months and years.

The noble Lord, Lord Curry, mentioned concern that we sometimes have in the north-east that the northern powerhouse seems to be concentrating on areas to the south of us, particularly on Manchester and Leeds. I wish them every success, but we wish to be fully part of the initiative. I am glad that the noble Lord made that point. I am glad that these issues have been aired. I hope that the Government will take them to heart. I beg leave to withdraw the amendment.

Amendment 73B withdrawn.

Amendment 73C not moved.

House resumed.

House adjourned at 10.15 pm.